A landmark year for Tejas Networks
I. Industry Overview
A robust telecommunications infrastructure is now an essential service for delivering high-speed connectivity to people, homes, offices and governments. A combination of factors such as increased adoption of newer generations of mobile broadband technologies (4G/5G), multi-gigabit fiber broadband, bandwidthintensive applications such as high-speed business Ethernet, cloud connectivity, proliferation of web-enabled internet devices (IoT) and data center inter-connections are resulting in an expansion of the telecom equipment market. With internet becoming more ubiquitous and use of high-bandwidth services such as high- definition video streaming, social networking, online gaming and e-commerce becoming commonplace, there is a dramatic increase in data traffic in telecom networks. As a result, telecom operators are increasing capital investments in mobile infrastructure, optical transmission, broadband access and packet switching networks to ensure that mobile and fixed broadband services are delivered with the requisite quality, reliability and in a cost-effective manner.
The global telecom service provider equipment market can be broadly classified into wireless and wireline segments. The wireless segment predominantly consists of Mobile RAN (Radio Access Network) and Mobile Core products whereas the wireline segment mainly includes Broadband Access, Optical Transmission, Switches and Routers. With our current portfolio of products, we are able to address a significant portion of this market. At a global level, the total addressable market (TAM) for Tejass wireline products is estimated to grow from US$33 Billion in 2024 to US$50 Billion by 2029. Similarly, the global TAM for Tejass wireless products isestimated to grow from US$44 Billion in 2024 to US$58 Billion by 2029. All of the major geographic markets in the world are significant addressable markets for these product segments.
Our Business
Tejas Networks designs, develops, manufactures and sells high performance carrier-class equipment required for building telecommunication networks. We provide an extensive, end-to- end portfolio of wireline and wireless products that are sold to telecommunications service providers, internet service providers, utility companies, enterprises, defence and government entities to build both fixed and mobile networks. Our end-to-end product portfolio spans across "customer premises" (i.e., networking devices such as fiber modems or switches used at homes, offices or campuses to connect to wide-area networks), "access/edge" (i.e., the outer perimeter of a telecommunications network comprising cell towers, telco offices and edge data centers which connect to end consumers over radio bands, copper or fiber), "metro" (i.e., networks that aggregate and distribute traffic collected from access/ edge networks within a large city or region) and "core" (i.e., networks that interconnect metro networks using high bandwidth transmission) networks.
Product Portfolio
Our portfolio of leading-edge telecom products includes 4G/5G mobile base stations, carrier-grade, multi-terabit optical transmission and switching, fiber broadband access, multi-gigabit
Ethemet/IP switches, as well as access and metro routing products.
• Our products are based on global technology standards such as ITU, IEEE, IETF, MEF 3GPP and are used at different locations in a telecom network including at cell towers, at exchanges, in data centers, utility sites, on customer premises as well as at the point-of- presence (POP) sites of a metro, state-wide or national network.
• The Companys products can address bandwidth requirements starting from a few megabits up to tens of terabits and are used for network applications such as mobile backhaul, broadband access, enterprise services, wholesale bandwidth services, data center interconnectivity, critical infrastructure and network modernization.
• Our products are modular and our programmable software- defined hardware™ architecture employing field-programmable silicon allows us to remotely upgrade our hardware with new capabilities and features as per new customer requirements, standards or technology trends. This enables our customers to adopt a "pay-as-you-grow" approach (i.e., purchase our products/ services incrementally as needed) while adopting new services, and also enables them to extend the life of installed systems through regular feature upgrades without having to invest in new hardware purchases.
• Our software- defined-hardware™ architecture also enables us to deploy the same products in multiple geographies by making country-specific adaptations, thus allowing us to save costs and realize economies of scale.
Our products have been deployed in 75+ countries and we are ranked as a top-10 global supplier of optical aggregation and broadband access equipment.
Competitive Strengths
Since our inception, Tejas has been successfully competing against many of the worlds leading telecom equipment vendors from Europe, USA and China as well as local vendors from India. Our customers often cite the competitiveness of our products and our ability to keep them updated for future, our industry knowledge, technology strengths, world-class quality, highly responsive technical and supply chain support and a proven track record, as reasons for preferring us over our competitors both in India and internationally.
The core competitive strengths of our business are summarized below:
Software-Defined Hardware™ Product Architecture:
Our products are characterized by a flexible architecture based around a proprietary software base and a common hardware platform. We have a portfolio of re-usable "building blocks" of hardware as well as software, which enables us to develop cost- effective and highly customizable products and also provides a time-to-market advantage. Our products utilize a programmable software-defined hardware architecture implemented with FPGAs (field programmable gate arrays), network processors, DSPs (digital signal processors) enabling future-proof hardware realizations and a common software code-base that delivers an app-like ease of development and upgrades of new features and technology standards. Further, our advanced software and hardware integration leads to higher performance and lower costs. We are able to help our customers manage costs by enabling them to extend the life of installed systems through regular software upgrades which help them transition across technology changes in their networks, without having to invest in new hardware purchases. Our software-led product approach also enables us to sell the same product globally by easily making country specific adaptations.
Platform Convergence with Multi-technology Integration:
Our products deliver a greater degree of service flexibility and performance to our customers through cost-effective integration of diverse technologies, access modalities and telecom functions in the same platform. Our leading-edge optical Access/Edge products combine 4G LTE/5G NR mobile RAN, xPON-based fiber-to-the-home (FTTH) broadband, multi-gigabit IP/Ethernet access (GE/10GE/100GE) with terabit-scale backhaul using optical and packet technologies in a compact and energy-efficient shelf ensuring lower total cost of ownership (TCO) for our customers. Similarly, our optical Metro Core/Backbone products converge terabit- scale DWDM transport with multi-terabit OTN switching to help our customers achieve significantly lower cost per bit than our competitors. Moreover, we offer a versatile network management system that delivers substantial savings in operational costs to our customers by unifying service provisioning, monitoring and management across multiple technology layers in the same software.
Next-generation Wireless Products for 4G and 5G:
We have a differentiated portfolio of 4G/5G products for building both mobile and fixed wireless networks. Our company, along with its subsidiary Saankhya Labs, offers a diverse range of high- power 4G and 5G radio units operating in multiple frequency bands, supporting both TDD and FDD multiplexing technologies, while delivering advanced features such as massive MIMO, 5G broadcasting and software-defined radio (SDR) designs. Our novel 4G/5G baseband unit (BBU) platform also integrates optical transport and IP/MPLS routing functions thereby avoiding hardware duplication and simplifying network management. We are currently one of the few telecom equipment companies in the world to offer both 3GPP and O-RAN compliant products for 5G RAN (Radio Access Networks).
Scalable, Low Operating Cost Business Model:
Our business model is based on locating substantially all of our operations in India, except for international sales and support, which results in significantly lower operating expenses as compared to our global competitors. Further, since all our research and development is based in India, we are able to develop state-of- the- art products and are able to generate significantly better returns on our investments, by leveraging the availability of qualified and cost- effective engineering talent in India. We manufacture our products in India through partnerships with multiple, reputed Electronics Manufacturing Services (EMS) companies, enabling us to stay asset-light and cost-efficient in our production while delivering economies of scale to fulfill large production orders. We ensure high customer shipment quality by having an in-house manufacturing facility, that is focused on final integration, testing and quality control of our products, both wireless and wireline. Our turnkey EMS model allows us to adjust our manufacturing capacity to meet changes in customer demand, while optimizing our working capital, since the EMS takes the responsibilities of sourcing and managing long-lead components. For our international sales, in addition to our direct sales force, we leverage our partnerships with local systems integrators as well as others telco OEMs to sell in to their customer base in the global markets. This allows us to keep our sales costs relatively low, while - expanding our reach to customers that may otherwise not be accessible to us.
Market Leadership in India:
Tejas is a leading Company in Indias optical networking market. Our products have been deployed by leading telecommunications operators in India, such as Bharti Airtel Limited, Reliance Jio Infocomm Limited, Vodafone-Idea Limited, Tata Communications Limited, Tata Teleservices Limited and Bharat Sanchar Nigam Limited, and others, with whom we have long-standing customer relationships. Further, large public sector utilities such as Power Grid Corporation of India, RailTel Corporation of India, Indian Railways, Indian Oil Corporation, Oil India Limited, Delhi Metro, Gas Authority of India Limited have been our customers for many years. Our products incorporate several key requirements of emerging markets and are hence well suited for Indian market conditions. Our GPON products have also been selected by multiple pan-India and regional broadband operators for their FTTx rollouts. As a domestic company, Tejas is able to build deeper customer relationships through superior local market support and first-hand knowledge of domestic customer needs to build more relevant products.
Technology and Thought Leadership:
Tejas has been actively participating in various technology and industry forums and Tejas management personnel are well respected thought-leaders. Tejas is one of the founding members of Indias Telecom Standards Development Organization (TSDSI) that aims at developing and promoting India-specific requirements, standardizing solutions for these requirements and contributing to global standardization activities in the field of telecommunications. Our Chief Technology Officer was the first chairman of TSDSI. Senior members of our technology office are contributing to TSDSIs work related to new optical backhaul and 5G RAN standards. Tejas was the founding member and chair of VoICE (Voice of Indian Communication Technology Enterprises) which was established in 2021 to foster the development of Indian Digital Communications Technology (DCT) ecosystem through consolidated efforts of homegrown enterprises and continues to contribute actively to this association. Tejas is a Governing Council member of TEPC (Telecom Equipment and Services Export Promotion Council) set up by the Government of India to promote exports of telecom equipment and services. We also hold memberships in international standards bodies such as 3GPP, BBF (Broadband Forum), WBBA (World Broadband Association), ORAN Alliance and in domestic industry associations such as CII, FICCI and B6GA.
