Sanjay has a Master of Science degree from North Carolina State University, USA and a Bachelor of Science degree in engineering from Birla Institute of Technology Mesra, where he was awarded the institute gold medal for standing first in the electronics and communication engineering batch.
Tejas Networks is an India-based optical and data networking products company. Tejas designs, develops and sells high-performance and cost-competitive products to telecommunications service providers, internet service providers, utilities, defence and government entities in over 60 countries. Tejas products utilize a programmable software-defined hardware architecture with a common software code-base that delivers an app-like ease of development and upgrades of new features and technology standards. Tejas is ranked amongst top-10 suppliers in the global optical aggregation segment and has filed over 300 patents worldwide.
Replying to IIFL, Sanjay Nayak said, “we see opportunities for our GPON products, optical transmission products as well as ruggedized switches.”
Tejas Networks has witnessed a decent debut on the equity markets. Can you elaborate your plan on utilising IPO proceedings?
Our IPO proceeds will be used to make increased investments in R&D and to reduce our working capital. We also expect to leverage the IPO to strengthen our company’s balance sheet, which in turn will give comfort to our customers, as we bid for larger deals. We will also increase our international sales and marketing focus, especially for countries in Africa, South East Asia and Americas.
How will GST impact your business and the industry going forward?
At a company level, we don’t see any significant impact of GST, since the taxes we pay are shared with our customers on a pass-through basis.
Can you throw some light on company’s capital expenditure plans in the forthcoming years?
As a technology product company, R&D investments gives us the innovation edge that enables us to create technology-leading, yet cost-competitive products. We track latest technology trends in optical and data networking as well as latest global standards in software-defined networking and 5G and drive our product strategy accordingly.
Going forward, a large part of our capital expenditure will continue to be in R&D investments, which mainly consists of manpower costs. This investment will not only enable us to stay competitive with our current products, but in addition it will also help us introduce new products and features in adjacent technology areas such as GPON/next-generation PON, LTE-based Broadband wireless access and ruggedised Ethernet switches for secured networking. Capital expenses required for increasing our manufacturing capacity will be marginal, since we outsource a large part of our manufacturing to global electronic contract manufacturers.
Will you give us idea about Tejas Networks’ segmental revenue break up for FY17?
In FY17, approximately 63% of our net product and services revenues came from domestic customers. Within India, revenues from government entities (such as BSNL, Railtel and Bharat Broadband Nigam) constituted 44% of our total revenues, whereas revenues from private telecom operators constituted approximately 19% of our total revenues. Internationally, our growth was driven from success in SE Asia, Africa and Latin America, where customers have India-like needs.
With increased usage of data, India is now the world’s fastest growing market for optical networking equipment. India has significant growth potential for many years, since there is a lot of catch-up investments that to be done by telecom operators as well as government entities. With our strong incumbency, long-standing customer relationships and government’s focus on Make-in-India, we are well positioned to benefit from this increased demand for optical networking equipment in India.
Can you give us company’s R&D expenses as a per cent of top line? How has your R&D helps for Tejas Networks to grow in general?
We are an R&D driven company with a strong focus on innovation and intellectual property creation, which has enabled us to compete against global players and successfully win business. In the last three fiscals, while on a YoY basis our R&D investments have increased, but due to a larger revenue base, our R&D expenses have ranged from 8.3% (FY17) to 12.7% (FY15) of our net revenues on a fully-expensed basis. While our global competitors spend between 15-20% on R&D, we get a higher ROI on our R&D investment, due to our lower India-based manpower costs as well as higher degree of design-reuse and our IP. We have filed over 333 patents and recently won the “Most Innovative Product” award for 2016 from Indian Electronics and Semiconductor Association (IESA) and the National Intellectual Property (IP) award for 2017 from the Government of India.
Our products are based on a software-defined hardware architecture, where we leverage our in-house portfolio of over 250 silicon-IP blocks and advanced software code base to create differentiated products. While our programmable platform allows us to get a time-to-market advantage, it also reduces the total cost of ownership for our customers, who use our products to seamlessly transition their networks from the earlier voice-dominated networks to the new data-driven networks.
Our R&D leverage is evident from the fact that we have grown our net revenues from Rs 386 crore in FY15 to Rs 878 crore in FY17, while our headcount only increased from 498 to 600 in the same period.
Do you foresee your company to get smart cities order in future term? Is company planning for applying to get orders?
Yes, we are excited about the opportunities in Smart cities in India, which is one of the major programs that Indian government is pushing, in addition to Bharatnet, which will serve as a backbone for Digital India. With high volumes of data generated by various smart city applications such as video surveillance, security etc., it is inevitable that the backbone of smart cities will need to be a high capacity optical network. Given the security considerations in such network, we see opportunities for our GPON products, optical transmission products as well as ruggedized switches. We are closely tracking various tenders and are working with system integrators and other partners for participating in upcoming bids for smart cities.
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