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Tejas Networks Raises Rs 349.5 Crore From Anchor Investors Ahead Of IPO

Tejas Networks allotted 13.6 crore shares to 17 anchor investors at Rs 257 a piece.



Electrical cables connect computer hardware inside the Barcelona Supercomputing Center (BSC) in Barcelona, Spain (Photographer: David Ramos/Bloomberg)
Electrical cables connect computer hardware inside the Barcelona Supercomputing Center (BSC) in Barcelona, Spain (Photographer: David Ramos/Bloomberg)

Telecom equipment maker Tejas Networks Ltd. raised Rs 349.50 crore from anchor investors ahead of its initial public offer, which opened on Wednesday.

The company allotted 13.6 crore equity shares to 17 anchor investors at Rs 257 per share, according to an exchange filing. Shares have been allotted at the upper end of the price band which was set at Rs 250-257.

Abu Dhabi Investment Authority, East Bridge Capital Master Fund Ltd., Reliance Capital Trustee Company Ltd. and the Colombia Emerging Markets Fund were together allocated almost half of the shares kept aside for anchor investors.

Tejas Networks is looking to raise up to Rs 777 crore through its IPO which will be a mix of fresh issue of equity shares and an offer for sale. The company aims to raise Rs 450 crore from the fresh issuance.

Tejas Networks, which is looking to enter South-East Asia, Africa and Latin America, told BloombergQuint that the company plans to strengthen its balance sheet by using the IPO proceeds to scale up its international operations. Its global business grew 70 percent last year and the company expects the momentum to continue.

Working cost and financial capital has come down in the last two years due to investment in research and development, Sanjay Nayak, chief executive officer and managing director, said.

It is not fair to say just because we have exposure to public sector business, the payment cycles are longer. We are doing more of a project business, which is around 10-15 percent of our business, and that is where the working capital gets stretched.
Sanjay Nayak, CEO and MD, Tejas Networks

Use of Proceeds

While more than 65 percent of the proceeds will go towards working capital, a part of it will be spent on capital expenditure and towards payment of salaries and wages of research and development team. The remaining will be set aside for general purposes, according to the company’s red herring prospectus.

Tejas Networks is an optical and data networking products maker with customers in over 60 countries. It designs, develop and sells high-performance and cost-competitive products to telecommunications and internet service providers, utilities, defence companies and government entities. It has four sales offices in India and six sales offices overseas, from where it generates 35 percent of its revenues.

What Brokerages Say

A significant portion of the company's revenue comes from a limited number of large customers, brokerages say. This is a concern as these customers have a "substantial negotiating leverage" and their loss could have an adverse effect on business, said ICICI Securities in a report.

Angel Broking, which has a 'subscribe' rating on the issues, said a debt-free balance sheet after the IPO and the government's push for a digital India will drive growth momentum for Tejas Networks.

Brokerage Prabhudas Lilladhar, however, expects growth to remain strong over the next two years but sees headwinds from cyclical volatility, increased dependence on public sector units and a less scope for free cash generation. It has an avoid rating on the issue, the brokerage said in its IPO note.