Tejas Networks Limited (TEJASNET) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Tejas Networks Limited Q1 FY '25 Earnings Conference Call hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ashvik Jain from ICICI Securities. Thank you, and over to you, sir.

Thank you. Good evening, everyone. Thank you for joining on Tejas Networks Limited Q1 FY '25 Results Conference Call. We have Tejas Networks management on call represented by Mr. Anand Athreya, Chief Executive Officer and Managing Director; Mr. Arnob Roy, Chief Operating Officer and Whole Time Director; Mr. Sumit Dhingra, Chief Financial Officer; Dr. Kumar N. Sivarajan, Chief Technology Officer. I would like to invite Mr. Anand sir to initiate with opening remarks, followed by a quarterly update, post which we will have a Q&A session. Over to you, sir.

Good evening, guys. Thanks for attending the Q1 FY '25 Tejas Networks earnings call. I have my colleagues here, Arnob Roy, COO and Executive Director; Dr. Kumar Sivarajan, CTO, and Sumit Dhingra who is our CFO, and obviously in the room. I want to give you some key updates for Q1 FY '25. I'm happy to inform you that this has been the best quarter ever for Tejas. Our Q1 FY '25 net revenue was INR 1,563 crores, which was an 8.3x year-over-year. And the profit after tax in Q1 FY '25 was INR 77 crores. And we ended Q1 with an order book of INR 7,091 crores. Let me talk briefly about our business. We are primarily 2 segments: wireless and wireline. On the wireless business, our 4G/5G RAN installations for the BSNL's pan-India network is progressing well. We have cumulatively so far shipped approximately north of 27,000 sites as of end of Q1. And we also have significantly scaled up our manufacturing capacity of the RAN equipment. We have also, in addition to the B1 Band 1, Band 28 and dual-band radios, we have also made production releases of additional 4G radios, which are mostly kind of globally used bands also, which is Band 3, which is 800 megahertz, Band 5, 850 megahertz and Band 41, which is 2,500 megahertz. And we are also engaging with several wireless providers, were for proof of concept, who could become our potential customers, both in private and utility verticals. Now I'll go on to the wireline business. As we talked about engaging with international customers, so I'm happy to inform you that we won a strategic deal with the Tier 2 operators in the U.S. for their network modernization project, and also another telecom operator in Southeast Asia for a broadband rollout. We are also seeing repeat orders of our GPON, DWDM and packet equipment from our existing customers, right, both in India, Southeast Asia and also in Africa. And as you know, we also are at one of the largest deployment of IP/MPLS routers India called BSNL MAAN. And we have made good progress on the installation commissioning, we delivered a lot of equipment last quarter and the installation and commissioning is happening as we speak. One quarterly update I want to give you is the merger of Saankhya Labs with Tejas it's in an advanced stage. And NCLT has reserved the matter for orders. So now I think it's a matter of time when these things come together. Now I will hand it over to my colleague, Sumit Dhingra to talk about the financials. Thank you.

Thank you, Anand. Good evening, everyone. For the quarter 1 financial year '25, we had our total revenue from operations of INR 1,563 crores. This constituted revenue from sales and service of about INR 1,496 crores, this was a 8x revenue growth over the previous year and 28% growth over the last quarter. Other operating revenue, which consists primarily of C&I incentives was INR 67 crores for the quarter as compared to INR 156 crores in the previous quarter. I would like to clarify that previous quarter included PLI receipt for FY '23 and for the full year FY '24. Compared to that Q1 recognition of revenue for PLI includes only the Q1 '25 component. On an aggregate basis, the revenue grew at 18% growth over the previous quarter. Our EBIT for the quarter was INR 167 crores as compared to negative INR 80 crores to the previous year and INR 258 crores in the quarter before that. However, as I mentioned, this also had the impact of other operating income in the 2 quarters. So if I take that out, quarter 4 -- previous quarter, EBITDA was INR 101 crores. And compared to that, we are at INR 100 crores for this quarter. PBT quarter is INR 122 crores compared to INR 233 crores for the quarter before that and negative INR 66 crores for the year, quarter 1 for the previous year. Profit after tax for the quarter is INR 77 crores. This is compared to INR 26 crores on previous year's quarter 1 and INR 147 crores for the quarter 4. Our full year quarter -- full year profit after tax for the last year was INR 63 crores. Compared to that, in the current quarter itself, we have INR 77 crores of PAT. We can move to the next slide, which talks about key financial indicators. Our inventory increased from INR 3,788 crores to INR 3,853 crores in the quarter. This increase is predominantly due to ramp-up of wireless shipments, and this will get converted over the next months into finished goods and get shipped. Trade receivables grew from INR 1,458 crores to INR 2,052 crores. This, again, is increased due to higher shipments in Q1, but we made progress in terms of collections as well, and we collected about INR 1,170 crores during the quarter. Payables has come down from INR 1,839 crores to INR 1,376 crores. But at the same time, the borrowings have gone up from INR 1,744 crore to INR 2,844 crores, which implies a net debt of about INR 2,200 crores at the end of the quarter. Our cash position stands at INR 612 crores. With this, I'll hand it over to Arnob Roy to take care of the next slide.

