Rs 1 lakh to Rs 10 lakh: This Tata Sons backed small-cap company from the telecom space soared over 900 per cent in just two years!
In July 2021, Tata Sons bought a 43.35 per cent stake in the company for Rs 1,884 crore in a multi-step deal that involved the sale of shares worth Rs 500 crore and warrants worth Rs 1,350 crore.
Tejas Networks Ltd, an S&P BSE SmallCap company, has delivered multibagger returns to its shareholders in the last two years. During this period, the company’s share price jumped from Rs 68.60 on 15 October 2020 to Rs 712.60 on 14 October 2022, an increase of 938.7 per cent in the two-year holding period.
An investment of Rs 1 lakh in the shares of this company two years ago would have turned to Rs 10.38 lakh today.
Incorporated in 2000, Tejas Networks is an optical, broadband and data networking products company. It is engaged in designing, developing and sales of high-performance and cost-competitive products, which are used for building high-speed communication networks to carry voice, data and video traffic from fixed-line, mobile and broadband networks over optical fibre. The company’s clientele includes telecommunications service providers, internet service providers, utility companies, defence companies and government entities in more than 60 countries.
Industry dynamics that favour growth
- As per a study done by Market Research Future (MRFR), the global telecom equipment market size is projected to grow at an 11.23 per cent CAGR by the year 2025.
- Increasing number of cellular stations, increased data consumption, need for next-generation ready network equipment for 5G networks and fibre-based broadband networks have driven a new capex cycle across the globe.
- On the domestic front, government policies favour the telecom sector. The government has designed a Rs 12,195-crore production-linked incentive (PLI) scheme for the sector. This scheme aims to boost local production of telecom equipment, reduce dependency on imports and provide an opportunity for domestic manufacturers to focus on exports as well.
Tata Son’s investment in the company proved to be a game changer
On 29 July 2021, the company announced that it executed definitive agreements with Panatone Finvest Ltd, which is a subsidiary of Tata Sons Pvt Ltd. Tata Sons bought a 43.35 per cent stake in the company for Rs 1,884 crore in a multi-step deal that involved the sale of shares worth Rs 500 crore and warrants worth Rs 1,350 crore. Moreover, Tata Sons made an open offer to acquire up to a 26 per cent stake at Rs 258 per share, following SEBI regulations.
This transaction provides an opportunity for Tejas Networks for leveraging synergies with Tata Group with access to wider global relationships. Moreover, the capital infusion strengthens the company’s balance sheet, which enables it to invest for growth and expand its product portfolio.