Tejas Networks Ltd Management Discussions

1. Macro-Economic Overview

In 2024, the global economy showed resilience and clear indications of recovery from the pandemic upheavals of previous years. Despite macro-economic headwinds and geopolitical uncertainties like Russia-Ukraine war, Israel- Gaza conflict and tariff uncertainties, the overall GDP growth was estimated to be 2.6% with both developed and emerging economies appear to be progressively settling at a stable growth trajectory. Indias macro-economic outlook remained robust with positive movements in both public and private investments, fastest growth in manufacturing PMI (Purchasing Managers Index) on the back of manufacturing shift, boost in domestic retail market based on higher disposable income for consumers. Based on the above factors, the country is poised to be the fastest growing large economy in the world in the coming years and projected to have a real GDP growth rate of 6.4% in FY25.

2. Telecom Industry Outlook

A robust telecommunications infrastructure is now an essential service and will contribute significantly to the overall GDP, both globally and in India. Globally there are over one billion people who are not yet connected, quite a few mobile networks which are yet to be upgraded to mobile broadband 4G/5G technology and millions of homes and enterprises yet to have high speed broadband connectivity. Global telecom industry is experiencing significant data growth due to increased adoption of smartphones, bandwidth-intensive applications such as high-definition video streaming, and AI-based consumer and business applications, which will further continue to grow.

This will further increase the adoption of mobile broadband technology, multi-gigabyte fiber broadband and cloud connectivity resulting in higher investment into building 4G/5G networks by operators and mission-critical networks by enterprises. Recent advances in satellite communications and broadcast technologies, and their growing convergence with mobile technologies in the form of NTN (Non-Terrestrial Networks) and D2M (Direct to Mobile) standards, are further reinforcing this trend by enabling cost-effective connectivity and content delivery in remote and underserved regions around the world.

As a result, telecom operators are expected to increase capital investments in mobile infrastructure, broadband access, optical transmission and packet switching networks to ensure that broadband services are delivered with the requisite quality, reliability and in a cost-effective manner.

Total addressable market (TAM), excluding China, for Tejass products is estimated to grow from US$49 Billion in 2024 to US$58 Billion by 2029 at a 5-year CAGR of 3.3%

3. Indigenous Technology Outlook

With the current geo-political situation, the Government of India recognizes that in order to realize the vision of a "Viksit Bharat" by 2047, it is important for the country to achieve technological sovereignty and have trusted technology in all critical telecom product areas that underpin a modern, resilient and secure network infrastructure. We believe that Government of Indias focus on self-reliance and trusted networks will continue to increase in coming years. India is being increasingly viewed as the "Voice of the Global South", so success in India is a credible reference in the emerging markets of Africa, South-East Asia, SAARC and Latin America. Developed economies such as USA, Western Europe, Australia and Japan too are actively refreshing their existing wireless and wireline networks with trusted technology alternatives.

4. Tejas Networks Overview and Positioning

Tejas Networks, a part of the Tata Group, is a leading telecom and networking solution provider is uniquely positioned vis-?-vis competition to address both the market trends of global telecom market growth and Indias vision of self-reliance in technology development. Tejas Networks has developed an end-to-end portfolio of wireless, wireline products substantiated with satellite & broadcast solutions. These include 4G/5G radio access (LTE/NR), converged 4G/5G core, fiber-to-home & fiber-to-enterprise (GPON/XGSPON), optical transmission (DWDM/ PTN/OTN), carrier switching and routing (Ethernet, IP/MPLS), satellite and broadcast networking products.

Tejas Networks is an R&D driven company with over 65% of its workforce employed in R&D. Tejas Networks designs, develops and delivers abovementioned products from its R&D and Manufacturing facilities in India, hence stands for Government of Indias strategic vision of ‘Design in India and ‘Make in India The company is approved under the design-linked PLI scheme for five years.

Tejas is headquartered in Bengaluru (India), with offices across India and in several countries spanning six continents. Tejas is actively contributing to global 5G/6G standards through its work in Indias telecom standards organization (TSDSI), Bharat 6G Alliance, ITU-R Working Groups, 3GPP and O-RAN Alliance. The company has filed 529 global patents of which 351 have been granted.

Tejas is ranked among the top-10 suppliers in the global optical aggregation and optical line terminal markets (source: Omdia). We maintain a robust global supply chain to meet customer expectations through timely deliveries and quality products.