So in the next few minutes, I'd like to give you a color of the business that we have done in Q1 and also the outlook for our business going forward. So as far as Q1 is concerned, the revenue mix as we put our business in the industry sector, the India Government, India Private and International. The Indian Government saw about 7% of our overall revenue for the quarter, and saw a significant growth, a healthy growth of 2.5x year-over-year. And this growth was led mainly by the network in house in the utility segment. The India Private consisted 90% of our business. And as you know, we categorize the BSNL 4G shipments, since it goes to TCS. The category back to India Private but -- so the India Private business, about 90% of our revenue for Q1 and had a very strong growth over 14x of Q1 of FY '24, and mainly dominated by the BSNL 4G shipments. International business was largely flat, the slight decline and it was 3% of our overall revenue for the quarter. And as we mentioned earlier, this is an area that we have our significant focus on, and we are increasing our sales and marketing presence in international territories, and we are into a lot of engagements in the international territories as well, and I'll talk about that a little bit. So in this quarter, we had for international shipments, our key shipments happened to the customers in Africa and in South Asia. So we closed the quarter with a backlog of INR 7,091 crores. It was lower than the backlog that we closed in Q4 and largely it was a lot of the wireless shipments happened as we expanded our, increased our wireless shipment in the quarter that's part of the reason with all the backlog went down. And as part of the backlog, India still had a significant amount with INR 1,800 crores. We dominate partly our BSNL 4G backlog. And the international loss of INR 260 crores. So going forward, some of the key opportunities being targeted, and this is beyond, of course, our regular run rate business with our existing customers, we schedule, keep on buying on the -- in terms of multiyear contracts. The key large opportunities we targeted is -- one is the expansion of BSNL 4G and network. We know that we have built out our for saturation sites, as I call it, and it's corresponding backhaul network, which is an extension of the MAAN network. And then BharatNet Phase-III, which has the tenders, as we see, has now come to an advanced stage, and I think the bidding, the tender time lines has not been pushed out, but this is also some of the big options that we're targeting. And then the Kavach project of Indian Railways for the Collision Avoidance Systems based on whereas our 4G technologies are a key part of the communication infrastructure. We have done successful POC over here, and we are waiting for the tender process to get through. Then expansion of the network backbone in the utility segment. I mean, this segment, we're seeing a signal strong demand in this segment, both for their captive network requirements as far -- as well as their telco business, their wholesale bandwidth business. And we see a lot of opportunities during the year where they want to scale up their backbone network several times built on our optical transmission technology. We also -- internationally, we're also engaged in several broadband opportunities with Tier 1 -- multiple Tier 1 opportunities in the Middle East. We're in a good position in the network, but at least this will take some time to close, but we are in advanced stage with trials and other engagements and commercial engagements there as well. And then in South Asia, we are also engaging in the wireless and a metro aggregation opportunity with a Tier 1 operator. And in both of these include our 4G, 5G equipment, our packet transport equipment as well as our Metro WDM equipment. So this is also one of the large deals that we are working on, where we are in advanced stage. And we're looking forward to winning a significant part of these deals to be able to create our business backlog for the future. I will next go on to giving you some color of our business outlook that we see over the next few years. And as you all know, the network traffic worldwide continues to grow, grow rapidly, and right now, we're on the cusp of a significant growth, driven by newer generation applications like Generative AI. These are not the key drivers on the key applications driving the building of AI data centers and the interconnectivity and that's generating a huge amount of traffic. Also application net virtual reality, special computing which is processing high amount of 3D data and doing a huge amount of computing as well as exchanging data with servers located in remote locations. Then multiplayer gaming consuming a high amount of bandwidth because it's working with a high definition video, high definition graphic and that's also causing a huge amount of network growth. And then the growth of streaming video that we are all familiar with. So all of this growth in the technology and the network traffic is driven by enablers of advanced communication technologies, the kind of stuffs that we build, that is 4G, 5G mobile broadband, multi-gigabit fiber broadband and transmission technology and then its computing devices at the edge of the network. So all of this is leading to newer investments, this is driving fresh investments in the fixed and mobile networks worldwide. So some of the things that are happening are the transformation in enterprises and cloud, AI data centers and their connectivity, high bandwidth connectivities. It's a long runway of deployment of 4G and 5G globally. 4G is primarily in a lot of the developing countries where deployment is at an initial stage and 5G in many of the developed economies. And then massive investments in broadband connectivity that's happening in the world over, including developed economies like Europe and the U.S., that there are massive investment programs going on. There's a modernization of utility network, which is demanding the transition from the old TDM to IP networks, and that has been happening for a few years, and we are seeing an acceleration all the adoption of this transformation. Our digitalization of cities and economies, building out of smart and safe cities across the world. So these are some of the many phenomena that we have that's happening. And the outlook for our business over the next few years still looks strong. And all of this is driving our development of key technologies for wireless RAN and crosshaul, our multi-terabit packet and optical transmission technologies and high-speed broadband access with GPON and XGS-PON and associated technologies. So in summary, our business outlook looks strong. There are many new generation applications which are driving our business going forward. And so I think that is what is also driving our investment in technology, in R&D, in catering to the requirement driven by this evolution. So with this, I'll pause over here and we'll open the floor for questions.