Innovative Products for Focus Applications:
While our products are based on global telecom standards and can be used widely, our focus has been to build highly differentiated feature sets for certain target applications that have a large market potential. Our unique software-defined hardware architecture gives us a competitive edge to our products and enables us to win against global competitors. Our advanced alien wavelength solution on TJ1600 platform for seamlessly transporting high- capacity 100G/200G/400G+ wavelengths without guard bands, on a third-party 10G DWDM network is field-proven with multiple optical vendors and is gaining strong market traction with Tier- 1/ Tier-2 bandwidth service providers in emerging markets. TJ1600S/I is a versatile OTN and packet cross- connect product for backbone networks with a novel disaggregated "pay-as-you- grow" architecture that can realise multi- terabits of packet-optical switching. Across our product portfolio, we have one of the densest realizations of circuit emulation function in the industry today
that allows a service provider to efficiently support legacy TDM services while transitioning to a next-generation packet switched infrastructure. Our mobile backhaul products can transcend multiple technology generations and the same base platform can transition from 2G/3G to 4G/5G through suitable hardware and software upgrades. Unlike competitive offerings in this space, all our products can be managed from a single Network Management System (NMS) that can provide services across multiple technology layers viz., Ethernet, MPLS-TP, IP/MPLS, DWDM, OTN and GPON/ XGS-PON.
Proven Quality with Mature Development Processes:
We are TL9000 and ISO9001: 2008 certified for our quality management system. We have established sophisticated design, development and testing infrastructure in-house, which helps us monitor our quality management closely. Our optical networking products have successfully passed all tests and have received approvals from the Telecommunication Engineering Centre of India and have received Technical Specification Evaluation Certificate, signifying that our products meet the specifications set out by PSU customers in India. We have also been approved under various international standards such as MEF CE2.0, CE marking, cTUVus mark, FCC, ICES, Safety standard IEC60950-1 in connection with our products. Our in-house manufacturing facility complies to both ANSI (USA) and IEC (Europe) standards for Electrostatic Discharge (ESD) control. We also comply with European Union directives on electronics waste, Waste of Electrical and Electronics Equipment and Restriction on the use of Hazardous Substances and our Environmental Management System is ISO 14001 certified. We have built a reputation for technologically-advanced, high-quality products that are supported by our reliable customer service. In FY 2022 we also received ISO 27001 certification for our information security management. We have shipped over 900,000 systems since inception and our products have consistently delivered a field uptime exceeding 99.999% since 2008.
Our Strategic Priorities
Our overarching vision is to create a global-scale, top-tier telecom and networking products company from India. The foundation for this vision will be built on three strategic pillars that include R&D and Innovation, Sales and Marketing, and Supply Chain Management.
R&D and Innovation:
The company will continue to invest in R&D to enhance and expand our world-class product portfolio to deliver end-to-end communication networks for both service provider and enterprise applications. Our R&D efforts are geared towards defining and developing a future-ready product portfolio with leading-edge features, in line with market trends and customer requirements. We will continue to hire top-notch R&D talent and teams to expand the breadth and depth of our product and technology offerings that will enable us to address a larger share of the global telecom and networking capex spend. The company will focus on growing its technological competitiveness by expanding its participation in global standards bodies, strengthening its intellectual property base in cutting-edge areas through in-house design innovations and collaborations with leading research institutes and academia. We will maintain requisite R&D facilities and testing infrastructure to optimize commercialization time and to develop competitive products that meet the required technical and regulatory standards.
Sales and Marketing:
As the countrys leading R&D-driven domestic telecom equipment vendor, we will target to gain a dominant market share in India to gain economies of scale and play a key role in the national mission to build an "Atmanirbhar" telecom sector. Meanwhile, we will continue to expand our international business by capitalizing on the Tata brand strength, synergies and deep customer relationships with global telcos. We are seeing growing traction for our state- of-the-art optical, broadband and data networking products in the international markets and will continue to focus on growing our business share by increasing our product competitiveness and making appropriate sales investments. The new geo-political developments are also motivating customers to diversify their sourcing to reduce their supply chain risks, and we are well positioned to benefit from this trend.
Supply Chain Management:
The company will leverage Government of Indias PLI scheme to build a global-scale supply chain operations with adequate manufacturing capacity to execute large wireline and wireless orders while meeting global industry standards of quality, timeliness and cost-effectiveness. We will enhance our asset-light operational model by diversifying partnerships with leading EMS companies in the country while developing a strong back-end operations for global technical support for pre- and post-sales, from India.
State of the Business
FY24 was a landmark year for Tejas Networks with the company registering the highest-ever annual net revenues in its corporate history of 2471 crore which was a y-o-y growth of 168%. The company maintained its strong business momentum through significant order wins in the wireline and wireless equipment segments and ended the year with a highest-ever closing order book of 8,221 crore. The company also delivered solid financial performance in terms of operating margins and profitability.
A Year of Record-breaking Project Wins
1. BSNLs Pan India 4G/5G Network Roll-out
In response to the Government of Indias ‘Atmanirbhar Bharat call, Tata Consultancy Services Limited (TCS), Centre for Development of Telematics (C-DOT) and Tejas collaborated to design and develop an indigenous telecom stack. Post a well-structured proof of concept and satisfactory evaluation of the indigenous telecom stack, BSNL awarded the mandate to TCS to supply, install and commission the pan-India 4G/5G mobile network across 100,000 sites.
Tejas is the supplier of 4G/5G baseband and radio units for this network and received its single largest order of 7,492 crore from TCS. We have shipped equipment for over 10,000 sites by the end of FY24 and are well-poised to complete the project by end of this year.
This project is a landmark development in Tejas corporate history. This is a one-of-its-kind project in terms of scale, indigenously development technology and execution complexity Tejas is playing its part in bridging the digital divide and in enabling BSNL to enhance its competitiveness. It is the first wireless project for Tejas and demonstrates our strong product development and execution capabilities. The company is fully dedicated and focused on its successful execution which will also position us strongly for similar opportunities in future across India and the World.
2. Single Largest Wireline Equipment order of 696 cr
Tejas won the single largest wireline equipment order of 696 crore in our companys history for supplying over 13,000 units of its state-of-the-art TJ1400 access and aggregation routers for BSNLs nationwide IP/MPLS based Access and Aggregation Network (MAAN). The company won this tender while competing with global top tier vendors basis technical and commercial evaluation. The company completed supplies for the MAAN network by the end of FY24.
3. Transformative Network Deployment in Italy Fibreconnect, a wholesale telecom infrastructure developer in Italy, commissioned a country-wide, end-to-end fiber network using our full range of optical networking and broadband access products. Tejas was the sole supplier of optical networking and broadband access products and deployed its full range of products including GPON/XGS-PON, fixed LTE and PTN technologies for Access and Aggregation, multi-terabit OTN/DWDM systems for metro and backbone, and ONTs for business and industrial premises. The entire network is being managed using TejNMS, the companys universal multi-technology network management system.
4. Partnership with Telecom Egypt
The company entered into a strategic partnership with Telecom Egypt for the replication of Indias BharatNet and NKN (National Knowledge Network) projects in Egypt.
R&D and Manufacturing Highlights
1. Tejas significantly scaled up its R&D and Manufacturing infrastructure and also opened a new R&D facility in Chennai. The company registered a 2.5x growth in R&D strength over the last two years.
2. The company launched and shipped several world-class products in the wireline and wireless segments. These include 4G/5G Multiband Radios, IP/MPLS Access/Aggregation Routers, GPON/XGS-PON Micro-OLTs, Multi-terabit DWDM with 1.2Tbps transmission per wavelength, and SaaS-based Advanced Broadband Manager.
3. Tejas continued to strengthen its IPR repository with 446 patent filings at the end of FY24.
4. Tejas received 32.66 crore as design-linked PLI incentives for FY23. The company is approved under the design-linked PLI scheme for five years.
Awards and Recognition
1. Tejas received the 2023 Voice and Data Excellence Award in the "Make in India" category for our Carrier Router portfolio
2. Our TJ1600 product selected as the "Best Indian IPR of the Year in Telecom" at the India Mobile Congress (IMC), New Delhi
3. Tejas won the "Leading PON-based Smart City Service" solution award at Network X event in Paris
4. Tejas was honored as the "2023 Public Company of the Year" by Light Reading, USA at their annual Leading Lights Awards
5. Tejas was voted as the "Most Outstanding Company in India" in the Technology Hardware & Equipment sector at the 2023 Asiamoney Outstanding Companies Poll (Singapore)
6. Tejas was conferred DataQuest Indias "Pathbreaker of the Year" Award in 2023
7. Tejas was recognized as a representative vendor in 2023/2024 Gartner? market reports on Optical Transport Networks and O-RAN/vRAN/RIC.
