Welcome to the latest edition of Hidden Gems Weekly. In recent weeks we examined a communication equipment manufacturer, a packaged food exporter building global brand buffers and a niche coatings player riding premiumisation trends. This week, we turn to a company operating at the core of digital infrastructure, where telecom networks, data flows and emerging technologies like AI begin to converge.
For most companies, a year like FY26 would be hard to explain.
A Rs 900 crore loss, rising debt, stretched working capital and no clear earnings visibility usually point to a business under stress.
Yet, in the case of Tejas Networks, a Tata group company, management is framing this not as a breakdown, but as a transition.
That difference in interpretation is where the real story begins.
Tejas Networks Limited 1-Year Share Price Chart
The numbers reflect stress, not stability
Tejas reported revenue of Rs 1,103 crore for FY26, down a whopping 87% from Rs 8,923 crore in FY25, when the BSNL rollout drove a surge in activity.
At the same time, the balance sheet has expanded in ways that are difficult to ignore. Inventory stands at Rs 2,438 crore, receivables at Rs 3,258 crore and net debt has risen to Rs 3,531 crore, up from Rs 3,349 crore in the previous quarter.
Taken together, this is not a business going through a mild slowdown. It is a business where earnings, cash flows and balance sheet are all under pressure simultaneously.
The slowdown was visible well before the full-year numbers
The weakness did not arrive suddenly in the fourth quarter.
Through FY26, revenues remained subdued across quarters, with Q4 revenue at Rs 333 crore and losses continuing despite some sequential recovery.
This suggests that the decline was not event-driven, but structural. This was a consequence of stepping down from a one-off project cycle into a far thinner base of recurring business.
In effect, the company moved from executing a large national rollout to rebuilding its revenue pipeline almost from scratch.
The hangover of a one-time cycle
Tejas’ recent scale was driven by the BSNL 4G/5G deployment, which went live across over 100,000 sites.
But once that cycle peaked, the absence of similar large orders became visible immediately.
Receivables remain tied to BSNL collections. Inventory has been built in anticipation of additional orders, including a delayed add-on purchase order that is still under discussion.
This creates a familiar but uncomfortable setup.
Capital has already been deployed. Revenue is yet to follow.
Investment continued, even as revenue didn’t
What complicates the picture is that the company chose not to slow down.
FY26 saw continued investment in R&D, product development and technology platforms. Intangible assets under development expanded significantly, reflecting ongoing investments in next-generation products and partnerships.
Management’s reasoning is straightforward.
In a deep-tech business, cutting investment risks losing future relevance. And so, despite weak financials, the company chose to invest through the downcycle.
The shift in narrative: from telecom to AI infrastructure
That future is being framed around a structural shift.
Management expects AI to fundamentally reshape network demand, with AI traffic projected to account for over 60% of total network traffic in the coming decade.
This shift is expected to change not just the scale of data, but its nature. This involves requiring higher-capacity optical networks, deeper data center interconnect and a growing layer of edge infrastructure to handle distributed processing needs.
In that narrative, Tejas is no longer just a telecom vendor. It is positioning itself as a participant in a broader AI-led network infrastructure cycle.
A gap between readiness and revenue
On paper, the building blocks are in place. The company has an order book of Rs 1,514 crore, partnerships with global players like NEC and an expanding presence in international markets.
But the financials tell a different story.
A significant portion of opportunities remains at the stage of trials, pilot deployments and early engagements. Revenue conversion has not kept pace with investment.
Returns have collapsed — and recovery is not gradual
This gap shows up most clearly in return ratios.
Return on equity is deeply negative, return on capital employed is below zero and operating margins have turned sharply negative through FY26.
This is not a temporary dip caused by idle capacity.
It is a reflection of a business where fixed costs are already incurred, but revenues are yet to scale.
Which means recovery, if it comes, will not be gradual. It will require a step-change in revenues.
Valuation
And yet, the market is not valuing the company on current earnings.
At a market capitalisation of around Rs 7,200 crore and a price-to-book of roughly 2.5x, the stock reflects expectations of recovery rather than current performance.
This is despite a Rs 909 crore FY26 loss, negative return ratios and limited earnings visibility.
What is being priced in is not FY26.
It is a future where network investments accelerate, primarily driven by AI, data centers and next-generation telecom infrastructure.
Management is pointing to FY27 — but without committing numbers
Management has described FY26 as a year of consolidation and transition.
Several expected projects were delayed, resulting in a revenue shortfall. At the same time, investments were maintained in anticipation of future demand.
Looking ahead, management expects better financial results in FY27, supported by order book conversion, new deals including the NEC partnership and improving business traction.
But there is a limit to this optimism.
The company does not provide revenue or profitability guidance, leaving the outlook qualitative.
The balance sheet is carrying the transition
For now, the balance sheet is absorbing the gap between present and future, with a debt to equity of 1.43 and a poor interest coverage ratio.
Management expects receivables, particularly from BSNL, to reduce over the coming year.
But until that happens, the balance sheet remains exposed to operational and external delays.
What needs to happen from here
The next phase of the story is relatively straightforward to describe, but harder to deliver.
First, existing opportunities need to convert into firm orders and revenue. Trials and pilot projects must translate into commercial deployments.
Second, working capital needs to normalize. Collections from BSNL and other customers must come through and inventory needs to be absorbed into shipments.
Third, revenue growth must begin to outpace the current cost structure, allowing operating leverage to play out.
Without these shifts, the current model remains financially stretched.
The boardroom reflects Tata backing — but capital discipline is the real question
Tejas today is no longer just a founder-led telecom company. It is part of the Tata Group, with Tata Sons as the promoter and N. Ganapathy Subramaniam as Chairman. That brings credibility, access to large opportunities like BSNL, and institutional backing that few domestic peers can match.
At the same time, the company continues to retain its technology DNA, with founders still involved in product development and strategy.
That combination is important.
The presence of a strong promoter group reduces concerns around governance and access to capital. But it also shifts the lens to how that capital is deployed.
The current phase of elevated investment, rising debt and weak profitability suggests that management is prioritising long-term positioning over near-term returns.
Which leaves investors with a more specific question.
Not whether the opportunity exists, but whether capital allocation will translate into sustainable returns.
The story is no longer about capability
Tejas has already demonstrated that it can build competitive products and participate in large-scale network deployments.
It is about timing, execution and financial alignment.
Because the company is effectively betting that future demand will justify current investments.
The question that matters
The Tejas story now sits between two timelines.
One where investments are already made, costs are already real and financial stress is visible.
And another where demand is expected, orders are anticipated and revenues are projected.
The question is not whether the opportunity exists.
It is whether it arrives fast enough.
Because in businesses like this, timing is not a detail.
It is the difference between operating leverage and financial strain.
Disclaimer:
Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Manvi Aggarwal has been tracking the stock markets for nearly two decades. She spent about eight years as a financial analyst at a value-style fund, managing money for international investors. That’s where she honed her expertise in deep-dive research, looking beyond the obvious to spot value where others didn’t. Now, she brings that same sharp eye to uncovering overlooked and misunderstood investment opportunities in Indian equities. As a columnist for LiveMint and Equitymaster, she breaks down complex financial trends into actionable insights for investors.
Disclosure: The writer and her dependents do not hold the stocks discussed in this article. The website managers, its employee(s) and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.