[Operator Instructions] First question is from the line of Rishabh Gang from Sacheti Family Office.

Good set of numbers. I wanted to understand what is the total universe of sites which are eligible of 4G, 5G RAN, I understand for BSNL, we have done 100,000 sites as of now. So what is the universe for BSNL? Among that, how much percentage is eligible for a 5G RAN, like what is your best estimate, how much sites will go to 5G upgrade? And what is the kind of cost which will be incurred, let's say, INR 100, it costed for 4G RAN equipment. So how much would it cost for the 5G upgrade? And regarding the 4G, 5G RAN, for the private telcos, like Jio and Airtel have done a good amount of CapEx some years ago. So when do you think the replacement cycle will come from the private telco side?

Yes. So as far as BSNL is concerned, we are still -- first of all, we are seeing a lot more investment that still needs to be run in 4G and I talked about a good network expansion in terms of the saturation sites that is going to come up with BSNL, there's some of the remote sites across the country. So the 4G expansion is a key part of our wireless -- upcoming wireless business. As far as 5G is concerned, there are 2 parts portions to it. One part is 5G upgrades in the existing 4G bands, right? And so that's part of the existing tender that we are executing right now. So that is going to happen, and that's the business that is part of the tender that's going to be executed later on. Apart from that, BSNL is also going to come up with a nationwide tender for 5G in the performance that is the high speed band which is called the 3.5 gigahertz. So that is still in the works. There will be a process of POC of equipment and all those kind of things. So that's going to be something that a nationwide build out, which is -- it depends on the scale at least, the deploy of 5G. And it is certainly going to be on the scale of what the private operators have done.

Can you draw some comparison between the 4G spend per site and 5G spend per site? I want to have some numbers or some percentage.

Yes. So absolute numbers are difficult to give. But if you see the kind of spend that is going to -- that has happened in 4G. And if you take another 20%, 30% more spend that's going to happen in 4G, then 5G is going to be not of that scale, it's going to be smaller because a lot of the initial 5G deployment happens in urban area, right, initially. So that is going to be a smaller percentage of that. And then when 5G adoption happens and 5G monetization happens and like the rest of the operator, I think lot of increase in 5G deployment will also happen across the length and breadth of the country. It's going to happen in phases.

