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.
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.
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%.
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.