II. Results of our operations
Our statement of function wise profits and losses is as below:
| Particulars | Standalone | Consolidated | ||||||
| 20241 | % | 2023 | % | 2024 1 | % | 2023 | % | |
| Revenue from operations (A) | 2,370.46 | 100.0 | 871.05 | 100.0 | 2,470.92 | 100.0 | 921.54 | 100.0 |
| Cost of materials consumed | 1,584.76 | 66.9 | 559.31 | 64.2 | 1,589.28 | 64.3 | 561.10 | 60.9 |
| Manufacturing Expenses | 76.59 | 3.2 | 27.42 | 3.1 | 86.61 | 3.5 | 30.83 | 3.3 |
| Service Expenses | ).66 | 2.8 | 54.60 | 6.3 | 92.33 | 3.7 | 87.93 | 9.5 |
| Total Cost of Goods Sold (B) | 1,728.01 | 72.9 | 641.33 | 73.6 | 1,768.22 | 71.6 | 679.86 | 73.8 |
| Gross Profit (C) = (A) - (B) | 642.45, | 27.1 | 229.72 | 26.4 | 702.70; | 28.4 | 241.68 | 26.2 |
| Operating Expenses: | ||||||||
| Research & Development (Gross) | 387.02 | 16.3 | 2 37.90 | 27.3 | 403.42 | 16.3 | 258.97 | 28.1] |
| Less: R&D Capitalized | (263.96) | (11.1) | (159.39) | (18.3) | (273.11) | (11.1) | (176.56) | (19:2)] |
| Research & Development (Net) | 123.06 | 5.2 | 78.51 | 9.0 | 130.31 | 5.3 | 82.41 | 8.91 |
| Selling, Distribution & Marketing | 147.84 | 6.2 | 94.90 | 10.9 | 156.79 | 6.3 | 101.00 | 110 |
| Allowance for expected credit loss | 17.76 | 0.7 | (33.32) | (3.8) | 15.21 | 0.6 | (32.97) | (3.6) |
| General & Administrative | 88.49 | 3.7 | 42.34 | 4.9 | 124.96, | 5.1 | 72.34 | ; 78 |
| Operating Expenses (Net) (D) | 377.15 | 15.9 | 182.43 | 20.9 | 427.27 | 17.3 | 222.78 | 24.2 |
| Profit from operations (EBITDA) (E) = (C) - (D) | 265.30 | 11.2 | 47.29 | 5.4 | 275.43 | 11.1 | 18.90 | 2.1 |
| Depreciation and amortization (F) | 161.23. | 6.8 | 105.13 | 12.1 | 182.45. | 7.4 | 122.50. | 13.3 |
| Profit/(loss) before interest and tax (EBIT) (G) = (E) - (F) | 104.07 | 4.4 | (57.84) | (6.6) | 92.98 | 3.8 | (103.60) | (11.2) |
| Other Income | 64.08 | 2.7 | 77.18 | 8.9 | 64.66 | 2.6 | 78.56 | 8.5 |
| Foreign exchange loss | 9.32 | 0.4 | 2.85 | 0.3 | 9.50 | 0.4 | 2.41 | 0.3 |
| Finance costs | 35.08 | 1.5 | 5.20 | 0.6 | 47.92 | 1.9 | 15.20 | F6 |
| Profit/ (Loss) before tax | 123.75 | 5.2 | 11.29 | 1.3 | 100.221 | 4.1 | (42.65) | (4.6) |
| Tax expense: | ||||||||
| Current tax expense/(benefit) | 21.66 | 0.9 | I - | - | 21.79 | 0.9 | (0.32) | (0.0) |
| i Deferred tax expense/(benefit) | 20.11 | 0.8 | 8.25 | 0.9 | 15.45. | 0.6 | (5.92) | (0.6) |
| iProlit/(l.oss) after tax | 81.98 | 3.5 | 3.04 | 0.3 | 62.98; | 2.5 | (36.41) | (4.0) |
| iEarnings/ (Loss) per share (Par Value 10 each) | ||||||||
| !(a) Basic | 4.83 | 0.20 | I 3.71 | (2.46) | ||||
| (b) Diluted | 475 | 0.19 | I 3.65 | (2.46) |
Revenue from operations in crore
| Particulars | Standalone | Consolidated | ||
| 2024 | 2023 | 2024 | 2023 | |
| Product revenue | 2,138 10 | 805 46 | 2,148.77 | 806 56 |
| Service revenue | ||||
| Installation and commissioning revenue | 13.01 | 8.41 | 13.44 | 8.42 |
| Annual maintenance revenue | 54.95 | 52.31 | 55.17 | 52.77 |
| Other service revenue | 7.80 | 2.90 | 96 94 | ! 51.82 |
| lotal services revenue | 75.76 | 63.62 | F | 113.01 |
| Other operating revenue | 156.60 | 1.97 | 1 | 1.97 |
| Revenue from operations | 2,370.46 | 871.05 | 2,470.92 | 921.54 |
All the below discussions are based on consolidated financials
Revenue from operations (Net revenues)
Our revenue from operations increased by 168.1% from 921.54 crore for FY 2023 to 2,470.92 crore for FY 2024.
In FY 2024, our India business grew by 197% YoY overall. Within
that, we saw growth in the India-Government segment (247% YoY growth), led by business from BSNL. The India-private segment grew 172% YoY, led by business from TCS and we also secured new application wins in major telecom operators. India-private business contributed to 54% of the total revenues on a larger revenue base compared to 50% in the previous year.
During the year, total international revenue share was 10% as against 24% during the previous year. On an absolute basis, international revenue increased 3% YoY.
Sale of products
Our revenue from the sale of products grew by 166.4% from 806.56 crore for FY 2023 to 2,148.77 crore for FY 2024. The revenue increase was primarily due to increase in our India-private revenue. Product revenues were 93% of net revenues (excluding other operating revenue) for FY 2024 (previous year 88%).
Sale of services
Our revenue from the sale of services grew by 46.5% from 113.01 crore for FY 2023 to 165.55 crore for FY 2024. AMC revenues contributed to 33% of the total service revenues. Service revenues were 7% of net revenues (excluding other operating revenue) for FY 2024 (previous year 12%).
Other operating revenue
Other operating revenue majority consist of PLI income. Based on an application made by the Company during the year for the PLI for the financial year ended March 31, 2023, the Company has received 32.66 crore by March 31, 2024 which has been recognized as income during the year. Further, the Company is eligible for the PLI for the year ended March 31, 2024, for which there is reasonable assurance that the company will comply with the conditions attached to the PLI scheme and that the grant will be received and thus has recognized an income of 123.70 crore towards such PLI. Hence the total PLI accounted is 156.36 crore.
Customer concentration
We are in a B2B business and significant portion of our revenues are derived from small number of customers, which is inherent nature of our industry. This may lead to quarterly fluctuation and seasonality in our revenues.
We saw strong order inflows during the year and our backlog increased to 8,221 crore as of March 31, 2024 ( 1,934 crore as
of March 31, 2023). This increase was significantly led by TCS (BSNL 4G/5G project). Our backlog represents the POs received from the customers which remain unexecuted as of March 31, 2024 and consists of product as well as service orders. Out of this, the Company expects to recognize revenue of around 93% within the next one year and the remaining thereafter.
Cost of materials consumed
Our cost of materials consumed increased by 183.2% from 561.10 crore for FY 2023 to 1,589.28 crore for FY 2024. The increase is pre-dominantly on account of increased revenue. Function wise expenses
• Our manufacturing expenses increased by 180.9% from 30.83 crore for FY 2023 to 86.61 crore for FY 2024 primarily due to increase of production capacity and warehouse and also increase in employee benefit expenses and subcontractor charges. The increase was broadly in line with the increase in scale of operations. As a percentage of our net revenues, the manufacturing expenses in FY 2024 increased to 3.5% from 3.3% in FY 2023.
• Our service expenses increased by 5% from 87.93 crore for FY 2023 to 92.33 crore for FY 2024 primarily due to increase in employee benefit expenses and warranty expenses. As a percentage of our net revenues the services expenses in FY 2024 decreased to 3.7% as compared to 9.5% in FY 2023.
• As a result, our gross profit in absolute terms increased by 190.8% from 241.68 crore for FY 2023 to 702.70 crore for FY 2024. During the year the gross margin increased to 28.4% of net revenues.
• Our research and development expenses on a gross basis increased by 55.8% from 258.97 crore (28.1% of net revenues) for FY 2023 to 403.42 crore (16.3% of net revenues) for FY 2024 primarily attributable to increased employee benefit expenses and technical consultancy charges. Our research and development expenses, net of capitalisation grew by 58.1% from 82.41 crore for FY 2023 to 130.31 crore for FY 2024. As of March 31, 2024 we have filed for 446 patents of which 335 have been granted.
• Our selling, distribution and marketing expenses grew by 55.2% to 156.79 crore (6.3% of net revenues) during FY 2024 from 101 crore (11.0% of net revenues) during FY 2023. This is primarily on account of the increase in employee benefit expenses, travel expenses and freight cost.
• Allowance for expected credit loss (ECL) has increased from (32.97) crore in FY 2023 to 15.21 crore in FY 2024. The company has provided for the Allowance for ECL as per the policy in the current year. The current year provision for ECL is a result of increase in debtors balance. We continue to focus on collecting the overdue amount receivable from customers.
• Our general and administrative expenses grew by 72.7% to 124.96 crore (5.1% of net revenues) during FY 2024 from 72.34 crore (7.8% of net revenues) during FY 2023 primarily on account of increased employee benefit expenses and professional charges.
Employee benefits expense
Our gross employee benefits expenses grew by 52.3% from 394.46 crore for FY 2023 to 600.93 crore for FY 2024. This was primarily due to increase in head count and also on account of increase in annual compensation required to retain talent. The head count hasincreased from 1,417 as on March 31, 2023 to 1,980 as on March 31, 2024 of which 1,272 are from the R&D function. In addition to R&D, we continue to focus on recruiting talented workforce across all functions, in line with our expected growth plans.
The employee benefit expense includes share based compensation expense (for ESOP/RSU granted), recognised in accordance with Ind AS 102 of 107.30 crore for FY 2024 compared to 59.92 crore for FY 2023.