So how much does an upgrade cost? Like how much -- let's say INR 100 is the 4G cost. So how much is an upgrade, 4G to 5G?

So as I said, there are 2 parts: upgrade of 4G to 5G in the existing 4G bands, that's a fraction, right? I mean that's a smaller fraction because it comes with a small amount of hardware and software upgrades. But 5G deployment in the newer, bands in the performance band, that spend is as much as that and if not more than that of 4G RAN, right? Because especially, this is deploying things like massive MIMO with [indiscernible] PR and stuff like that. Advance technology, which gives a very high-performance radio capabilities. Those costs are obviously higher. But on the average, you can look at the 4G side plus, plus kind of a thing, as for per unit site cost.

Got it. On the private telcos, can you give some idea on when did the 4G, 5G CapEx actually started for players like you and Airtel and when do you think the replacement cycle will come and some idea of how much size can come?

I mean -- so 4G -- you already know the 5G deployments that these operators have done. And right now, we see the first phase of deployment that has happened. And going forward, as 5G usage goes up and 5G monetization go up, I mean we expect to see a lot more requirement to happen because this network is still small compared to the overall 4G network. And 4G is still the backbone of the mobile different network for the operators. But as 5G becomes more and more popular, more cost-effective and more newer applications come in, I think 5G network will go up as well and kind of cover the entire country and maybe over time replace the 4G network.

What is the useful life of such equipment?

Well, useful, I think if you look at how the 2G network has been deployed and living and then how 3G got deployed. So it depends on the success of a particular technology. A particular technology can, if it's live for 7, 8, 9 years, it's a technology successful. If the transition happens sooner than it can happen in 5 years. So I mean you have to just look at how things evolved in India to get an idea of that.

Got it. Very interesting. Sir, like we compete with players like Nokia, Cisco and Ericsson, right. So I wanted to ask how much cost advantage do we actually have against these players? And how much of the cost advantage is taken away when these players have an Indian R&D and manufacturing setup. Because I believe all of these 3 players have R&D and manufacturing setup in India. So do we really have a cost advantage there?

Rishabh, I really suggest in the interest of time. We should give an opportunity to other people for asking their question. I'm sure your questions will be covered during the call. I'm sure people will have similar questions. And if not, I'll come back and answer before the end of the call.

Next question is from the line of Ashish Sriram Thavkar from JM Mutual Fund.

Sir, if you can elaborate on the data center side, do we have a role -- obviously you in your opening comment did mention roughly. But are [ we as well as the ] switches are probably -- either going through some differentiation on our part. And also, sir, potentially by what time lines are you targeting some of these players?

Yes. So I think there are 2 parts to the question. What is our role in data centers? Our communication equipment is attribute for the data center connectivity, right? We don't sell equipment inside the data center. It is mainly the high bandwidth connectivity that is required between data centers as the exchange can take sometimes to build backup and all those kind of things. So the data center interconnect is a market that we play in. I also talked about -- you also raised a question about our switches, layer to layer switches. So the switches that we have is mainly for building campus networks and enterprise networks, and they are not -- the application is not inside data centers. They are not top of rack switches and all those kind of things, that's not where we're play in. Our switches are used mainly for building campus networks.

Okay. That's fair enough. Sir, in addition, they recently said that the telco [ automation ] North American region has defeated all the access inventory and since we are now also deploying our investments to tag those markets and obviously, we have won one of those deals. How do you see the landscape evolving especially in the U.S. now?

No. I didn't get the point on access inventories in the U.S. I didn't quite understand that. But in general, I think there's a lot of investment that is happening in the U.S., again, driven by the same things, driven by the cloud, driven by AI, AI data centers and so on. I mean either this is data is for everyone to see, right, how the AI component suppliers, how their business is going. So all of that is going into building AI cloud centers and more and more applications running over there. So the phenomenon that I talked about of interconnectivity that is also, they're very strong in the U.S., right. Apart from that, we're also seeing a huge investment happening in the government, what they call is the BEAD program for rural connectivity across all of the U.S. because U.S. is a very large country and a population well set out. So there's a lot of investment going on in those markets for providing broadband connectivity. So all of these provide us opportunities. The initial opportunities that we have, apart from this, some of the interesting opportunities that we are targeting is modernizing of very old network in the U.S. as you know U.S., they have a very advanced economy with telecom networks, which have been built over a long period of time. So a lot of it is legacy networks which are getting transformed as we speak. And so they have very interesting technology in the area, which are -- which we are engaging with, with several customer projects.

