Tejas Networks Limited (TEJASNET) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q4 and FY '25 Earnings Conference Call of Tejas Networks Limited hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mohit Mishra from ICICI Securities. Thank you, and over to you, sir.

Good evening, everyone. Thank you for joining on Tejas Networks Limited Q4 FY '25 Results Conference Call. We have Tejas Networks management on call represented by Mr. Anand Athreya, CEO and Managing Director; Mr. Arnob Roy, COO and Whole-time Director, Mr. Sumit Dhingra, CFO; Mr. Kumar N. Sivarajan, CTO. I would like to invite Mr. Anand Athreya to initiate with opening remarks, post which we will have a Q&A session. Over to you, sir.

Thanks, Mohit. Good evening, everyone. So thanks for joining the Q4 FY '25 earnings call. I'm here with Arnob, Kumar and Sumit in this room. So I would like to give you a very key update. The first one is as of yesterday, your company completed 25 years. It was incorporated on April 24, 2000. So I have the founders here, Kumar, Arnob Roy and Sanjay Nayak who was our previous CEO. I want to thank them and congratulate them on this fantastic milestone. Thank you, guys. So one key important update I would like to give you is that we shipped 100,000 sites on the BSNL 4G project, that's something that we were on for the last 1.5 to 2 years. So that milestone is a great milestone that we have accomplished as of last quarter. In terms of revenue, Q4, we landed up at INR 1,907 crores. It was 1.4x year-over-year. And for the financial year FY '25, we hit INR 8,923 crores, which is more than $1 billion, and it's 3.6x year-over-year. In terms of profit after tax, we were negative INR 72 crores. And then the FY '25 profit after tax we ended up at INR 447 crores. The order book at the end of Q4 was INR 1,019 crores. And some of the key business highlights is, as I just said, started, we shipped close to more than 100,000 sites for the BSNL 4G/5G network. This is one of the largest single vendor RAN network in the world ever delivered in record time. So I think I'm very proud of the team and also the consortium of TCS, C-DoT and also our customer BSNL for actually helping us make this happen. We also signed a very strategic technology collaboration agreement with NEC Corporation in Japan. And this is for the development of advanced wireless technologies, RAN technologies and also the core and EPC and also a joint go-to-market, right? So as the 2 companies, we can take it to our customers. We also had several key wins on our leading-edge optical platforms, both on the PTN and FTTx mobile backhaul and also for broadband services and power utility networks. And we also are expanding our sales footprint in Americas and EMEA and ANZ, right? In terms of corporate update on the occasion of 25 years, completion of registering Tejas Networks, we are considering -- and considering the performance of the company in the last fiscal year, the Board has recommended a dividend of 25%, which turns out to be INR 2.5 per share, subject to the approval of the shareholders. We also received around INR 123 crores for FY '24 in the first tranche of INR 189 crores as PLI incentives. And we also won the Best Mobile Technology Breakthrough from ETTelecom recently. From a summary point of view, I'm really proud of what Tejas accomplished. In fact, this is the largest revenue that we've had in the 25 years, and it's a blurry milestone in a big number. So I want to thank our shareholders, our investors and also our employees and our customers for helping us achieve this fantastic milestone. Yes, I'll hand it over to Sumit who will go through the financials and other details. Thank you.

Thanks, Anand. Good evening, everyone. For the financial year FY '25, we had revenues of INR 8,923 crores. EBIT of INR 905 crores, profit before tax of INR 698 crores and PAT of INR 447 crores. Looking at the fourth quarter, the revenues were INR 1,900 crores, which is 1.4x year-on-year. EBIT for the quarter was INR 18 crores and PBT of negative INR 45 crores. The profitability for the quarter -- and to that extent, the full year is partly impacted because of the provisions for inventory obsolescence and write-down of about INR 117 crores that we did in this quarter, Q4, the number for the full year was INR 181 crores. We also wrote off certain expenses related to intangible assets under development during the quarter so that sort of has suppressed the profitability for the quarter. Moving to the key financial indicators. Inventory at the end of the quarter stood at INR 2,367 crores. This will get converted to finished goods and get shipped over the next few quarters. Trade receivables at the end of quarter 4 stood at INR 4,884 crores and the increase is mainly because we had higher shipments, particularly on the BSNL 4G project during the quarter. We've collected about INR 1,900 crores during the quarter, and we expect to make further collections over these receivables over the next few quarters as the milestones get completed. Cash position at the end of the quarter was INR 827 crores and a borrowing of INR 3,269 crores, implying a net debt of about INR 2,300 crores. I'll hand it over to Arnob to take over the business update.

