Things to know before investing in Tejas IPO!!!!
IPOs are really
buzzing now as the markets are really happening. Nothing is rocking the markets
as of now and Indian markets are appearing to be very strong as compared to any
other markets. This is the opportunities for companies to mobilize funds and that’s
what many companies are doing. Another IPO lined up is Tejas Networks Limited.
So is it a
good bet to invest in Tejas? Let’s find out.
About the
Company!!!
Tejas Networks Ltd is an India-based optical and data
networking products company with customers in over 60 countries. They design,
develop and sell high-performance and cost-competitive products to
telecommunications service providers, internet service providers, utility companies,
defence companies and government entities (collectively, “Communication Service
Providers”). Their products are used to build high-speed communication networks
that carry voice, data and video traffic from fixed line, mobile and broadband
networks over optical fibre. They are taking good advantage or the Make in
India and Digital India banner.
Promoters!!!
The company is professionally managed and doesn’t have any
promoters. Cascade Capital Management, Mauritius is the major share holder of
the company with 31.38% of shareholding followed by Sandstone Private
Investments holding 6.45%.
Utilization of Funds!!!
The Company has proposed to utilize the Net Proceeds towards
funding the following:
1. Capital
expenditure towards payment of salaries and wages of our research and
development team;
2. Working capital requirement; and
3. General corporate purposes
Now to understand it better to have a look at the financials
of the company. So let’s move to financials:
Looking at the Balance Sheet we can find that:
1) The company has a huge amount of
money invested in Intangible assets and intangible assets in development. This
means that the company is very much into developing new technologies and in
utilization of funds (1) what it has mentioned is that same.
2) The company has a good amount of
reserves making its net-worth Rs 446.69 Crores as on 30.09.2016 as against Long
term debt of Rs 31.38 Crores. However it’s important to note that the companies
short term borrowings is very high at Rs 65.88 Crores as on 30.09.2016 and Rs 17.44
Crores as on 31.03.2016.
3) Another important factor is that the
company’s Revenue for the year 2015-16 was Rs 625.53 Crores and its Debtors as
on 31.03.2016 is Rs 249.37 Crores followed by Creditors at Rs 199.8 Crores.
This is almost 1/3rd of total Revenue. Now may be this industry
operates in such high debtor and creditor levels. Strictly fundamentals is
concerned the company is finding it difficultly in managing its working
capital. Which is also mentioned in the utilization of funds column.
4) Another fact is the inventory
turnover ratio. The company’s inventory as on 31.03.2016 was Rs 231.58 Crores
which is again almost 1/3rd of Revenue. The company does seem to be
struggling with working capital.
5) The company has suffered losses in
the past but considering the fact that it has reduced its debts the finance
cost has significantly come down thereby allowing it to have profits and also considering
the fact that the revenue has been inconsistent, the company appears to be
highly risky.
So after looking
into the financials and its investment in such intangible assets it’s very much
in a different league and therefore we would say that its worth taking the risk
however exercise caution.
Thanks for Joining us.
-RicherInvestor.
Written by Roger Vins (CA, Com)
Disclosure:
No on from RicherInvestor or the author has any financial interest in the Company.
The author is not a research analyst.
No on from RicherInvestor or the author has any financial interest in the Company.
The author is not a research analyst.
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