Yes, fair enough. So lastly, this entire BSNL execution, that will happen in FY '25? That's first and second, the EBITDA margins that you reported this quarter around 15%. Is there a -- is this a sustainable number for the entire year?

I didn't get your question fully, but the first part I got, which is that, yes, the current few that we have, the current opportunities that we expect to complete in FY '25.

And the reported EBITDA margin of 15% this quarter that we did. Is that a sustainable number to assume going forward?

So we don't give any guidance on our margins and the financials. But I think you can look at the trend and make your assumptions about that. But as such, we don't give a guidance on these kind of questions.

Next question is from the line of Vimal Jamnadas Gohil from Alchemy Capital Management Private Limited.

I have 2 questions. One is on our visibility post FY '25 in terms of our GPON and DWDM, which is our cash cow, so to say, for our customers ex of BSNL, which is India Private and International customers. So what's the visibility looking like since we have sort of increase our manufacturing capacity, how do we sort of make sure that as and when the BSNL contract ramps down, we utilize our manufacturing capability to the most efficient possible extent. So that's question number one. The second question is for Mr. Dhingra. Sir, on the wireless margins, how do you see the wireless margins panning out over a period of time? I do understand that you don't give out forward guidance. But as and when we -- the BSNL contract comes into our numbers, do you expect the wireless piece to sort of come in line with company average post FY '25?

Yes. So I'll address the first 2 questions about GPON and WDM outside of BSNL. Yes. I mean our -- most of our GPON and WDM business right now is outside of BSNL, most of the private operators from the utilities and from our international customers. And as I mentioned, there is a huge demand for broadband connectivity and for upgrading our backbone network. And these are the places where our equipment is very applicable and very relevant. So as and when we win additional deals based on the increasing demand, I mean, that business looks healthy and looks -- will continue to grow, and that's what our expectation is. As far as manufacturing capacity is concerned, so we -- as we have mentioned earlier that we have a very asset-light manufacturing model, right where in the back end, we work with large EMS vendors of scale, right, for building our -- what we call is the PCB assembly. There is a hardware blocks that go into -- assemble into our systems. So as we scale up for manufacturing capacity in the back end, we just signed up with multiple EMS partners, and they have a lot of capacity, for us, all you have to skill up is our system assembly and test capacity in our factory in Bangalore. So as we scale up our manufacturing capacity, the largest scale up happens in the back end, which is BSNL. So it's a low effort or low intensity investment for us to really scale up and scale down our manufacturing because of the model that we follow. But the reason we have also scaled it up is not only for the BSNL business, but over time, over long-term, we are bullish about how our business is going to grow and grow both in wireless as well as wireline. So a lot of the preparation and the investment that will happen is to address opportunities in the future as well. So, wireless margin?

Yes. See, the -- as I mentioned earlier as well, this is the first wireless projects that we're executing. And as we go along, as we add more wireless orders going forward, we would expect the margins to improve. There is no particular reason to suggest that the wireless margins would be very different from wireline margins in general. And as we ramp up our businesses and as we ramp up our -- let's say, foreign or international orders, you'll see the margins improve and potentially be at the same level for both wireless and wireline products.

Sir, how does the visibility look for international orders for our wireless products post FY '25?

Yes, right. So as I said, we are engaged very deeply with -- we have many opportunities in international markets. And these deals take some time to convert because we go through in terms of trials and commercial cycles and all those kind of things. So we are at the initial phase of international engagement with our wireless products and will close over a period of time. But we do see a lot of opportunities given the huge [indiscernible] we build out that is happening in a lot of the emerging markets and also the 4G replacement that will happen of very old 4G gear that's going to happen in the market as well, as well as 5G expansion in the developed market. So all in all, it's a good opportunities set for us and as far as sale.

Next question is from the line of Khush Gosrani from InCred Asset Management.

Sir, I wanted to understand what is -- how much we would have bid for the BharatNet's Phase-III, what will be our opportunity sense over here?

Could you please repeat the question? I didn't really...