Thanks, Sumit. Just wanted to give a little bit of color to the business of FY '25 and the upcoming year. So for financial year '25, the revenue mix was -- India government was 3% of our revenue. This is a year-over-year decline of 66%. And that's primarily because, as you are all aware, the India government business is very tender-driven, and depending on the time line of the tender and the time line of the execution of the tender, the revenues depend on the particular time and the quarter and financial year in which they get executed, and that's the reason why it's very lumpy, that part of the business. India Private grew significantly and was the dominant share. Of course, as we've mentioned, that the BSNL 4G shipments through TCS is considered as part of the India private business. But apart from that, I think we saw a good amount of growth of our wireline business in the India private segment among the private mobile operators. International, we had a year-over-year increase of 18%. In the overall scheme of things, it's still a small number. It was like 3% of our overall business. And it was driven mainly through key shipments to the U.S., Africa, South Asia, both our existing customers and a few new strategic logos as well. Now we closed the year with a backlog of INR 1,000 crores, INR 1,019 crores, where INR 900-plus crores of that was from India and INR 100 crores plus from the international. Moving on to FY '26. As you can make out, FY '25 was a milestone year for us in terms of our revenues and driven by the large BSNL 4G project. So obviously, FY '26 will be different in terms of revenue, revenue profile and so on. And our business of FY '26 has to be seen in the perspective of the revenues of the previous years, right, from FY '24 and so on. So the good thing is that our portfolio got expanded significantly in FY '25 and increased our addressable market. We had -- during the year, we invested significantly in R&D and sales to support the development and execute on the road map for our products, especially in wireless. And the good news is that it has got expanded significantly the portfolio. So we now -- we support 5G or multiple bands, and that gives us a really good opportunity to upgrade 4G networks, not only in India but worldwide. We enhanced our portfolio with advanced 5G massive MIMO radios. So we have now a portfolio of not only our own 5G radios, but also the ones with the partnership with NEC and also leveraging there some of the advanced beamforming technology and all those kind of things to support more sophisticated and advanced features in our areas as well. We also acquired a field-proven 4G/5G core, and that was part of the NEC partnership and a lot of future development in the core is going to happen with the baseline of this core software, which is -- has seen a lot of international deployment. We also expanded our IP/MPLS router family, based on the -- as you know, we've deployed a very large network in the BSNL network for the 4G/5G backhaul. And over the years, we completed the deployment, completed commissioning of that network, which is carrying a significant amount of their mobile traffic as well as their broadband services are carried over this network. We also added to the family by additional set of products, both in the modular as well as the fixed platforms. We announced our optical portfolio from 400 gig and to release 800-gig and 1.2 terabit per channel DWDM systems. This is kind of absolute state-of-the-art in terms of what's available across the world. And with this, it puts us in the league of the leaders in the optical networking products and companies. We also enhanced our FTTx portfolio with XGSPON or with 10 Gig PON products and shipped a few initial customer orders. So -- and with this, we'll see a lot more traction coming for our 10-gig GPON products internationally. Apart from that, I think the markets for our products set, all the product segments, as you know, we have a wireless product segments with the RAN and Core. And for the wireline segment, we have the routing switching. We have FTTx, the broadband, the fixed line services. And the optical, the packet optical and the WTM transmission, they are the 3 product lines in wireline. And the -- all of those product segments are projected to grow globally, not only in India, but also in the international. That gives us a great opportunity, especially with the expansion and the maturing of our existing portfolio. The domestic opportunity pipeline that we have includes large projects in the government sector, which we have discussed before. Many of them are in a very advanced stage of negotiations and so on. And hope to continue over the next 1 or 2 quarters. There are -- we have had several new customers and new application wins in both private and government sectors, which we announced during the year. And we have deployed, executed these projects very successfully and they are substantial business, we expect to expand in FY '26. We had a significant event in terms of the partnership with NEC, which not only gives us access to advanced technologies but also access to global customers and -- which are NEC's customers and also their prospective customers, which helps us in joint go-to-market opportunities with NEC. So with this, we expect our international wireless business to get a significant boost with this partnership. We also invested in expanding our global sales footprint. So we set up more offices in Southeast Asia, in ANC and expanded our operations and sales operations in Americas. And we had also on the back of a few strategic wins in those markets, we think that we will -- it will give us a strong momentum for increasing our international business in FY '26. So that concludes our presentation of the results of Q4 and the outlook for FY '26, and we'd like to open up the floor for questions.