Other Expenses
Our other expenses increased by 73.6% to 253.19 crore for FY 2024 from 145.85 crore for FY 2023. The increase in other expenses was primarily on account of increase in subcontractor charges by 21.93 crore (on account of increase in head count), increased travel expenses by 9.83 crore and increased professional charges by 9.36 crore.
EBITDA
Our EBITDA as a % of net revenues increased during the year to 11.1% compared to 2.1% in the previous year. The EBIDTA % increase was primarily on account of increase in revenue and the impact of operating leverage as significant portion of the costs are fixed in nature.
Finance Costs
Our finance costs increased by 215.3% from 15.20 crore for FY 2023 to 47.92 crore for FY 2024. The increase was mainly on account of interest expense on borrowings of 21.91 crore incurred during the current year on account of borrowings for working capital purposes and 12.31 crore towards recording of non-controlling interest cost of Saankhya Labs Private Limited as financial liability.
Depreciation and amortization
Our depreciation and amortization costs increased by 48.9%, from 122.50 crore for FY 2023 to 182.45 crore for FY 2024. This was attributable to increase in amortisation of intangible assets by an amount of 31.29 crore (mainly due to higher capitalization of product development expenses) increase in depreciation on property, plant and equipment amount by 23.09 crore and increase in depreciation of right-to-use assets by 5.57 crore. As a % of net revenue, depreciation and amortization costs reduced from 13.3% in FY 2023 to 7.4% in FY 2024.
Other income
Other income decreased from 78.56 crore for FY 2023 to 64.66 crore for FY 2024. This was primarily on account of decrease in treasury income on deposits kept with banks and financial institutions.
Profit before tax
As a result of the foregoing, our profit before tax increased from a loss before tax of 42.65 crore for FY 2023 to a profit before tax of 100.22 crore for FY 2024. As a % of net revenues, our profit before tax for FY 2024 was 4.1% compared to (4.6)% for FY 2023. The primary reason for the profit is strong revenue growth and the impact of operating leverage as significant portion of the costs are fixed in nature.
Tax expense
On Standalone basis the Company continues to pay the income tax on MAT basis. During the current year, company had accrued current tax expense of 21.79 crore. The company had a deferred tax charge of 15.45 crore mainly due to increase in timing differences which was offset by increase in MAT credit and losses.
Profit after tax
As a result of the foregoing, our profit increased from a loss of 36.41 crore for FY 2023 to profit of 62.98 crore for FY 2024. As a % of net revenues, our profit after tax for FY 2024 was 2.5% compared to loss after tax of 4.0% for FY 2023.
Earnings per share (EPS)
The details of EPS on standalone and consolidated basis are as follows:
| Standalone | Consolidated | |||||
| Particulars | 2024
(?) |
2023
(?) |
%
Increase |
2024
(?) |
2023
(?) |
%
Increase |
| Basic | 4.83 | 0.20 | 2,315.0% | 3.71 | U.46) | 250.8% |
| Diluted | 4.75 | 0.19 | 2,400.0% | 3.65 | (2.46) | 248.4% |
Weighted average equity shares used in computing earnings per equity share as follows:
| Particulars | Standalone | Consolidated | ||
| 2024 | 2023 | 2024 | 2023 | |
| Basic | 169,704,867 | 153,677,077 | 169,704,867 | 153,677,077 |
| Diluted | 172,495,689 | 157,058,060 | 172,495,689 | 153,677,077 |
On a consolidated basis, our basic and diluted EPS increased by 250.8% and 248.4% respectively on a YoY basis. The increase in weighted average basic share numbers for the year ended March 31, 2024 was on account of exercise of employee stock options and restricted stock units by the eligible employees.
III. Financial condition
A. Sources of Funds 1. Equity share capital
We only have one class of shares, equity shares of par value of 10 each. Our authorised share capital is 260 crore divided into 26,00,00,000 shares of 10 each.
During the year ended March 31, 2024 the Company has issued 23,37,207 equity shares consequent to the exercise of the employee stock options and restricted stock units by the eligible employees of the Company. The outstanding paid-up equity share capital stands at 170.71 crore comprising of 17,07,08,060 equity shares of 10/- each fully paid up as on March 31, 2024. On July 25, 2016, 3,27,27,930 partly paid equity shares issued by the Company to the Tejas Employees Welfare Trust (TEWT) on July 11, 2010, were forfeited. The outstanding paid-up equity share capital including forfeited shares stands at 173.98 crore as on March 31, 2024.
Employee Stock Option Plans (ESOPs) and Restricted Stock Units (RSUs):
The total option pool authorised for grant across three ESOP schemes (ESOP 2014, 2014-A and 2016) is 1,41,01,767. Of these, 7,59,904 are outstanding as on March 31, 2024.
Pursuant to Members resolution, the RSU 2017 plan was approved during FY 2018. The aggregate number of Equity Shares, which may be issued under RSU Plan - 2017, shall not exceed 30,00,000. During the year 25,400 RSUs were granted and an aggregate of 8,60,399 RSUs are outstanding as on March 31, 2024.
Further, Pursuant to Members resolution, the RSU 2022 plan was approved during FY 2023. The aggregate number of Equity Shares, which may be issued under RSU Plan - 2022, shall not exceed 50,00,000. During the year 11,05,692 RSUs were granted and an aggregate of 28,34,221 RSUs are outstanding as on March 31, 2024.
2. Other equity
Securities premium reserve
On standalone and consolidated basis, the securities premium reserve increased from 2,773.34 crore as at March 31, 2023 to 2,830.53 crore as at March 31, 2024. The increase was on account of 8.09 crore for exercise of employee stock options and transfer of a sum of 49.10 crore from employee stock compensation reserve to securities premium reserve upon exercising of ESOP/ RSU in accordance with Ind AS 102.
Employee stock compensation reserve
On standalone basis, the balance as at March 31, 2023 and March 31, 2024 amounted to 75.92 crore and 133.43 crore respectively. On consolidated basis, the balance as at March 31, 2023 and March 31, 2024 amounted to 77.12 crore and 135.32 crore respectively. The increase is on account of ESOP as well as RSU grants resulting in employee share based payment expenses of 106.61 crore (includes 31.95 crore cross charged to Saankhya Labs Private Limited) (previous year 58.72 crore) on standalone basis and 107.30 crore (previous year 59.92 crore) on consolidated basis as per Ind AS 102 and transfer of 49.10 crore (previous year 12.09 crore) to securities premium reserve upon exercising of ESOP/RSU both on a standalone and consolidated basis.
Retained earnings
On a standalone basis, the balance in retained earnings as at March 31, 2024 and March 31, 2023 was 64.28 crore and (13.63) crore respectively. On a consolidated basis, balance in retained earnings as at March 31, 2024 and March 31, 2023 was 6.58 crore and (52.07) crore respectively. Standalone retained earning includes profit 81.98 crore for the current year and consolidated retained earnings include profit of 62.98 crore for the current year. As per the Companys dividend policy, the Board may recommend to distribute dividend upto 25% of the free cash flow of the corresponding Financial Year, out of retained earnings, after taking into account the relevant provisions of the Companies Act. For the year ended March 31 2024, the Board has reviewed and decided not to recommend any dividend.
Networth
On a consolidated basis our networth has increased to 3,149.49 crore as at March 31, 2024 compared to 2,972.96 crore as at March 31, 2023 on account of profits during the year. Our book value per share increased to 184.50 as of March 31, 2024 from 176.57 as of March 31, 2023.
B. Application of funds
1. Property, plant and equipment
Additions to gross block
On a consolidated basis, during the year, we incurred expenditure on property, plant and equipment of 173.70 crore (previous year 64.35 crore), comprising 96.18 crore (previous year 29.45 crore) in Laboratory equipment, 51.27 crore (previous year 15.54 crore) in Plant & Machinery- Cards/Prototypes and Others, 9.92 crore (previous year 6.03 crore) in Computing Equipment, 6.42 crore (previous year 2.14 crore) in Electrical Installation, 4.66 crore (previous year 5.69 crore) in Servers, 2.08 crore (previous year 1.85 crore) in Furniture and Fixtures, 1.95 crore (previous year 2.50 crore) in Networking equipment, and 1.22 crore (previous year 1.15 crore) in Office Equipment.
Deductions to gross block
During the year, we deducted from the gross block 0.35 crore on Computing Equipment ( 0.06 crore in the previous year) on a consolidated basis due to disposal of assets.
Capital expenditure commitments
The estimated capital expenditure commitments (net of advances and deposits) of 79.20 crore as at March 31, 2024 as compared to 39.21 crore as at March 31, 2023.
2. Intangible assets and Intangible under development
Intangible assets comprise of computer software as well as product development expenditure.
Additions of 10.42 crore was made in computer software, as against 11.81 crore in the previous year. During the year, 213.24 crore (previous year 76.59 crore) was capitalised from intangible assets under development to product development. As per accounting policy, the capitalised product development gets amortised over a period of 24 months.
Additions to intangible under development for the year amounted to 282.38 crore (previous year 190.56 crore) which includes capitalisation of employee benefit expense and consultant costs, incurred towards development of the products, of 273.11 crore (refer note 23 and note 25 of consolidated financials) and 9.27 crore towards software.
3. Inventories
During the year ended March 31, 2024 inventory increased by 3,090.88 crore and the inventory balance was 3,737.74 crore as at March 31, 2024, compared to 646.86 crore as at March 31, 2023. Average inventory days outstanding increased to 505 days as at March 31, 2024 as against 301 days as at March 31, 2023.
The increase in inventory is on account of securing some long lead components for expediting delivery of several orders - primarily BSNL 4G RAN. The same will be converted to finished goods and shipped in upcoming months.