Sir, for BharatNet Phase-III, Stage-III, what kind of order size opportunities there for us?

Okay. In a BharatNet Phase-III, for us as far as the equipment is concerned, comes with 2 parts. One is the GPON equipment, ONTs and OLTs. And the other part -- a larger part are the IP/MPLS routers, which is going to be used in BharatNet. So for both of them, we have very relevant products. And they are -- we are going to -- we are actively working with customers and our system integration partners to bake into this project. Initially, as you know, the BharatNet as a budget is quite a large one, like INR 1,030,000 crores and the equipment budget is roughly 9% to 10% of that. And in the first phase, we see around anywhere between INR 4,000 crores to INR 5,000 crores of equipment, it is getting addressed to the initial tenders. So but that is the overall landscape, and we are going to -- we hope to win a significant part of that.

Sure. And this would be for how many GPs 167,000?

I am not sure about the number of GPs that are getting covered. I'm not -- I don't have the number.

Got it. And one last question, sir, what type of debt numbers we would have to take more debt now going ahead for working capital purposes? What kind of peak debt we would add?

See, again, difficult to give guidance on future numbers. But as a trend, this increase in borrowings is essentially for working capital purposes, which is predominantly led by the wireless project that is getting executed. Now as mentioned earlier, this project, we are expecting to complete this year. And as shipments progress, working capital intensity would increase a little bit from here and then thereafter keeps coming down. So I think within this year, you would see that sort of project execution that the working capital would spike up and then gradually come down.

The next question is from the line of Kaushal Kedia from Wallfort PMS.

My first question is what kind of an order book pipeline are we looking at? On the opportunities front that you mentioned that the BSNL, 4G network, the BharatNet Phase-III coverage for the railways, expansion of utility networks, what is the kind of order book pipeline that we're looking for?

So it is -- these are not orders that we have won as of now, right? I mean we have talked about -- we have order book of INR 7,000 crores, and these are some of the new opportunities, new large opportunities that we are targeting, right. So I can give a flavor of what is the size of expansion of the BSNL 4G network or BharatNet Phase-III, I just talked about that right now. So similarly, I mean, there are Indian railways as well as broadband in retail and operators, we're all quite large opportunities, which will enable our growth for the future and create our business pipeline as well as backlog so this is little hard for me to quantify and say that this is going to be the number going forward quarter after quarter. Just want to give a flavor of what's that.

Sure. Okay. So sir, one more thing that in the previous participant's question, you answered that BharatNet equipment budget is around INR 4,000 crores to INR 5,000 crores for -- in Phase 1.

Yes. This is actually BharatNet Phase-III. But yes, I mean, the overall equipment budget is -- actually the sanction budget is much more than that. But initially, what we are saying in this current phase what is being tendered would be in the range of INR 4,000 crores to INR 5,000 crores, we would say on the equipments.

Next question is from the line of Sachin Jain, an individual investor.

Sir, my question is, the POCs, in which we are doing for a lot of private and utilities. The first is, are there international players we are doing disputes with and where are -- on this POCs, what would trigger this sort of success -- BSNL to get a confirm order. And what is our right to win over there because essentially, we are fighting with Nokias or Ericsson of the world. So can you give more qualitative color on this aspect, sir?

Yes. So I guess your question was specific to wireless to 4G, 5Gs, right? So as the POCs, which are ongoing are across deployment across a few sites, right? It could range anywhere from 5 to 10, 5 to even more than that and it goes through an extensive free trial, which also includes interoperability with the software, with the core and also interoperability with the other radio equipment which is deployed out there because a lot of places, including handovers and all those kind of things are done. So POCs for wireless equipment is of this kind of a nature. Now question is that, how do we would compete with Nokia and Ericsson and all those kind of people. So there are few areas, ours is a more modern 4G equipment with support from many different bands which are deployed by operators. And then we also have a lot of efficient technology with our business. For example, our RAN equipment comes with architecture, come with integrated backhaul, integrated transport, right. So with technology like that, what -- it saves a lot of CapEx and OpEx cost for the operator because typically, RAN equipment is back-ended with a separate backhaul equipment, a router or an equivalent equipment like that. But what we have done is we have integrated a lot of this technology into our RAN equipment, into our [indiscernible]. So as a result of which, is a significant saving to the customer for building his backhaul network, both in terms of -- not only in terms of CapEx, but also in terms of OpEx in having to manage a different backhaul network, right? So apart from that, I mean our baseband unit, which is part of the RAN is also what we call this are Ultra-Converged Broadband access equipment, right? So whenever you deploy our BBU, there is -- the equipment is architecture as such that you could also incur hardware modules from where you could launch your broadband services for homes and enterprises, right? So this huge amount of technology integrations that we have done in our RAN equipment and specifically the baseband unit, this was -- these are some of the big differentiators that we actually project and our customers also appreciate which helps them in optimizing the network cost. So these are some of the areas. And of course, there are many other smaller details that are in regards to this aspect.