[Operator Instructions] We have our first question from the line of Vimal Gohil from Alchemy Capital Management.

Yes. Firstly, a question for Sumit, sir. Sumit, sir, on this inventory obsolescence and various other write-downs of intangibles, which is amounting to roughly INR 140 crores. This is -- is there any spillover expected in FY '26?

I think evaluation of inventory for obsolescence, write-down, et cetera, or even charging of certain expenses, it's an ongoing evaluation that the company does every quarter whenever we work on our results. So that in various shapes and forms, it keeps on getting evaluated. I think as we completed this project and we were coming towards the end of this year, this initiative was taken and we took these obsolescence and write-offs, write-downs and provisions. We don't -- I mean, it's an ongoing exercise. So there will always be certain provisions that we'll continue to make. But this is also a sort of a onetime significant effort that we have put in.

So basically, what you mean is there can be -- the provisions will happen, but the magnitude may not be as large as this one?

Yes. evaluation, this is -- an ongoing exercise always on a quarterly basis, any organization would do.

Yes. So, I'd like to add that given the nature of our business that we are a product company. We have to continuously invest in many different innovations and also products in anticipation of technology changes or building a newer innovation in our products. And all of them don't often realize fruition, right? So from that point of view, I think it is expected that some amount of our efforts that we put in or the investment that we put in that sometimes need to be written off for inventory, which is out there, which is not salable. So it is a nature of our business, given -- is outcome of the nature of our business, given the kind of the product company that we have. And as Sumit said, we do this determination at the end of every quarter and every year to see what kind of write-offs or provisions we need to do.

Sir, is there a chance that this particular quarter because we finished a large contract -- a mega size contract, is there a chance that this particular quarter, the expenses would have been particularly higher because I would have imagined that this kind of provision would have been scattered over 4 quarters or maybe more or over the year rather, which has happened in one single quarter almost. So how should we look at this? I mean INR 140 crores, of course, it will depend on what -- how much is expensed out? Or what is the kind of revenue we build for FY '26, but my point is that if we continue to have such large provisions going forward, it is going to hamper our profitability when we are entering FY '26 at significantly lower revenue base?

I think typically, at the end of the year, always this exercise is undertaken. And given that this is another large provisions or write-offs that we've taken, we wouldn't expect such large numbers going forward. I think, progressively continue normal provisions will continue to happen. So to some extent, I can say that this is a onetime initiative.

Fair enough, Sumit sir. Sir, the next question is on -- I need a date on 4 specific contracts that we've consistently spoken about in our previous calls. One is on the follow-up contracts from BSNL for 4G and 5G. The second one is on the VIL order win that we had last quarter. The third one is Rail Kavach and the fourth one is on BharatNet. If you can briefly touch upon each of these, where are we in terms of either tender or execution?

Yes. So for the add-on on BSNL, I think we're in advanced discussions on this thing, and we expect, as you can see that this time, these things often take time and beyond what we can plan for. But I can -- we can say they're busy in advanced stage of discussions, and we'll hopefully close in this quarter, we expect it to close by this quarter. Regarding VIL, we won that last year. We did our shipments in Phase 1 and successfully executed the projects. We've got add-on business as well. And that business is expanding, and we hope to expand that business going forward in FY '26 as well as their networks expand. Rail Kavach, I think the tender is getting delayed. We completed our POC successfully. But I think they are taking more time to further tender -- for issuance of the tender and finalizing the specifications. BharatNet, as you know, the -- in most of the circles, the SIs have been assigned, the tender many of them have the POs and their ongoing discussions with the -- on the -- with the system integrators on the particulars of the products and the quantities that will be shipped, they are also in the part of the OEM selection and also finalizing the quantity. So we are again at a very advanced stage of discussions with them, and this is also something that we hope to close in this quarter.