4. Financial assets
a) Investments
Investment in subsidiaries is carried at cost as per Ind AS 27, Separate Financial Statements. Investment includes 294.81 crore (previous year 294.81 crore) out of which 10.87 crore is towards investment in the 100% subsidiary company Tejas Communications Pte Ltd and 283.94 crore investment in majority owned subsidiary Saankhya Labs Private Limited.
Pursuant to a definitive agreement entered into by the Company with Saankhya Labs Private Limited (Saankhya Labs) and its shareholders on March 30, 2022, the Company acquired majority stake in Saankhya Labs Private Limited on July 1, 2022. The Company during the quarter ended September 30, 2022, acquired 64.40% of equity shares in Saankhya Labs Private Limited (Saankhya Labs) through secondary purchase at a price of 454.19 per equity share amounting to 283.94 crore (refer note 40 of standalone financials).
Other investment comprises of investment in mutual funds amounting to 333.71 crore as at March 31, 2024 (previous year 262.24 crore), and investment in ELCIA ESDM cluster of 11,000/- as at March 31, 2024 (previous year 11,000/-).
b) Trade receivables
We manage credit risk by regularly monitoring individual customer payment capability, their creditworthiness, their past payment performances, and through routine communication with those customers and the concerned parties.
On a consolidated basis, trade receivables amounted to 1,457.90 crore and 518.03 crore as of March 31, 2024 and March 31, 2023, respectively Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. On a consolidated basis, Average days sales outstanding (DSO) was at 132 days as at March 31, 2024, compared to 140 days as at March 31, 2023.
As per Ind AS 109, we are required to apply Expected Credit Loss (ECL) model for recognising the allowance for doubtful debts.
We use a simplified approach to compute the ECL allowance for trade receivables and contract assets. The movement in ECL during
FY 2024 is as follows: in crore
| Particulars | Standalone | Consolidated |
| Loss allowance as on April 01, 2023 | 94.06 | 105.26 |
| Forex movement | - | (0.28) |
| Changes in loss allowance | 25.53 | 26.44 |
| Receivables Written Off | (7.77) | 1 (11.23) |
| Loss allowance as on March 31, 2024 | 111.82 | 120.19 |
c) Cash and Cash Equivalents
(1) Deposits with original maturity of more than three months but less than twelve months, balances with banks in unpaid dividend account & balances held as margin money or security against fund and non-fund based banking arrangements.
On a consolidated basis, during the year our total cash and cash equivalents (including investment in liquid mutual funds and deposits with financial institutions) reduced by 665.84 crore and stood at 640.52 crore as at March 31, 2024, as compared to 1,306.36 crore as at March 31, 2023. During the year, the decrease in the cash and cash equivalents was primarily due to higher working capital requirements.
d) Other Financial Assets
The details of other financial assets are as follows:
| Particulars | Standalone | Consolidated | ||
| 2024 | 2023 | 2024 | 2023 | |
| Non-current | ||||
| Security deposits | 9.90 | 5.44 | 10.27 | 7.04 |
| Current | ||||
| ! Security deposits | 1.30 | 0.67 | 2.85 | 0.67 |
| Interest accrued but not due | 0.42 | 3.98 | 0.64 | ; 4.12 |
| Foreign exchange forward contracts | 2.57 | 0.02 | 2.57 | 0.02 |
| Government grant i (Production & design ! linked incentive) receivable | 123.70 | - | 123.70 | - |
| Other Receivables* | 143.34 | 60.36 | 80.71 | 30.02 |
| i lotal | 281.23 | 70.47 | 220.74 | 41.87 |
The Company is eligible for the PLI for the year ended March 31, 2024, for which there is reasonable assurance that the company will comply with the conditions attached to the PLI scheme and the grant will be received and thus 123.70 crore has been accrued towards such PLI.
Other receivables majorily comprises of outstanding balances from contract manufacturers of 75.04 crore as on March 31, 2024 (previous year 30.02 crore).
*On a standalone basis, other receivables, comprises primarily of outstanding balances from contract manufacturers amounting to 75.04 crore and 62.53 crore of receivable from Saankhya Labs Private Limited.
5. Other assets
The details of other assets are as follows:
in crore
| Particulars | Standalone | Consolidated | ||
| 20241 | 2023 | 2024 | 2023 | |
| Non-current | ||||
| Pre-paid gratuity | 0.14 | 0.30 | 0 14 | 0.30 |
| i contributions..[a.s.set) | ||||
| i Prepaid expenses | 0.69 | 0.27 | 0 69 | 0.27 |
| Contract assets | 94.61 | - | 94.61, | - i |
| Capital Advances | 3.20 | 8.54 | 3.20 | 8.54 |
| Balances with government authorities | 3.48 | 15.52 | 15.25 | 25.26 |
| Currenl | ||||
| Advances to suppliers | 88.82 | 59.69 | 56 | 59.88 |
| Capital Advances | - | - | 0.04 | 0.17 |
| Balances with government authorities | 638.58 | 113.06 | 638.58 | 113.06 |
| Prepaid expenses | 8.69 | 4.58 | 10.80 | 5.80 |
| Contract assets | 32.21 | - | 32.21 | |
| Advances to employees | 1.61 | 1.26 | 2.09 | 1.41 |
| Others | 0.08 | 0.02 | 0.21 | 0.02 |
| Total | 872.11 | 203.24 | 888.38 | 214.71 |
During the year, on a consolidated basis advances to suppliers stood at 90.56 crore as at March 31,2024 as compared to 59.88 crore as at March 31, 2023 primarily due to advance payment to few vendors to secure the inventory on time.
Balance with Government Authorities primarily consists of 650.55 crore (Previous year: 122.42 crore) towards GST Receivable which can be utilised in the subsequent years.
During the year, the Company has supplied goods to certain customers wherein the right to collection is after completion of future other contractual obligation. The Company expects these contract assets to be reclassified to Trade Receivables on completing other contractual obligations.
6 Tax
| Particulars | Standalone | Consolidated | ||
| 2024 | 2023 | 2024 | 2023 | |
| Advance Income Tax (net) | 28.26 | 25.82 | 4.66 | 31.71 |
| Deferred Tax Assets (net) | 98 | 103.09 | 26.64 | 42.09 |
| i Total | 111.24 | 128.91 | 61.30 | 73.80 |
in crore
| Particulars | Standalone | Consolidated | ||
| 2024 | 2023 | 2024 | 2023 | |
| The balance in Deferred Tax Assets comprises temporary differences attributable to: | ||||
| Difference between tax base and carrying amounts of assets and liabilities (including expenses deductible upon payment) | (121.16) | (52.69) | (185.41) | (123.56) |
| Lease Liabilities | 48.98 | 16.85 | 49.00 | 17.32 |
| Unabsorbed depreciation and allowances under section 35 | 127.89 | 109.78 | 135.79 | 119.59 |
| MAT credit | 71.91 | 14.14 | 71.91 | 44.14 |
| Total deferred tax assets | 127 62 | 118.08 | 71.29 | 5749 |
| Right of use assets | (4464) | (14.99) | (44.65) | (15 40) |
| Net deferred tax assets | 82.98 | 103.09 | 26.64 | 42.09 |
Effective the Ind AS transition date, the Company has recognised deferred tax assets on losses comprising unabsorbed depreciation and unutilised expenditure on scientific research carried forward from previous years. The Company has estimated that the deferred tax assets will be recoverable using the estimated future taxable income. Deferred tax assets primarily comprise of deferred taxes on property, plant and equipment, tax losses, tax credits and unabsorbed depreciation of previous years.
During the year, the Company has accrued 0.68 crore of interest recognized on the income tax refund on account of the receipt of the order giving effect for few assessment years.
During the year, the Company has received refund from Income Tax Department amounting to 0.73 crore for one Assessment Year.
On Standalone basis the Company continues to pay the income tax on MAT basis and recognized a charge of 21.66 crore during the year. The company also recognized deferred tax charge amounting to 20.11 crore on account of timing differences and creation of asset based on carry forward of losses. On a consolidated basis we have accrued a deferred tax charge of 15.45 crore mainly due to decrease of deferred tax liability on intangible assets accounted as part of Purchase Price Allocation (PPA).
7. Financial liabilities
The details of trade payables and other financial liabilities are as follows: in crore
| Particulars | Standalone | Consolidated | ||
| 2024 | 2023 | 2024 | 2023 | |
| Borrowings | 1,744 09 | - | 1 744 09 | - |
| Merger Liability | - | - | 168.99 | 156.68 |
| Trade payables for goods i & services | 1,844.82 | 307.28 | 1,839.32 | 301.02 |
| Lease Liabilities | 140.19 | 48.23 | 140.23: | 49.82 |
| Due to employees | 60.46 | 43.67 | 69.80 | 50.02 |
| Capital Creditors | 49.80 | 17.57 | 49.80: | 17.57 |
| Unpaid dividend | 0.03 | 0.03 | 0.03 | 0.03 |
| Other payables | 0.15 | 0.15 | 0.15, | 0.15 |
| Total | , 3,839.54 | 416.93 | 4,012.41 | 575.29 |
On a consolidated basis, trade payables for goods & services stood at 1,839.32 crore as at March 31, 2024 as compared to 301.02 crore as at March 31, 2023. The increase in payable was on account of increased procurement of inventory. On a consolidated basis, our average days payable outstanding (DPO) increased by 3 days from 81 days as at March 31, 2023 to 84 days as at March 31,2024. Amount due to employees increased from 50.02 crore as at March 31, 2023 to 69.80 crore as at March 31 2024, comprising of the employee compensation benefits (including year end performance linked variable pay) payable as of the respective year end.