5. Our Customers

Our customer segments include Communications service providers (CSPs) for both mobile and fixed broadband, internet service providers (ISPs), broadband bandwidth providers, Enterprises like utility companies, defense and government entities who build mission-critical networks to meet their in-house telecommunication requirements. Since inception, the company has deployed over one million of its software-defined hardware™ systems in 500+ carrier networks across 75 countries. All major private telecom operators, telecom PSUs and utilities in India use Tejas products in their networks. Tejas is also a domestic supplier of optical and data networking products for various government projects of national importance, having security/ strategic implications such as national knowledge networks and defense networks.

6. FY25 Highlights

FY25 was a landmark year for Tejas Networks with the company registering the highest-ever annual net revenues in its corporate history of 8,923 crore (3.6x of FY24). The company also delivered solid financial performance in terms of operating margins and profitability.

6.1. Significant Business Wins and Execution

•Tejas supplied its radios and baseband equipment for one of the worlds largest single-vendor 4G RAN networks delivering 100,000+ sites in record time

•Signed a multi-year contract with Vodafone Idea, one of Indias leading telecom service providers, as a wireline equipment partner for their pan-India 4G and 5G backhaul networks

•Won multiple contracts from leading electric utilities in India and South East Asia to supply optical transmission and packet transport equipment for their network transformation projects.

•Successfully completed PoC (Proof of Concept) and received initial purchase orders for our network modernization solution from a leading telecom service provider in USA

•Won multi-million-dollar expansion orders for PTN and DWDM products from an existing carrier of carrier customer in Malaysia

6.2 R&D and Manufacturing Highlights

•Tejas significantly scaled up its manufacturing and procurement capacity over the last 18 months. The company has more than doubled its R&D strength over the last two years.

•Inaugurated a Center of Excellence for Wireless Communications in Electronics City, Bengaluru. The center seeks to advance research in frontier technologies, standards and architectures that will underpin next- generation mobile networks as they evolve towards 6G and beyond.

•The company launched and shipped several world-class products in the wireline and wireless segments. These include Massive MIMO Radios, Multi-RAT baseband equipment 5G O-RAN radios, enterprise-grade FTTX products with future scalability to 50Gbps per subscriber, high-capacity coherent DWDM supporting 1.2Tbps per wavelength and C+L bands, and feature enhancements to its IP/MPLS Access/Aggregation Router portfolio.

•Tejas continued to strengthen its IPR repository with 351 global patent grants and 529 global patent filings at the end of FY25.

6.3 Awards and Recognition

•Tejas won the ET Telecom award in the category "Mobile Technology Breakthrough" for its 4G/5G baseband and radio solutions

•Tejas won the Global Connectivity Award (GCA) for the "Best Hardware Innovation" at Capacity Europe, London

•TCS and Tejas jointly won the "Best Interactive Exhibitor of the Year" award at the India Mobile Congress (IMC), New Delhi

•Tejas was awarded the Africa Digital Economy Award 2024 in the category "FTTH OEM Vendor of the Year" at Nairobi, Kenya

•Tejas won the Pandit Deendayal Upadhyaya Telecom Excellence Award for 2023 in the "Telecom Equipment Research and Manufacturing" category from the Department of Telecommunications, Government of India

•Arnob Roy, COO and Executive Director, was elected as the new Chairman of TEPC (Telecom Export Promotion Council) for the period 2025-2027

•Dr. Kumar N. Sivarajan, CTO, elected as a Fellow of the Indian National Science Academy (INSA) from January 2025

6.4 Revenue Overview

Revenue	FY23		FY24		FY25
Products	807	88%	2,149	87%	8,277	93%
Services	113	12%	166	7%	178	2%
Revenue from Sales & Service	920	100%	2,314	94%	8,455	95%
Other operating revenue	2	0%	157	6%	468	5%
Revenue from Operations	922	100%	2,471	100%	8,923	100%

In FY25 Tejas supplied its radios and baseband equipment for one of the worlds largest single-vendor 4G RAN networks delivering 100,000+ sites in less than 18 months by the end of FY25. As a result, it reported all-time high Revenue from Sales & Service of 8,455 crore in FY25 (3.7x of FY24).

Other operating revenue primarily consists of PLI income. Pursuant to the approval received from the Department of Telecommunication under the Production Linked Incentive (PLI) Scheme, Tejas has recognized PLI Incentive of 468 crore during the year ( 157 crore in FY24) considering that there is reasonable assurance that Tejas will comply with the conditions attached to the PLI scheme and that the grant will be received. During FY25, the Company received 123 crore of PLI incentive for FY24 and 189 crore of PLI incentive for H1 of FY25.

6.5 Geographical Mix

Revenue	FY23	FY24	FY25
India Govt	26%	36%	3%
India Private	50%	54%	94%
International	24%	10%	3%
Revenue from Sales & Service	100%	100%	100%

In FY25, revenue contribution from India Private business grew significantly driven by deliveries of 4G radios for the BSNL 4G project.