Fair enough. Arnob sir, In your commentary, in your notes, you mentioned that FY '26 will have a different kind of a revenue structure, which is understandable coming from this kind of a base. However, for FY '24, we had closed the year at a revenue growth of close to INR 2,500 crores. With an order book of INR 1,000 crores, how do we expect to sort of be INR 2,500 crores in FY '26?

Well, as you know, we don't give revenue guidance, right? But if you look at our opening backlog and the business pipeline that is in front of us, and that's -- I wanted to give you a flavor of that, both in terms of the large projects as well as the run rate projects from the private sector. If you look at all of that, I think there is a significant -- there is a very good opportunity of having a pretty significant business in FY '26 as well. And there is a good amount of business pipeline built out there and specially with our expanded set of products, I think we are looking at FY '26 very positively.

And sir, just one clarification on what you mentioned here. Some of the orders that you've got or are expected to execute for the newer products, will it be fair to say that this will be a bit more short cycle in nature as compared to what we've done for BSNL. So some of the order intake, which will come within FY '26 will get executed within FY '26, which is why the order book for Q4 may not be as -- may not be -- may not give you a correct picture of what is to come in FY '26, I think there could be a positive surprise.

Let me put it this way, without getting into any specific guidelines. I think most of the opportunities that I talked about, we do expect them to close and get a large part of them getting executed in FY '26. Of course, the larger orders will -- there will be some overflow onto FY '27 also, but a significant part of the opportunities we expect to get completed in FY '26.

Fair enough, sir. Just one last data point, if you can help me with the number of employees that we closed in FY '25? And the capital -- employee cost, we is capitalized this year.

Roughly at around 2,380 employees at the end of the year. And sorry, what was the other question?

Sir, your employee cost that is capitalized this year? Employee cost. Last year, it was somewhere near INR 250-odd crores.

Yes. So about INR 289 crores of cost was capitalized.

We have our next question from the line of [ Akash Mehta ] from [ Canara HSBC Life ].

So just my question is, I mean in continuation to the previous participant. So just wanted to understand in terms of the order book, which is at about INR 1,019 crores, we are expecting. So what kind of addition we are expecting from the major projects that are there in terms of Rail Kavach, the Vodafone Idea one, additional BSNL and BharatNet and other projects that we could see over the next -- I mean getting executed probably over the next couple of years? If you could just help with that?

Yes, I think we don't share specific numbers with respect to each and every deal. And many of them are yet to materialize. They are very close. And so since we give -- don't give specific numbers for every deal, it's very hard to say what is FY '26 is going to look like and what are the numbers that we are expecting from them. But as I think the size of these projects and the opportunities are, you can probably make some good estimate about those. And we look forward to kind of fairly successful FY '26, but not in -- not comparing it with FY '25.

But any broad -- I mean, if you could just help us with any broad opportunity size from that perspective or that would be kind of helpful. I mean not guidance or in terms of revenue, but what you are internally targeting in terms of these projects?

No, I don't have any specific numbers to share with any of them. I mean, each of those large opportunities of BharatNet and the BSNL add on and all those kind of things are in -- I mean there are like several hundred crores and upwards of -- some of them upwards of INR 1,000 crores also. But beyond that, I don't have any specific numbers to share for each of them. But these are large, right?

Understood, sir. Fair enough. And second is on you mentioned that there are certain large projects in government sector that would come through in the next couple of quarters. So can you help us in terms of what kind of project this could be?

Yes. So those are the ones that I think Vimal was referring to, the add-on BSNL, Rail Kavach, BharatNet and so on, both the central and the state BharatNet. So each of these are very large group. Some of them are several hundred crores. Some of them are several thousand crores as well. So those are the large projects where we are hoping to bring a significant share of.

We have our next question from the line of Manish Ostwal from Nirmal Bang Securities.

I have a slightly longer-term question. From last couple of years, we have expanded capability product basket and the geography and we've built teams in different markets also. And you said F'26 outlook, our addressable market is expanding. So if we take a 3- to 5-year view on the business, where the size of opportunity, can you quantify the size of opportunity which we are target to capture or participate? And secondly, in terms of performance evaluation internally of delivery of -- against our budgets, how -- what are the key metrics you look at internally to judge the performance benchmark? So can you share details around these 2 things?

