Tejas Networks IPO, which is open for subscription until Friday, 16 June 2017, has been subscribed 38.32% on the second day of bidding. Of their respective quota of reserved shares, institutional investors bid 32.86%, while the retail investors bid an impressive 109.50% of theirs’. However, non-institutional investors bid a mere 2.04% of their quota. The IPO is worth up to Rs 776 crore, out of which the company plans to raise up to Rs 450 crore through a fresh issue of equity shares, while the existing stakeholders would get the rest via an offer for sale.
Bangalore-based Tejas Networks, which makes products for optical fibre and data networks, may be an attractive bet for a long-term investor willing to ride out a few potential risks to the stock. While the company’s continuous efforts on research & development and investments in technological innovation are at the core of its strength, the same R&D spends and breakthroughs in technology may pose significant risks to its business going ahead.
Angel Broking has recommended to ‘subscribe’ to the issue due to Tejas Networks’ strong revenue CAGR of 24.2% over FY2013-17; improving RoE to 12.9% in FY2016-17; strong operating leverage with asset-light business; strong professional team with significant industry experience; and its technology leadership with a strong patent portfolio across the world.
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IDBI Capital has rated the issue as ‘subscribe’, but has cited high days receivable, which indicates a poor management of accounts receivable, and expansion plans in Africa as potential risks.
Choice Capital has recommended to ‘subscribe’ to the issue, although it has termed valuation slightly expensive. The brokerage house said that based on the positive outlook of the industry and positioning of Tejas Networks in the industry, the forward valuation demand by the company seems to be attractive, provided the momentum in the business in FY17 continues.
SMC Research has rated the issue at 2.5 on a scale of 5, suggesting that the long-term investors may opt for the issue as Tejas Networks is set to benefit immensely under the government’s Digital India and Make in India campaigns.