6.6 Order Book

Our backlog represents the POs received from the customers which remain unexecuted as of March 31,2025 and consists of both products and services orders. A significant portion of our revenues are derived from a small number of customers. This may lead to quarterly fluctuation and seasonality in our revenues. We saw strong order inflows during FY24, which got executed during the year FY25. As a result, our order backlog has decreased from 8,221 crore at the end of FY24 to 1,019 crore by end of FY25. We continue to focus on growing and diversifying our order book through product development and international expansion.

6.7 Financial Highlights P&L Summary

	FY23		FY24		FY25
Revenue from Operations (A)	922	100%	2,471	100%	8,923	100%
Cost of materials consumed	561	60.9%	1,589	64.3%	6,542	73.3%
Manufacturing expenses	31	3.3%	87	3.5%	188	2.1%
Service expenses	88	9.5%	92	3.7%	223	2.5%
Total Cost of Goods Sold (B)	680	73.8%	1,768	71.6%	6,954	77.9%
Gross Profit (C) = (A) - (B)	242	26.2%	703	28.4%	1,969	22.1%
Operating Expenses:	_	_	_	_	_	_
Research & Development (Gross)	259	28.1%	403	16.3%	557	6.2%
Less: Research & Development Capitalized	(177)	-19.2%	(273)	-11.1%	(305)	-3.4%
Research & Development (Net)	82	8.9%	130	5.3%	252	2.8%
Selling, Distribution & Marketing	101	11.0%	157	6.3%	293	3.3%
General & Administrative	72	7.8%	125	5.1%	140	1.6%
Allowance for expected credit loss	(33)	-3.6%	15	0.6%	26	0.3%
Operating Expenses (Net) (D)	223	24.2%	427	17.3%	711	8.0%
Profit from operations (EBITDA) (E) = (C) - (D)	19	2.1%	275	11.1%	1,258	14.1%
Depreciation and amortization (F)	123	13.3%	182	7.4%	353	4.0%
Profit before interest and tax (EBIT) (G) = (E) - (F)	(104)	-11.2%	93	3.8%	905	10.1%

1All metrics are for consolidated financials and in crores (other than percentages and ratios)

FY25 was a landmark year for Tejas, and its revenue increased multifold to reach 8,923 crore. Growth in revenue led to higher gross profit, EBITDA and EBIT.

6.8 Total Cost of Goods Sold

Cost of Materials has increased significantly in FY25 driven by the execution of the 4G project. While our Manufacturing and Service expenses have decreased as % of revenue, but it has increased in absolute terms mainly due to higher provision for warranty, contract workforce, supply chain, logistics, support and related spends, particularly to support the execution of large projects.

6.9 Operating Expenses

Operating Expenses have increased from 427 crore to

711 crore in FY25 (1.7x of FY24). However, as % of revenue, it has reduced from 17.3% to 8.0% in FY25.

Tejas operating expenses mainly consist of employee costs across various functions like R&D, sales and marketing, and

Corporate (G&A). Other key costs include outward freight, sales and promotion cost, rentals (for offices and warehouses), contractors and consultants, etc. Tejas continues to invest significantly in R&D which has led to increase in headcount and R&D costs. Additionally, the freight costs have gone up this year driven by the execution of 4G project.

6.10 Profitability

Tejas reported EBITDA of 1,258 crore in FY25 (vs 275 crore in FY24) and EBIT of 905 crore (vs 93 crore in FY24). The growth was driven mainly due to significant increase in revenue. However, EBITDA has increased from 11.1% to 14.1% while EBIT has increased from 3.8% to 10.1%.

6.11 Balance Sheet Summary

Metric	FY23	FY24	FY25
Inventory	647	3,738	2,367
Trade receivables	518	1,458	4,884
Payables	301	1,839	1,184
Customer Advances	15	974	1,491
Net Working Capital1	935	3,147	4,524
Cash and Cash Equivalents	1,306	641	827
Borrowings	-	1,744	3,269
Net Debt (Borrowings – Cash)	(1,306)	1,104	2,442
Return on Net Worth	(1.5%)	2.1%	12.8%

1Net Working Capital = Current Assets (excluding Cash & Cash Equivalents) net of Current Liabilities (excluding Borrowings and lease liabilities)

6.12 Working Capital

In FY24, Tejas saw an increase in its working capital position in preparation of execution of the large 4G order. The large order book run down in FY25 has resulted in lower inventory. At the same time, receivables have increased with the project execution and deliveries. Advance of 1,460 crore received from TCS as part of the 4G project (currently under current liabilities) will reduce corresponding receivables progressively on completion of the milestones and adjustment of advance against such receivables.