Outlook over the next few years are good because overall, in all the product segments that we operate in, they are all expected to grow significantly anywhere between 3%, 4% going up to 6%, 7% globally. In India, the investments are also growing substantially. India is one of the fastest-growing market. So from an environment point of view, and our products and the relevance of our product point of view, I think we are in a very good position right now. We have -- especially in India, we have incumbency in many of the customer accounts. Our key investment and the key challenge is really growing our international business as well. And it is mainly a question of execution of successful business in a growing market for us. So I think the market growth and opportunity is not a challenge. It's like it's a question of being able to execute successfully, especially with the newer products and the upgraded portfolio that we have. So the second part of the question was regarding KPIs, I think it's very simple. The KPIs are, again, just the financial numbers in terms of revenues, margins, profits and cash flow. So I think all of this has to work out to the numbers and the financial performance of the company. So those are the key parameters that we monitor and we evaluate ourselves on.

Sir, the NEC tie-up which we have. So as per the some credit rating, we have to pay certain royalty yearly basis, so can you quantify the amount? And secondly, from this tie-up, what is the size of opportunity we can envisage for Tejas Network? And corresponding this question is when you say we have increased the size opportunity for -- from the different aspect. But in terms of competitive landscape for participating in that opportunity, can you talk about the competition level in terms of cost structures, in terms of where we are losing the bids? Can you name a few competitors also in this space where we are competing one-on-one?

Yes. So as Anand mentioned, NEC agreement is for development of advanced wireless RAN and core technologies. And as part of that, as part of that also to licensing their products and for joint go-to-market. So with this gives us a lot of access to NEC's existing customers worldwide, who are deploying the products as well as some of the newer opportunities that they're looking at globally, right? So this gives us a significant boost to our joint branding and joint go-to-market with their -- with their existing as well as the newer customers in the international market. So that's the big value coming out of that. Quantifying the number is not possible right now. I mean we don't share that. But we are looking at, of course, significant revenues. And most importantly, they are going to be international business. That's something that we are very keen to really grow and it's very important for our business to increase our footprint globally, and this gives us -- gives this initiative a significant boost. Second part is a competitive landscape. The investment, one of the reasons that we invested significantly last financial year and continue to support that is for accelerating our product road map, I think right now, over the last 12 months, the -- all the different initiatives that I talked about, all the product portfolio expansion that I talked about has now got us into a very good competitive space with the leading-edge product manufacturers across the world. And they are the people that everybody is familiar with in wireless, they are the Nokias, Ericssons and so on. For optical, it's like Ciena, Nokia and so on and routing/switching for the service providers is Nokias and Ciscos and so on. So those are all -- all of them are global competitors against whom we compete not only in India, but also in international markets. And with all the investments that we have made or the development that has happened, we find ourselves in a very good competitive position with respect to them.

We have our next question from the line of Advait Lath from Nippon India Mutual Fund.

Sir, just congrats on a great year. And I just wanted to ask what is the tariff-related use growth or what is the impact of that on us? And how are we looking at that risk in the long or medium term?

Yes. So the full impact of the tariffs and how -- where it lands finally is yet to be determined. As you know, there are discussions that are going on between the different countries. But the way we see it is that we see it with respect to our competitive landscape, most of our competitors also manufacture outside of the U.S., right, I mean, in different geographies, including Asia and various countries in Asia. So I think whatever the tariff impact on India is they're going to have the same tariff impact as well. So I think from that point of view, it's going to be -- it's going to be neutral, right? Because I think they are also again going to be affected by that. I think the part that could potentially impact is that if there is a negative sentiment in terms of business, global business and the investment from our customers go down based on the negative sentiment, if there's a conservative approach that happens in terms of the investment in network. I think that secondary impact is -- probably has a -- could be a larger risk than the exact -- the tariff by itself.

And just a follow-on question on the PLI schemes, when do you think we are eligible till? Which year?

Till FY '27.

And after that, that will cease to exit, right -- exist, right?

Yes, that's right. The current scheme is for 5 years. So it will end in FY '27.

We have our next question from the line of [indiscernible] from FedEx Securities.