During the year, the Company had borrowings for working capital purposes amounting to 1,744.09 crore.
As per the Shareholders agreement between the company and the shareholders of Saankhya Labs Private Limited ("SHA"), in the event the merger is not completed within the "Merger Long Stop Date", the Company shall purchase and the remaining shareholders of Saankhya Labs Private Limited shall sell the balance equity shares to the Company, as per the agreed price provided for in SHA. As the contract contains an obligation for the entity to deliver cash in exchange for its own equity shares (Non-Controlling interest), such an obligation is in the nature of financial liability under the provisions of Ind AS 32 "Financial instruments-Presentation". Hence, a financial liability has been recognized amounting to 168.99 crore (includes an amount of 12.31 crore pertaining to interest cost recognized) as at March 31, 2024.
8. Other Liabilities
The details of other liabilities are as follows: in crore
| Particulars | Standalone | Consolidated | ||
| 2024 | 2023 | 2024 | 2023 | |
| Advances received from customers | 968.41 | 4.11 | 974.00 | 14.71 |
| Deferred revenue | 4.05 | 4.80 | 14.58 | 13.07 |
| Liabilities on Corporate Social Responsibility | - | - | - | 0.30 |
| Statutory dues | 15.36 | 10.24 | 16.95 | 11.47 |
| Total | 987.82 | I 19.15 | 1,005.53 | 39.55 |
Deferred revenue represents the billings towards Annual maintenance contract (AMC) in excess of earnings. Revenue from AMC is recognized on accrual basis pro-rated over the period of the contract. Statutory dues comprise of the withholding and other local taxes payable as on the date of the Balance sheet for the respective year end.
9. Provisions
The details of provisions are as follows:
in crore
| Particulars | Standalone | Consolidated | ||
| 2024 | 2023 | 2024 | 2023 | |
| Non-current provisions | ||||
| Gratuity | - | - | 0.90 | 0.09 |
| Warranty | 13.13 | 2.03 | 13.13 | 2.03 |
| Current provisions | ||||
| Compensated Absences | 12.25 | 7.77 | 14.00 | 9.57 |
| Gratuity | - | - | - | 0.20 |
| Warranty | 4.13 | 2.34 | 4.79 | 2.34 |
| Others | 2.28 | - | 2.28 | - ! |
| Total | 31.79 | 12.14 | 35.10 | 14.23 |
Provision is made for estimated warranty claims in respect of products sold which are still under warranty at the end of the reporting period. These claims are expected to be settled over a period of 3 years. Management estimates the provision based on historical warranty claim information and any recent trends that may suggest future claims could differ from historical amounts.
IV. Liquidity
Our principal sources of liquidity are cash and cash equivalents (including the investments in liquid mutual funds and deposits with financial institutions) and also we borrowed working Capital loans to to meet our short term working capital requirements this year.
| in crore Particulars | Standalone | Consolidated | ||
| 2024 | 2023 | 2024 | 2023 | |
| Cash flow from operating activities | ||||
| Cash generated from operating activities | 334.53 | 39.51 | 375.73 | 43.11 |
| Movement in working capital | (2400.03) | (421.53) | (2,389.12) | (434.54) |
| Tax refund/(paid) | (22.56) | 12.71 | (23.09) | 11.29 |
| Net cash used in operating activities (A) | (2,088.06) | (369.31) | (2,036.48) | (380.14) |
| Cash flows from investing activities | ||||
| Capital expenditure (B) | (403.18) | (235.79) | (408.44) | (249.12) |
| Other investing activities | 853.68 | (372.78) | 838.98 | (332.32) |
| Net cash generated from/(used in) investing activities | 450.50 | (608.57) | 430.54 | (581.44) |
| Cash flows from financing activities | ||||
| Proceeds from ESOP/RSU | 10.43 | 8.83 | 10.43 | 8.83 |
| Proceeds from issue of equity shares through private placement | - | 1,012.50 | - | 1,012.50 |
| Proceeds from short-term borrowings (Net) | 1,726.89 | - | 1,726.89 | - |
| Others | (21.81) | (10.53) | (23.91) | (22.48) |
| Net cash generated from financing activities | 1,715.51 | 1,010.80 | 1,713.41 | 998.85 |
| Closing cash and cash equivalents | 582.44 | 1,293.28 | 640.52 | 1,306.36 |
| Free Cash Outflow (A+B) | (2,491.24) | (605.10) | (2,444.92) | (629.26) |
On a consolidated basis, the net cash outflow from operations for FY 2024 was 2,036.48 crore, as compared to 380.14 crore for FY 2023. The increase in operating cash outflow is primarily due to increase of inventories by 3,090.88 crore as compared to the previous year. The capital expenditure comprises of expenditure on property, plant and equipment of 151.01 crore and payment for intangible assets (including Product under development) of 257.43 crore. Other investing activity comprises of the investment in Mutual fund and the deposit kept with the banks and financial institutions.
Net cash generated from financing activities was 1,713.41 crore for FY 2024, as compared to 998.85 crore for FY 2023. During FY 2024, the Company received 10.43 crore towards exercise of ESOP and RSUs by employees (Previous year 8.83 crore). The Company has proceeds from borrowings of 1,726.89 during the current year (previous year Nil). The free cash outflow for FY 2024 was 2,444.92 crore as compared to 629.26 crore for FY 2023.
The closing cash and cash equivalents including the investment in liquid mutual funds and deposits with financial institutions stood at 640.52 crore as at March 31, 2024, as compared to 1,306.36 crore as at March 31, 2023.
Key Financial Ratios
| Sl. No. Particulars | Consolidated | Reasons for variance in excess of 25% | ||
| 2024 | 2023 | Variance | ||
| 1 Current Ratio (times) | 1.43 | 6.26 | -77% | Current assets increased by 1.54 times, Trade Payables & others increased by 6.02 times and working capital borrowings by 1,744.09 crore on account of increased operations resulted in reduced ratio. |
| 2 Debt-equity ratio (times) | 0.60 | 0.02 | 2,900% | Nil borrowings in FY 2022-23 vs working capital borrowings of 1,744.09 crore in FY 2023-24 increased the debt equity ratio. |
| 3 Debt service coverage ratio (times) | 9.19 | 10.42 | -12% | Not Applicable |
| 4 Return on Equity Ratio (%) | 0.02 | (0.01) | 300% | Increased due to higher profits. |
| 5 Inventory turnover ratio(times) | 0.72 | 1.21 | -40% | Decreased due to higher levels of inventory holding as at March 31, 2024 for project executions in FY 2025. |
| 6 Trade Receivables turnover ratio (times) | 2.76 | 2.60 | 6% | Not Applicable |
| 7 Trade payables turnover ratio (times) | 4.37 | 4.49 | -3% | Not Applicable |
| 8 Net capital turnover ratio (times) | 1.22 | 0.41 | 198% | Increased due to higher revenue from operations. |
| 9 Net (loss)/profit ratio (%) | 0.03 | (0.04) | 175% | Positive ratio for FY 2024 on account of profits in FY 2024 compared to losses in FY 2023. |
| 10 Return on Capital employed (%) | 0.03 | (0.01) | 400% | Positive ratio for FY 2024 on account of profits in FY 2024 compared to losses in FY 2023. |
| 11 ; Return on Investment | 0.03 | (0.01) | 400% | Increased due to EBIT 6.40 times higher as compared to previous year as against increase in average total assets by 1.07 times and positive ratio for FY 2024 on account of profits in FY 2024 compared to losses in FY 2023. |
Detailed Explanation of Ratios
i. Current Ratio: The Current Ratio indicates a Companys overall liquidity position. It measures a Companys ability to pay short-term obligations or those due within one year. It is calculated by dividing the current assets by current liabilities.
ii. Debt Equity Ratio: Debt Equity ratio is used to evaluate a Companys financial leverage. It is a measure of the degree to which a Company is financing its operations through debt versus wholly owned funds. It is calculated by dividing total debt (borrowings plus lease liabilities) by shareholders equity.
iii. Debt Service Coverage Ratio: Debt Service coverage ratio is used to analyse the firms ability to pay-off current interest and instalments. It is calculated by dividing earnings available for debt service (PAT + Depreciation + Allowance for expected credit loss + Finance Cost + Other noncash items) by debt service [interest and lease payments for the current year (excludes short term working capital borrowing repayments)].
iv. Return on Equity (ROE): It measures the profitability of equity funds invested in the Company. The ratio reveals how profitability of the equity-holders funds have been utilized by the Company. It also measures the percentage return generated to equity-holders. It is calculated by dividing PAT by average equity.
v. Inventory Turnover ratio: Inventory Turnover ratio measures the efficiency with which a Company utilises or manages its inventory. It establishes the relationship between sales and average inventory held during the period. It is calculated by dividing cost of materials consumed by average inventory.
vi. Trade Receivables Turnover Ratio: Debtors Turnover ratio measures the efficiency at which the firm is managing the receivables. The ratio shows how well a Company uses and manages the credit it extends to customers and how quickly that short-term debt is collected or is paid. It is calculated by dividing revenue from sale of goods and rendering of services including GST by average trade receivables.
vii. Trade payables turnover ratio: It indicates the number of times sundry creditors have been paid during a period. It is calculated to judge the requirements of cash for paying sundry creditors. It is calculated by dividing purchases by average trade payables.
viii. Net capital turnover ratio: It indicates a companys effectiveness in using its working capital. The working capital turnover ratio is calculated by dividing revenue from operations by the amount of working capital during the same period.
ix. Net (loss)/profit ratio: It measures the relationship between net profit and sales of the business.
x. Return on Capital Employed(ROCE): ROCE indicates the ability of a Companys management to generate returns for both the debt holders and the equity holders. It measures a Companys profitability and the efficiency with which its capital is used. ROCE is calculated by dividing the EBIT by total equity.
xi. Return on investment (ROI): ROI is a financial ratio used to calculate the benefit an investor will receive in relation to their investment cost. The higher the ratio, the greater the benefit earned. ROI is calculated by dividing EBIT by average total assets.