How big this opportunity would be from some of this opportunity each...

Yes, yes, yes. So obviously, it is not going to be one shot as big as a large BSNL deployment of 100,000 500,000-plus site, look, the expansion is going to be even more. So these are definitely not going to be one shot deal like that, even if it is a greenfield deployment, a lot of the emerging economies are smaller countries, price of each of them would be in several thousands, of size or tens and thousands of size, but not on the scale of what we see in India. That would be there. But on the aggregate, there would be many opportunities like that. So that's how we see at least international opportunities. So wherever -- and these are all the greenfield networks. But whenever there's an existing 4G, 5G deployment and they're trying to upgrade and stuff like that, it's again, going to be a portion of the network, or fraction of the network, if they want to upgrade either with a different band or replacing old 4G equipment and things like that, all replacing old 4G equipment with our kind of 4G, which is 4G upgradable to 5G, and that's the refresh of 4G equipment that we can do it. So all of this will be portions of the network and will not be as large as one large BSNL network of 100,000 plus size.

Actually for you in Indian, [Technical Difficulty] relevant opportunity size for you, can you give some idea on that also?

When you say a different opportunity per se, for India or in the global?

In the railway Kavach project.

The railway Kavach, from what I know is like around 15,000, 20,000 -- 15,000 sites, which is covering the entire railway network. That's our initial estimate of what's coming in the -- for the tender.

Opportunity for you, if you can highlight?

Yes. So I think the overall scale is 15,000, and it depends on how it is tendered and whether it's goes to single party or it is divided and all those kind of things, so we don't know all the details here, but such is kind of the scope of, there is an opportunity.

[indiscernible] you are providing entire Kavach system -- entire...

Sorry, I didn't understand the question.

On Indian Railways Kavach, what part of opportunity you are addressing is on the connectivity part or if you're providing the entire solution?

Only the connectivity, only the wireline.

Understood. And my last question is...

Sachin, can we give opportunities to the others also, and we can maybe get back with you?

Next question is from the line of Prabir Ratnabali.

I have a couple of questions. First, so far, you have received various order in terms of lease in 4G. So now is it fair to assume that in the next 3 years, the large orders that you were expecting are BSNL 4G to 5G and BharatNet is number one, and related to that, are we going to see the similar kind of execution cycle that we are seeing for BSNL 4G in terms of -- in case of this 5G as well as BharatNet that's 12 to 15 months?

So these projects have been -- roughly, you're right. It's going to be not 12 months. It is going to be more than that, based on the size of the networks that they're going to come up with, that they are going to be tendered. And also when the tender is going to happen. But once it is decided and once the execution happens, yes, each of the opportunity is going to be between 18 to 24 months, I will say, given the scale of things that are going to happen.

And sir, like what we have understood, like in case of 5G, the number of base stations, is it -- am I correct if you tell me that the 5G station are more because the facility is high, wavelength is low compared to 4G. So the base stations will be smaller and the number will be much bigger. So can we assume that as the numbers are bigger because of 5G, the order potential will be bigger also?

So if you look at 5G deployment, I think initial 5G deployments have been focused more towards the metros, right, towards the high usage and high paying customers. So initially, if you look at the 5G deployment that will happen on the private operators is a smaller trend, the overall 4G network. Well, that's for a reasons because they wanted to focus on the customer who would be using it. As 5G becomes more popular and become widespread, the network could be definitely become as big as the 4G network. And also what will happen is that as more advanced technology, advanced radios of massive MIMO and all those kind of things coming and the performance goes up, I think the cost of those radios will also be higher as the advance technologies. So that's the way to really look at it, that over time, the network initial 5G deployments are small, but that's going to go and cover -- not on the geography as we go forward, as our business matures and also a lot of the high performance areas are going to come in, which is also going to drive a lot of CapEx purchases for that equipment.