I wanted to understand in terms of the write-off, if I see over the last -- since FY '22, that's -- our inventory levels were around INR 200 crores and then -- since then, because of the BSNL contract, we significantly expanded. We also added because there are some component shortages. So write-off, what kind of equipment does it pertain to? Because it should be very significant in proportion to the FY '22 base. And also in terms of intangibles, can we talk about what kind of projects it is related to? That's my first question. Also on the BharatNet contract, we've seen a lot of announcements from system integrators from other companies in the value chain fiber optic companies. So -- and there, as per marketing, we've made an announcement for Tamil Nadu for us as well. So are there any other companies on the electronic equipment side that you are competing with? And what's holding back the announcement coming from Tejas on the scope and involvement in the BharatNet project? So just in terms of how much of the market share in the project, whatever the estimate be on the total magnitude of the project. But what is the market share that we are targeting for this contract?

Well, Specific to BharatNet, as I said, the announcements have come from the system integrators, mainly who have won the deal and those projects have a combination of lot of services, a lot of supply and deployment of fiber and all those kind of things. And then a significant portion is also about the equipment, right? So this is where I think the system integrators are working with the OEMs, with the equipment provider in finalizing them and as well as all the OEMs, including us are going through all the testing and certification process, which are part of -- without which you cannot be deployed in the network. So all that is happening in parallel. The discussions and negotiations with system integrators as well as testing and certification of our products. So I think they will -- as I said, they will probably close in Q1. And whether we announce that or not or it will depend at that point of time whether there's significant enough in terms of announcements and all those kind of things. But this is -- since this is a deal between private entities kind of thing, we'll need to see what can be announced or cannot be announced. However, their announcement is because it's like a public tender, and that's what has got announced over there. Regarding your first part of the question regarding inventory and write-offs, as I said, that the nature of our business that we have to do a lot of experimental development, a lot of trying out new ideas, new inventions and all those kind of things. And some of them may not lead to fruition, may not lead to products getting released kind of thing. So there is always some amount of -- and since we are -- we developed a significant amount of hardware as part of our products, there will be some amount of inventory, which goes stale or which becomes unusable in terms of our business because of products that we will take to production and so on. And similarly, with projects as well because this is the nature of the business, right? If you are in a very direct services kind of business where we are only executing customer contracts and business was based on that then there is a very direct connection to the business as well as in the customer business and the investments in the company. But for us, it's more of a -- we are a deep tech company. There's a lot of investment that goes on to innovation, and some of them -- many of them are successful. Some of them are not successful, and that's the nature of the game. And this happens. I mean, I think this quarter, it has been a large one. And as Sumit said that always we don't expect it to happen to the tune of these amounts. But this is the nature of the business. There's nothing unusual. I think the number is maybe a little more higher this year.

Is it fair to say that the -- on the inventory side also, there was some time that the experimental products that we were doing for that reason there is an inventory write-off? I mean, I'm just trying to understand the -- how old this inventory is on our books? I mean, because most of the buildup has happened over the last two years in inventory.

No, I think the development is ongoing, right? That never stops. It's not always connected to a particular business kind of thing. As you can see, while we were executing the BSNL 4G, the network huge amount of investment kept happening in 5G as well, right, in terms of looking forward for business. So some amount of inventory is connected to that, right? I mean maybe one particular approach we tried, we've tried multiple design and finalize on one of them. The one which is the best performance and kind of a thing, right? So those are experimental stuff that comes into the picture. Some of it is maybe inventory built over to some customer, to some business forecast, and may not have got consumed or kind of thing, right, and or got end-of-life kind of thing. So it's like a combination of this. As long as you're in the hardware business, there is -- those kind of events do happen, especially in the hardware product business, those kind of events to happen. And as I said, they will happen, but maybe always not to the tune that you've seen right now. And same to do with the project write-off. There will be experimental projects, which may not reach commercial success, and we write them off. But -- and this is a one-off large number this year.

And just on my other question, what I was trying to understand, are we competing with international vendors as well in the BharatNet contract? And how -- if you could give us any light on the number and the size of these other OEMs. I mean how -- what kind of degree of OEMs are we competing against? Just to understand what is our right to win in the BSNL contract?