Government support
Government of India has formulated various supportive policy measures for encouraging Indian electronics and telecom industry and proposed several incentive schemes which are applicable to the Company. The Companys products are eligible for Preference to Make in India (PMI) policy which is applicable for government procurement of telecom equipment. The company is also eligible to receive capital subsidy from the Modified Special Incentive Package (MSIPS) scheme. In FY 2024, the company received 32.66 crore as incentives for the fiscal year FY 2023 under the design- linked Production Linked Incentive (PLI) scheme for telecom and networking products. Our subsidiary, Saankhya Labs, has also been approved under Government of Indias Semiconductor PLI scheme. In FY 2022, the company and its products have also received approval from National Security Council Secretariat (NSCS) under the new Trusted Sources Mandate. The Company has been registered as a Karnataka ESDM company and is eligible for certain incentives as specified under the state ESDM policy from time to time. As a Department of Scientific and Industrial Research (DSIR) approved R&D center we are also eligible for benefits as specified by DSIR from time to time.
Research and development expenses
The Company tracks the latest telecom/networking industry standards, technology trends, consumer usage patterns, advancements in semiconductor as well as optical components and software development trends. Companys R&D efforts are geared towards defining and developing future-ready product portfolio with leading- edge features, in line with market trends and customer requirements. The Company maintains requisite R&D facilities, technology competence and skillsets that optimize product development time to deliver competitive products that meet the required technical and regulatory standards. Our Intellectual Property is in the form of our product design, software, know-how and know-why and some of it has been captured in the form of patents. As of March 31, 2024, our company and Saankhya Labs have cumulatively filed 446 Patents of which 335 patents have been granted.
V. OPPORTUNITIES
Investments in High-Speed Mobile Broadband Networks (4G and 5G):
The telecom industry is witnessing an increasing adoption of highspeed mobile broadband technologies based on 3GPP standards. Mobile networks are rapidly evolving from 2G/3G to 4G/5G technologies driving a strong demand for 4G and 5G RAN (Radio Access Network) equipment, comprising both baseband and radio units. Although 5G has been launched in several markets, 4G has significant room to grow in developing countries. As per GSMA, over 60% of mobile subscribers in Sub-Saharan Africa continue to be on 2G/3G. In India, the countrys leading public sector telco has launched a pan-India 4G/5G network of 100,000+ sites and we are the sole supplier of baseband equipment and radios for this large rollout. The 4G network is likely to be expanded to cover more locations and a portion of the sites will also be upgraded to 5G as part of the tender requirement. We are also undergoing POC (Proof of Concept) trials of our RAN products with a few other private operators and utilities which could translate into business in the coming years. Further, success in India will serve as a powerful reference with telcos in other emerging markets deploying similar 4G and 5G networks.
Accelerated Adoption of Fiber Broadband Services:
In wired broadband networks too, broadband access speeds are growing with multi-gigabit fiber-based home and office broadband fast replacing copper-based broadband services based on xDSL technologies. Today, on fiber-based access networks, popularly referred to as Fiber-to-the-Home/Curb/Premises (FTTx), next- generation xPON (GPON, XGS-PON) technologies can deliver up to ten gigabits of access speed to a fixed residence, cell tower or a business location. Newer xPON technology variants such as HS- PON are expected to increase this to 25G and 50G speeds in the near future. The pandemic further accelerated the need for highspeed, reliable and secured networks given the new trends such as work-from-home, remote learning, telemedicine, entertainment, e-commerce, etc. In India, less than 40 million homes have a wired broadband connection as of February 2024 (source: TRAI) and this represents a large growth opportunity for fiber-to-the-home (FTTx) services. As the mobile broadband market gets rapidly saturated, telecom and internet service providers are launching residential gigabit/ten gigabit FTTx- services, which are expected to increase the number of fiberised homes to over 100 million by 2030. The FTTx customer represent a very lucrative business opportunity for service providers in India, since the ARPU of an FTTx customer could be more than five times the ARPU of their mobile broadband subscriber. A similar trend for growth of FTTx customers is being witnessed in other countries as well.
Growing Demand for High-capacity Optical and Routing Products in Backhaul:
The proliferation of smart phones, tablets and IoT devices, rollout of new 5G networks for mobile and fixed broadband, and increased penetration of high-speed, fiber-based home and office broadband is driving an exponential surge in data traffic worldwide. This, in turn, is driving a greater demand for high-capacity transmission and routing equipment. India is expected to be one of the fastest growing markets in this segment since the country is vastly underserved in terms of fiber connectivity to cell-sites, with less than 38% connectivity. In FY24, Tejas supplied over 13,000 access and aggregation routers for BSNLs pan-India IP-MPLS based Access and Aggregation Network (MAAN) for converged multi-service backhaul of mobile, broadband, WiFi and VoIP traffic. Tejas is currently a leading supplier of state-of-the-art optical transmission products for leading private telcos and ISPs in the country. With its significant expanded and field-proven portfolio of optical and routing products, Tejas has an opportunity to gain a meaningful share of the backhaul equipment market, both in India and globally.
Increasing Government Investments to Bridge Digital Divide:
As an always-on, high-speed broadband has emerged as a basic necessity in the post-Covid world, Governments around the globe are making public funds available for ubiquitous fibre broadband to bridge the growing urban-rural digital divide in their countries. The government of India has rolled out one of the largest greenfield networks for rural broadband connectivity called Bharatnet on GPON-based fibre broadband technology. In BharatNet Phase-1 and Phase-2, over 200,000 gram panchayats have been connected. In Phase-3, BharatNets reach will be extended to nearly 700,000 villages in the country and Government of India has budgeted Rs 1.39 lakh crore for this project and one part of this project is currently in the tendering stage. Similarly, USA and Europe too have announced significant investments to transform rural communities. Significant investments are also happening in other government networks such as for defence, knowledge networks,municipal and public safety. Our secured Ethernet switches are widely deployed in such mission-critical networks, especially for campus networking and surveillance applications in Smart Cities and Safe City projects.
Favorable Policy Environment in India for Domestic Telecom Product Companies:
Government of Indias focus on building an "Atmanirbhar Bharat" that is self-reliant in core telecom technology areas is benefiting domestic telecom equipment companies like us with strong R&D capabilities and in-house IPR. Our company has been approved under Government of Indias design-linked PLI scheme with an investment commitment of 750 crore during the scheme period and received 32.66 crore as incentives for fiscal year FY23. Our subsidiary, Saankhya Labs, has also been approved under Government of Indias Semiconductor PLI scheme. In addition, we benefit from Government policies such as Preference to Make in India ("PMI") Policy, which are targeted towards encouraging indigenous technology/ product development and design-led manufacturing companies like ours. With increased focus on telecom and cybersecurity, Government of India has recently amended telecom licensing rules to mandate use of only trusted products and sources (as defined by National Cyber Security Coordinator) by all public and private Telecom and internet service providers in the country from June 15, 2021 which is expected to help the domestic telecom vendors, who can be a considered as a trusted source. Our company and products have been approved under the Trusted Sources mandate.
Structural Changes Favoring Alternative Vendors:
The global telecommunications industry is witnessing certain fundamental structural changes that are likely to allow newer companies with innovative offerings to disrupt and gain a larger share of the telecom equipment market. First, unlike previous mobile technology generations that required a tightly-coupled RAN and Core solution, 5G uses a more open, disaggregated architecture with a cloud-based core enabling service providers to adopt an unbundled multi-vendor solution for RAN (O-RAN) and Core. Secondly, with growing geopolitical tensions, the need for building secure and resilient telecom networks is gaining prominence. 5G networks are regarded as more susceptible to cybersecurity attacks due to the inherent vulnerabilities of its underlying technologies (IoT, IP, Cloud) and the mission-critical nature of its key use cases such as autonomous cars, public safety, drones etc. As a result, telecom service providers are shifting away from certain "high-risk" vendors and exploring newer trusted alternatives for their telecom equipment supplies. Developed countries like USA and Europe are providing funds to their domestic service providers to refresh their existing wireless and wireline networks with state-of-the-art products sourced from suppliers originating from trusted countries. Thirdly, besides the traditional consumer service component, 5G also opens up a large enterprise opportunity for vendors that can efficiently bundle network equipment, software and system integration to deliver industry-scale "Private 5G" solutions for multiple sectors such as manufacturing, healthcare, education, automotive and utilities.
Utility Network Modernization:
The emergence of bandwidth-intensive applications such as IP SCADA (Supervisory Control and Data Acquisition), Smart Grid, Video Surveillance, VoIP, LAN, Internet etc., is resulting in a rapid growth of data traffic in utility networks such as power, railways,
oil and gas, public safety etc., This is driving the need to upgrade and replace their operational networks, currently based largely on MSPP products, with packet technologies such as Carrier Ethernet, MPLS-TP/PTN, IP, and MPLS. However, given the large installed base of such TDM equipment and stringent quality of service demands of certain control applications (e.g., teleprotection in the power sector) it is operationally difficult for operators to replace this infrastructure abruptly and hence there continues to be a strong demand for both MSPP and IP based products in the interim especially in developing countries including India. Tejas is the one of the largest suppliers of telecommunications equipment to the utility sector in India and our products are used both in their captive operational networks and also as part of their carrier of carrier networks that provide bandwidth services to retail service providers. The company is therefore well positioned to benefit from this large global opportunity for cost-effective optical and packet solutions to effectively address the utility network modernization challenge.