6.13 Borrowings and Net Worth

Borrowings increased in FY25 primarily to meet the working capital requirements for large project execution. As a result, most of the borrowings are of working capital nature. We also have 118 crore of long term borrowings mainly to fund our capex requirements. Return on net worth has increased from 2.1% in FY24 to 12.8% in FY25 mainly on account of increase in profit after tax.

6.14 Key Financial Ratios

Refer Consolidated Financials Note 32.10 (Additional Information to Financial Statements - Ratios)

7. Looking ahead

7.1. Strengths and Opportunities

Strengths	Opportunities
• Converged end-to-end portfolio spanning wireless, optical, packet, satcom and broadcast technologies	• Growing large global telecom market
• Integration of fixed/mobile broadband, transport and routing functions in one chassis	• Rising geopolitical concerns driving demand for ‘Make in India and trusted products
	• Ongoing telco investments in 4G/5G mobile and fixed- line infrastructure
• Large home market in India with supportive Government policies for indigenous R&D and manufacturing
	• Increasing penetration of gigabit fiber broadband (FTTX) services in urban and rural areas
• Proven experience in building country-wide wireless and wireline networks at scale
	• Transformation of utility networks from legacy TDM to PTN and IP technologies
• Cost-efficient operating model with top-tier India-based R&D talent
	• Large-scale digital transformation of enterprises, industries and cities
• Scalable, asset-light manufacturing with multiple global EMS partners
	• Convergence of satellite, broadcast and mobile technologies
• Backed by the Tata Group

7.2 Our Vision and Strategy

Our overarching vision is to shape the future of trusted networks and mobility to support emerging need to connect people and things. We are committed to delivering value to our customers globally with intelligent, sustainable and secure networks, with superior execution.

The foundation to deliver the vision is built on three strategic pillars, namely, i) creating a converged end-to-end portfolio, ii) expand global market reach and iii) adopting futuristic technologies.

Converged End-to-End Portfolio

•Elevate our all-encompassing wireless and wireline portfolio to cater to evolving market demands

•Substantiate our satellite solutions to address emerging Non-Terrestrial Networks opportunities

•Leverage Broadcast and Chip design capabilities to create a unique position in the market.

Expand Global Market Reach

•Expand global presence in focus markets to enhance support to global customers

•Foster strategic partnerships and alliances to increase addressable market

•Leverage the esteemed TATA brand

Adopting Futuristic Technologies

•Actively contribute to global 6G standardization and research efforts, positioning us as leaders in next-generation connectivity

•Incorporate Artificial Intelligence to enhance capabilities in Self Organizing Networks (SON), Network Management system and software development

7.3. Our Core Values

Our core values serve as the guiding framework that shapes and sustains our culture.

Customer Centricity_ - Creating value for our customers at every touchpoint, ensuring their satisfaction and loyalty. Placing the customer at the heart of everything we offer, understanding their needs and making decisions that delight them.

Excellence_ - Committed to innovation, continuous improvement and holding ourselves accountable to the highest standards of delivering exceptional results._

Integrity_- Be honest, reliable, and consistent in our actions, building credibility with all our business stakeholders and the communities we serve.

Collaboration_ - Encourage open communication and teamwork across cross-functional teams to achieve organizational goals. Inspire creativity through a strong sense of team spirit.

Respect_ - Acknowledge the worth and dignity of every individual, regardless of differences. and create an environment of empathy and acceptance

7.4 Business Outlook

In spite of challenges of growing geo- political tensions, the overall global industry outlook in FY26 remains positive. The fundamental drivers of our business such as mobile data usage growth, rising fixed broadband penetration, enterprise digitalization and network transformation are robust. With our converged end-to-end portfolio and well-differentiated wireless and wireline product offerings, our demonstrated ability to execute large projects at scale, we are optimistic that the company will continue to build on its successes in the future years.