Yes, I think you have to realize that any business that we do, any customer that we compete in are with the same international vendors. So it's not something new for us, right? When we compete in a private operator like Vodafone India or in Airtel or Tata Communications, they're always up against international vendors, and we always have uniqueness and differentiators in our products, which help us win whenever we do kind of a thing, right? So it's the same over here. There are several -- we won business for routers against global competition that all the names that you know of, right? And it's a similar situation over here. And -- so it's just because international competition is there, it doesn't mean our chances are any less. We do that on a regular basis, not only internationally, but also in India. All those global vendors operate in India. So it's a part of it, it doesn't increase or decrease our chances of success in any meaningful way because that's what we do every day.

We have our next question from the line of [ Deepak Sharma ] an individual investor.

As a retail investor, just my concern is, as Tejas is not covered by any research analyst. So from the retail investor point of view, we are looking for some numbers or at least a broader idea about the sector opportunities but without numbers, very hard to judge where we are and will be in the next 2, 3 years. And after all, from stock price to salary or CapEx for revenue, everything is number. I'm not saying you give me the numbers of quarter-on-quarter or even the year. But can you please some -- give the hint what are the exact opportunity size for the sector in India for BharatNet, Kavach and Vodafone and so on. And what are the opportunity size for the global you are looking for FY' 26?

Yes. As I mentioned, we cannot discuss specific numbers and for specific customer opportunity. For the large government tender I said, they range from several hundred crores to several thousand crores. So those are fairly large deals. I mean, may not be as big as one BSNL 4G deal, but significant nonetheless. And so those are some of the significant projects based on which we form the base for our FY '26. But at the same time, our -- a lot of our investment and initiative is towards the private operators, both in India as well as internationally. And each of those opportunities, I would say, the large -- I mean, the smaller customer opportunities are in terms of, I would say, would be in terms of several million dollars, would go up to $5 million to $10 million. And the larger opportunities could go up to $50 million, $60 million kind of a thing also, right, or sometimes maybe bigger than that kind of thing. But it will be spread around. A lot of customers, a lot of different operators in different parts of the world as well as in India. So that is the kind of spread of large deals as well as the smaller deals kind of a thing. And the combination of those would work towards making our FY '26 numbers.

Okay. Now sir, can you put some highlights or any idea about what is the correlation with the CapEx of telecom companies and your revenue, not your -- even the sector factor revenue?

Well, yes, I think their CapEx spend is -- has a direct relation to us. Of course, a lot of the CapEx spend goes into the infrastructure of fiber or towers and power and all those kind of things, but roughly 10% to 15% of their overall CapEx budget goes into active equipment, the kind of stuff that we sell. So when you look at their CapEx spend numbers and projections, I mean that's kind of factor that you can use to get this kind of spend that will happen in the active equipment space.

Okay. Now sir, one more question. Sir, what is the CapEx growth rate you're expecting from the domestic and international markets from the telecom companies in the next 1 or 2 or at least 3 years?

So as I mentioned, I think the overall industry reports show a growth -- projected growth in all the product segments that we have, right, from 3% to 4% going up to 7%, 8%. And our addressable market is fairly large over here. Each of those segments of service providers the wireline is multiples of tens of billions of dollars. And same with wireline also, it's upwards of $30 billion, $40 billion globally. So in each of this wireline and wireless space, it's a pretty large addressable market and growing at a fairly good clip. So from that point of view, I think we are very bullish and encouraged about our prospects going forward, not only in FY '26, but also beyond that.

Okay, just a sub part of this question, this last question. So BSNL you have completed 1 lakh sites of BSNL. So if suppose you are BSNL, if you are competing with Bharti Airtel, Vodafone or even Jio at least how many towers -- how many 4G expanded towers required by the BSNL to compete with at least these 3 companies?

So roughly, from what I know, BSNL has 100,000 towers, but many of the operators have upwards of 200,000. Upwards of 200,000 towers many of the private operators have. So we do look forward to a lot of the expansion of BSNL network to be -- for them to be able to compete with those private operators, and that is a significant opportunity for us, both in terms of expanding the 4G network as well as upgrades to 5G, which is part of the tender that came out, right? I mean there is a significant amount of 5G upgrades as well. So a lot of work going on in that area, a lot of trials and testing and POC is going on. And hopefully, we should see some good business coming out of that, out of that incumbency that we have in the network.

We have our next question from the line of [ Hirenkumar Desai ], an individual investor.