Digital Transformation of Enterprises and the rise of Hyperscalers:
Migration to cloud-based services is a major driver for network evolution. Businesses worldwide are increasing their usage of online applications and services that are delivered over the cloud which is driving the need for high-speed data services. In addition, the emergence of web-scale internet companies (ICPs) is leading to large-scale construction of hyper-scale data centres and a significant growth in data traffic and optical networks. ICPs have significant bandwidth requirements for data center interconnectivity (DCI) and are among the first to deploy high-speed 400G, 600G, 800G and 1.2T optical channels on optical networks. The emergence of DCI is also resulting in a demand for newer types of optical networking equipment that are specially optimized for such applications which has further enhanced its market potential. High bandwidth content such as mobile applications, games and high- definition videos are being created and consumed worldwide. Video-centric services such as Netflix, Amazon Prime and YouTube are dominating data traffic and traditional telecommunication services such as short message service are being replaced by Internet applications services such as instant messaging, social networking and e-mails.
VI. RISKS AND CONCERNS
Business Risks:
A significant portion of our business is generated from a limited number of large customers, who have substantial negotiating leverage with us. Our business operations may fluctuate due to a variety of factors such as loss of key customers, fluctuation in demand and sales volume, timing and size of customer capital spends, inventory management practices and timely collection of receivables. In particular, with our recent wireless and wireline contract wins with BSNL, India-Government segment is expected to account for a disproportionally large portion of our revenues in the near term. Any short-term spending slowdown in the Indian telecom market and/or India-Government segment could adversely impact our business. Our gross margins and revenues are a function of our product and geographical mix that can sometimes turn unfavourable and adversely impact our business prospects. The telecommunications industry is highly competitive and the acquisition of new customers often calls for aggressive pricing besides state-of- the-art technology, support and quality Since many of our competitors are large global companies that possess significantly greater financial and marketing resources than we do,these competitors may be able to offer lower prices, extend attractive long-term financing, run expensive promotional campaigns to attract customers or introduce other offers that we may not be able to match and hence adversely impacting our business.
Industry Risk:
The telecommunications industry is dynamic and displays significant demand variations and lumpiness in short periods of time due to changes in the risk appetite of our service provider customers that can either delay purchases or lower their purchase volumes in response to perceived risks in the external environment. In the Indian market, we may see short-term financial stress as well as industry consolidation amongst our customers, which may also impact our business. Although we expect the industry segments we operate in to stay healthy in the long and medium term, the industry has gone through multiple economic downturns in the past that have seen sharp drops in capital spending by telecom operators. Sometimes the slowdown in investments is seen to be restricted to certain geographies or limited to specific industry segments, in which case our business in those geographies or from those product lines could be adversely impacted. Besides this, our inability to effectively respond to new developments in our markets arising from a growth in IP-based communications, emergence of new buyer categories such as OTTs (Over The Top) etc., can reduce our market power and impair our financials.
Technology Risk:
Our industry is characterised by rapid technological changes, customer requirements, evolving industry standards and launch of new products and services by our competitors. Our future success will depend largely on our ability to effectively anticipate and adapt to such changes by incorporating these in the form of new hardware or software features in our products. We have developed our solutions based on certain widely accepted industry standards that may either undergo changes, become obsolete or have reduced market acceptance owing to competing standards. Moreover, the use of open standards makes it possible for our competitors to develop similar products and services that are based on the same technology which can increase competitive pressure. Unless we respond quickly enough to such market challenges, either by repositioning our solutions or introducing new solutions with superior characteristics, our business, revenues and growth prospects would be adversely affected. However, developing new products and services in this industry is complex, expensive and often requires long hardware and software development cycles with significant upfront investments which may not always be possible. We have recently expanded our portfolio to include wireless products which requires significant R&D investments within a short span of time to achieve portfolio competitiveness against incumbent vendors in this segment while balancing the technology development needs of our existing wireline customers.
In many cases, we may be required to obtain special certifications or approvals before our solutions can be introduced in new geographies or to new customers in existing geographies. Our ability to expand our international operations may sometimes be constrained by such country specific regulations or standards that may require us to redesign our existing solutions or develop new products suitable for these countries. The cost of complying with evolving standards and regulations, or our failure to obtain timely domestic or foreign regulatory approvals or certifications,
may prevent us from selling our solutions where such standards or regulations apply, thus adversely affecting our operating results and growth prospects. Further, due to the introduction of data protection and privacy laws in many countries, telecom products may be subjected to additional testing and validation for vulnerability assessments which may require us to enhance our products to support additional security features that could potentially extend the sales cycles in select geographies.
Operational and Supply Chain Risk:
We depend on a limited number of external EMS companies and component suppliers for our manufacturing needs. Any failure on their part to deliver our products on time or to meet performance and quality standards can have an adverse impact on our business. In order to ensure business continuity, we have arrangements with multiple EMS organizations to provide us additional flexibility to change organizations if there is any kind of disruption at one facility. In spite of these measures, depending on the severity of the disruption, it may not be possible for us to entirely alleviate its effects on the production of one or more of our product families. As far as possible, we source our components from multiple suppliers (multi-sourcing) to minimize impact of adverse events and to accommodate sudden, unforeseen increase in customer demand for our products. However, despite our best efforts, for certain specific functionalities, we continue to rely on a single supplier for certain critical components in our products. In such cases, we are subject to supply chain risks from these single- sourced components, which could be on account of their lead times, costs, availability and quality.
The global semiconductor chip shortage increased lead times and costs for many components used by us, including those which are single-sourced. While the rate of component End-of-Life (EOL) declarations by suppliers have reduced in recent times, there are still critical components used in multiple products, which are under risk of EOL and could have a disruptive effect on our business.
In order to mitigate this, we have to source long-term forecasts and place advance inventory actions with our suppliers, while we may not have similar forecasts available from all our customers. Any failure on our part to forecast, plan, procure and manage the requirement of chips and the rest of our components could have an adverse impact on our business with either excess levels of inventories or shortage of inventory to meet our customer demand. Although lead times for components have come down in general, certain classes of components continue to have longer lead times albeit with lower volatilities thus enabling us to plan our business around these. Moreover, the impact of previous EOL components has been mitigated with product redesigns and the company has made strong representations with specific vendors in order to ensure that the new design revisions go into production in a timely manner to meet customer commitments.
Our success of business execution depends to a significant degree upon our continued ability to attract and retain highly skilled personnel for our research and development, sales and marketing, customer support, manufacturing, finance and operations teams. While we continually strive to adopt best practices in human resources and provide attractive compensation, including equity- based rewards, to attract and retain talent, the loss of services of any of our key personnel, significant increase in attrition levels or our inability to attract new talent could make it difficult to execute our business.
Macro Risk:
The Company is subject to credit risks, interest rate risks, refinancing risks and liquidity risks and the Company will adopt various measures at different points in time to counter these risks successfully. However, if these risk mitigation strategies do not prove to be successful, the health of the Company is likely to be adversely affected. As our international sales increase, we will increasingly be subjected to foreign exchange risks. Besides foreign exchange risks, our prospects can be impacted by the political developments in the countries we operate in such as governance instabilities, degree of privatization or sudden restrictions on the flow of goods to/from these countries.
Legal and Regulatory Risk:
There are outstanding legal proceedings against the Company and certain subsidiaries that are incidental to our operations, related to various tax proceedings which are pending at different levels of adjudication before courts, tribunals and appellate tribunals. While we are contesting the same, if these are not decided in our favor, may adversely affect our business and reputation. Intellectual Property (IP) is a critical element of our business and we will continue to apply for both domestic and international patents to improve our competitive advantage in the market. However, it is possible that some of these patent rights may be overturned by our competitors that will prevent us from selling the products that make use of these patents in their manufacture or compel us to pay royalties or licensing fees to our competitors. The telecommunication industry is driven by regulations and standards. Evolution or emergence of new standards that directly impinge on the types of products we manufacture or regulations that have a bearing on the services that these products deliver can affect our development costs or lower the business potential of these products. Sometimes, there may be alternate standards that may evolve in parallel and our investments in a standard that eventually loses out can lead to a decline in sales for associated products.
Credit Risk:
We are exposed to credit risk on the amount owed to us by our customers and these trade receivables are typically with no security and collaterals which are unsecured in nature. We periodically monitor individual customer payment capability in granting such open credit arrangements, and consider its creditworthiness, its past payment performances and communication with those customers. If our customers do not pay us promptly and if we are not able to collect the same or at all, we may have to make provisions for, or write-off such amounts. Additionally cash flow challenges that can come due to delays in supply clearances from customers, delays in project execution and customer acceptance can lead to inventory build-ups and delays in collections, This can also increase our peak borrowings and company plans to mitigate this challenge by working closely with our suppliers to extend payment cycles.
Liquidity Risks:
Our principal sources of liquidity are cash and cash equivalents, and the cash flow that is generated from operations through internal accruals. We may be exposed to liquidity risks if we do not generate enough cash flows from operations, and free cash flows.
Pandemic Risk:
Post COVID-19, due to increased demand for semiconductor chips and disruptions in global supply chains, we faced challenges with regard to lead times as well as availabilities for many semiconductor components that are used in our products. In addition, many component suppliers declared End-of-Life for some of their older/ slower moving products, which hampered our ability to fulfill certain customer orders in a timely manner. We closely monitored this situation and by taking appropriate advance inventory actions and realignment of our supply chain processes, have been able to mitigate these challenges to a large extent.
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