Okay. Sir, in July of this year, we have come across, even news that Chinese equipment makers like [indiscernible], they are planning to make some JVs with Indian companies. So do you see more competition incoming because when they will be a JV with Indian companies so they can be considered as an Indian entity and they can beat also in Indian projects?

No, I think the -- all the policies about JV with Chinese company, I mean that is not yet clear how that's going to happen. But as far as India product are concerned, I think there's a very clear definition about what Indian indigenous products are, and that is not only designed and manufactured in India, but also the ICR has to exist in India, has to be owned in India, registered in India. And there are other rules in terms of where the profit of the companies have to be, where the headquarters are going to be. So they are very, very well defined tight tools in terms of what defines to Indian company, making indigenous technologies. So we don't see joint ventures or anything like that diluting that kind of a thing, right? I mean, joint ventures, maybe, if at all -- if it happens at all, then it might of affiliated business in India. But as far as [ TrueBlue ] make in India is concerned, I don't think the current rules will enable that for technology, which may be imported or done technology transfer from somewhere else.

Okay. My last 2 questions, sir, if you can help us understanding the potential of data center business and the margin that you have reported this quarter, which is around -- EBITDA margin I'm talking about around 15%, will this be a sustainable margin going ahead?

So data center, as I said, the growth of data centers enables our business because even though we've not sell inside the data centers, where data center interconnectivity is what drives our business. So with the growth of data center, with the growth of traditional data centers as well as the AI, cloud centers and so on, the inter connectivity, it gives us a huge opportunity for our communication equipment. And as far as EBITDA margins are concerned, I think, Sumit has clarified earlier, we don't give guidance of margins and profitability. And I think we have to really make our estimates on the trends that we see, right.

The next question is from the line of Abhishek, an Individual Investor. As there is no response from the current questionnaire, we will move to the next question from the line of [indiscernible], who's an retail investor.

Sir, may I know when was the international order comes to the scale of the Indian product in terms of scale?

Yes. So I think, as we mentioned that our ambition is to become a global OEM in telecom. So a lot of our new investments in sales and marketing is happening in global markets earlier they were in markets in Southeast Asia and Middle East and Africa, and now we are making a lot more sustained investments in advanced economies like the U.S. and Europe and all this kind of things, there will be a lot of opportunities and also relevance for the kind of product and technology that we have. But these cycles are long, this takes a lot of patients, a lot of trials, a lot of investments and the thing that's proof of concept and all those kind of things will happen. So this will happen over time. Over a period of time, of course, we want to see our international business to grow as large as our domestic business, but that's going to happen over a period of time. And while that is happening, we don't want to take our eyes off the Indian market opportunity, which is very exciting. I mean a lot of investments are happening, a lot of growth is happening. This is our own market, we want to make sure that our full focus, and we do not miss out any opportunities over here, while at the same time, we keep growing our international investments. So long story short is that India is going to remain as a focus. As we grow our international business over time, our ambition is to make it as big as the domestic market, but it's going to happen over a period of time.

Sure, sir. And also, can I know what is our company doing in order to secure the international orders when the cycle arrives and what can we do more or what will you do?

Yes, yes. So what we're doing is we are increasing our presence, we are increasing our sales offices, support offices, warehousing, building our teams over there, engaging with customers, setting up labs in many different geographies, engaging with customers, setting up trials and all those kind of things. So those are the activities that are happening, actively participating in RFPs and all this kind of things. So that is what is happening. And that is initial part of engaging with international customers and business, okay?

I think it's probably time. I'm ready to make some closing comments.

Yes. Thanks, everyone. And I now hand it over to Anand for any closing comments.

Thanks, Arnob. So thank you, guys, for asking a lot of good questions. So I just want to close that while we're happy about this quarter, we are also heads on focused on execution and delivering rest of the orders and also to see how we can grow the business more. So the team is very focused on making that happen. And again, I want to thank you for your time and questions.

Thank you very much. On behalf of ICICI Securities, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.