My question was regarding employee benefit expenses. For last 3, 4 quarters, it's around INR 100 crores to INR 110 crores. I'm assuming that this is all fixed cost. So what kind of revenue and EBITDA is required to have breakeven on a quarterly basis?

Yes. So employee cost is predominantly fixed in nature. I think as we progressed over quarters, there has been an increase in the revenue -- in the employee cost, mainly coming out of investments that we need to do in R&D, in sales and marketing and other functions. So a part of our employee cost is also capitalized based on R&D projects that we are working on. So I think from the perspective of quarterly revenue and the revenue required to breakeven, I think a large part of this cost, our general cost structure other than the material cost is fixed in nature, right? So depending on the -- while I'm not giving the exact number, but depending on the margins that you assume, which is basically between 20% to 30% range that could give you the implied revenue required to be recovering the fixed cost that we have.

We have our next question from the line of Vimal Gohil from Alchemy Capital Management.

Sumit sir, can you help me with one more data point. For this particular year, what was the ESOP cost that we recorded in our P&L? Last year, I think we were at INR 107-odd crores. What would be that number for this year?

Vimal it would be roughly around INR 80 crores. We can give exact numbers later.

No problem. But this run rate is expected to be at this level or will reduce?

Look, I think as a function of how we, over time, chose to reward employees, I think over the last couple of years also because of RSUs that were part of the transaction. And otherwise, I think the expense may have been a bit higher. But I think it would generally continue to be broadly at similar levels as well.

And sir, this NEC capital outlay...

Finish. why don't you finish.

Sir, my question was on the NEC initiative. The capital outlay is -- has been recorded in our balance sheet already. And in which line item can we see that?

No, it is not yet recorded. I think as we go along, as the project delivery milestones get completed, it will -- you would see that progressively over the coming year. It will show up in intangible assets under development to begin with. Only a small portion has been recognized in the books.

Sir, I interrupted you in between, you completed your response?

Yes. Yes.

It's time for one last question, please. Okay. Can we close the call?

As you say, sir? If you want to take another question, I will take another, if you want to close, we'll close.

Okay. We'll take one more.

The next question is from the line of [ Manoj Shah ] from [ Lexco ] Investments.

Just wanted to check on this BSNL 4G upgrade order. Does that involve any contract for the maintenance part also? Or it was just the upgradation, onetime upgradation?

No, I think the BSNL contract includes maintenance over a period of 7 years after the network is commissioned. So all these -- in fact in general, any business anywhere we supply and deploy our equipment always comes with multiyear maintenance. And sometimes they get renewed year-over-year. But in this particular case, it's over multiple years, I think 7 years of maintenance also along with the contract.

And what would be the run rate per year for the maintenance?

There is no specific numbers that we can share for this.

Okay. And regarding this BSNL 5G, there was a news item which says that government wants to upgrade it to 5G. So you will -- your company will get first priority of some part of the order would be reserved for you -- for that? Can you little bit elaborate on that? Or it will be on a competitive bidding basis? 5G?

It's a combination. I think a lot of the 5G upgrade, whichever is going to happen in the same existing bands in which 4G is deployed that will come through the upgrade of our equipment. And that's where -- our equipment is designed for that. And even the original tender, which we executed has scope for this 5G upgrade in those bands. So those upgrades will come through our equipment. But there will be newer bands, some of the performance bands of 3.5 gigahertz and so on. So there, we expect to be new tenders, which come out. So there's going to be a combination for these.

What could be the size of this 5G order that you expect to get from this BSNL order?

Again, no specific numbers, and it all depends on the number of sites, the upgrade and all those kind of thing. But it could be -- obviously, it will not be as large as a fresh 100,000 site deployment. But based on the number of sites they upgrade, it will be -- I think the cost will be kind of a fraction of the total -- the base cost, which is there because this will be 5G upgrades, but -- and it depends on the number of sites that gets upgraded that will determine our revenue. But again, it is definitely significant in terms of several hundred crores for sure, right?

So it would be like for the 1 lakh sites what you've upgraded from -- to 4G, so those would get upgraded to 5G, those 100,000 sites?

No, no, no. I don't think that all of those sites will get upgraded to 5G.

It will be fraction of that. Okay, 8:30. So I want to thank everyone for participating in. Have a good evening. Thank you.

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