7.5 Risks and Concerns

Business	Limited number of large customers; Aggressive Pricing	Diversify markets; Expand portfolio for adjacent opportunities
Industry	Demand variations; economic downturns	Expand geographical footprint and target markets Actively track evolution and contribute to global standards
Technology	Rapid technological changes and ability to catch up
Supply Chain	Limited availability of EMS and component suppliers	Diversify EMS and supplier base
		HR best practices, skill development, quality work and competitive compensation
Operational	Ability to attract and retain high skilled talent
External	Subject to credit risks, interest rate risks, forex risks
		Risk Management framework to mitigate risks
Environment Legal & Regulatory	Legal and tax proceedings customary for a business of our nature. Risk of patent related disputes
		Contesting all outstanding legal proceedings in appropriate forums. Continue to invest in applying for patents and monitor market to prevent unauthorized use of our products or IP

8. Human Capital

As an R&D-driven company, we recognize that human capacity and intelligence are core assets that drive the organizations long-term success. The company proactively seeks to attract and retain top talent in all functions through progressive policies that seek to offer rich and varied career growth opportunities to our employees while promoting a truly inclusive work environment. We continue to strengthen our workforce through strategic talent acquisition, employee development and retention initiatives, while promoting diversity and inclusion. As of March 31, 2025, the company had 2,370 employees which is a ~20% increase over the last fiscal. Over 65% of our employees are in R&D with an average industry experience of 8+ years.

Talent Management Systems

Tejas has embarked on an HR technology upgrade to implement a unified Global HRMS platform. This upgrade will integrate Core HR, Recruitment, Performance Management, Compensation, Self- Service, and Business Intelligence modules.

Talent Development

Tejas Academy, our key Talent development ‘university has trained over 560 students with a learning effectiveness score of 4.2/5 over the years. The Academy focuses on structured programs and skill development through internal and external initiatives. Key internal programs include new graduate induction, technical bootcamps, and Leadership Development programs. External collaborations have seen over 120 training sessions conducted with technology partners. Customer training initiatives reached over 2,750 participants, including BSNL, Vodafone India Limited and other large customers.

Talent Engagement & Volunteering

Tejotsav, our employee-led cultural and engagement platform, continued to build a vibrant and inclusive company culture. Noteworthy events include TPL (Tejas Premier League) with 24 passionate teams and 400+ participants, Tejass Got Talent (500+ participants) and Womens Day celebrations. Tejas employees actively participated in several volunteering initiatives, reflecting our strong culture of social responsibility and community engagement. These activities provided meaningful opportunities for employees to contribute their time and energy toward impactful causes. Some of the key volunteering activities including the Akshaya Patra Foundation, Green June Volunteering, Tata ProEngage21 & Tejas E-Waste Volunteering Program.

9. Sustainability

Our company is committed to its mission of creating value for all its stakeholders and to positively impact the environment and the community at large. As a responsible business, our sustainability strategy is grounded on a robust and transparent ESG (environmental, social and governance) structure with our motto of "Balancing Growth with Sustainability". We are aware of the environmental impact of our products and endeavor that our products are engineered to consume optimum power and operate in an environment-friendly manner throughout their life-cycle. Our business operations too are geared to minimize negative environmental externalities such as implementing E-waste recycling through authorized agencies. On the social aspects, the company strives to reduce employee turnover rate and 100% of our employees earn above the minimum wage. The company has implemented a robust ESG governance framework and has conducted a comprehensive materiality assessment to evaluate ESG risks and opportunities. The company has a supplier code of conduct in place to uphold ethical business practices. We are certified under ISO14001 and ISO27001 affirming environmental management and information security management practices respectively.

10. Corporate Social Responsibility (CSR)

As an enabler of universal broadband and data connectivity, our technologies are the foundation that make modern digital economies possible, catalyze inclusive development and ensure that mission-critical services and businesses stay connected and remain available to all citizens. In addition, as a responsible business, we undertook various CSR initiatives that positively influence the lives of people in our local communities, with a special focus on education.

The company participated in the "Teach for India Fellowship" program which aims to sponsor qualified, volunteer educators to work directly with school students from low-income families in resource-poor environments. We supported the Parivaar Residential School, a program focused on offering care, education, and a safe environment for underprivileged children and enable them to flourish academically, socially, and emotionally. The company also partnered with the Bangalore Rotary Indiranagar Trust to renovate eight Anganwadi schools in rural Karnataka thus playing a vital role in providing essential services such as health and nutrition, immunization, and education to preschool children studying in these centers. Tejas employees actively engaged in volunteering initiatives through the Tata Sustainability Groups Volunteering Flagship and Tata ProEngage programs reinforcing our commitment to sustainability and community service.

Tejas reaffirms its commitment to social responsibility through foundational investments in primary education through our partners: Parivaar (West Bengal), Teach for India (Delhi), Rotary International (Karnataka). These initiatives focus on supporting residential schools, impacting students through teaching fellowships, and restoring Anganwadis. Tejas has demonstrated strong governance, with completion reports and utilization certificates submitted.

The company was instrumental in bringing a significant change in students lives through these initiatives.

11. Internal control systems and their adequacy

Refer Boards Report – "Internal Control Systems"