This Tata Group firm delivered 14 times returns in two years; do you have it?

At a time when the share market is in a consolidation phase, some stocks have defied gravity and delivered manifold returns to their investors. Tejas Network, a lesser-known Tata Group company, is one such stock that has surged 14 times in the last two years. The share price of ace investor Vijay Kedia-backed telecom gear firm has risen from ₹31.15 on May 22, 2020, to ₹453.2 intraday today, giving a massive return of 1,355% to its shareholders during this period. Meanwhile, the benchmark index BSE Sensex gained 76% during the same period.

As clear from the record growth in Tejas Network share price in the last two years, an investment of ₹1 lakh in the counter in May 2020 would have returned ₹14.5 lakh today.

The stock price has gained momentum after Tata Sons acquired a controlling stake in Tejas Networks, which designs, develops, and sells networking products to telecommunications service providers, internet service providers, utilities, defence, and government firms. In July 2021, Tata Sons subsidiary Panatone Finvest signed a definitive agreement to acquire a 43.3% stake in Tejas Networks for nearly ₹1,850 crore. As per the latest shareholding pattern available on the BSE, Tata Sons and its subsidiaries Panatone Finvest and Akashastha Technologies own a 52.45% stake in the company.

In April this year, Tejas Networks received an upgrade from ICRA with a stable outlook. The long term rating was revised to ICRA A+ from ICRA A- and the short term rating was upgraded to ICRA A1+ from ICRA A2+. The rating upgrade factored in the strategic investment by Panatone Finvest Limited (PFL) under a definitive agreement with Tejas Networks in July 2021 for a controlling stake in the company. It was also supported by Tejas’ healthy order book, strong track record in the industry and its long-term relationship with some large clients, which has helped it to maintain a healthy market share in the optical networking space in India.

ICRA in its report highlighted that decline in revenue and profitability in the past two years on account of a significant reduction in revenue, primarily from the government sector, remain a concern for Tejas Networks. Adding to it, the company continues to face delays in realisation of receivables primarily from one PSU customer, which has put pressure on its cash flows.

On Thursday, Tejas Network shares opened higher at ₹449, against the previous closing price of ₹446.60 and settled flat at ₹446.6. During the session, it gained as much as 1.5% to hit an intraday high of ₹453.20 after it announced acquisition of 62.65% stake in a tech company, Saankhya Labs. As per the company, the acquisition would boost its domain expertise and IPR in wireless communication (5G, Broadcast, Satellite) as well as semiconductor design. Saankhya will be complementary in terms of product/technology areas and customer access.