The quarter represents a dramatic reversal for a company that had shown promise in FY2025, when it posted annual revenue of ₹8,923.00 crores and net profit of ₹446.00 crores. The current quarter's revenue of ₹306.79 crores marks an 88.39% year-on-year decline, whilst the sequential quarter-on-quarter comparison shows a modest 17.18% improvement from Q2 FY26's ₹261.82 crores. However, this sequential uptick provides little comfort given the magnitude of the year-on-year deterioration.
The stock has experienced severe selling pressure, declining 62.12% over the past year and underperforming the Sensex by a massive 69.79 percentage points. Trading below all key moving averages—from the 5-day MA of ₹440.81 to the 200-day MA of ₹623.54—the technical picture remains firmly bearish. The company's proprietary Mojo Score stands at a dismal 1 out of 100, with a "STRONG SELL" rating reflecting deep concerns across valuation, quality, and financial trend parameters.
Financial Performance: A Quarter of Severe Deterioration
In Q3 FY26, Tejas Networks' net sales collapsed to ₹306.79 crores from ₹2,642.24 crores in the corresponding quarter last year, representing one of the most dramatic revenue contractions in the Indian telecom equipment sector. Whilst the company showed a 17.18% quarter-on-quarter improvement from Q2 FY26's ₹261.82 crores, this sequential recovery pales in comparison to the structural revenue decline that has materialised over the past year.
The operating profit (PBDIT excluding other income) turned deeply negative at -₹134.26 crores in Q3 FY26, compared to a healthy ₹371.56 crores profit in Q3 FY25. Operating margins collapsed to -43.81%, down from a respectable 14.88% a year ago. This margin compression reflects not merely revenue decline but fundamental operational challenges, with costs failing to adjust proportionately to the revenue contraction.
| Quarter | Net Sales (₹ Cr) | YoY Change | Net Profit (₹ Cr) | YoY Change | PAT Margin |
|---|---|---|---|---|---|
| Dec'25 | 306.79 | -88.39% | -196.55 | -218.64% | -64.14% |
| Sep'25 | 261.82 | -90.69% | -307.13 | -211.61% | -119.66% |
| Jun'25 | 201.98 | -87.08% | -193.87 | -350.22% | -95.98% |
| Mar'25 | 1,906.94 | — | -71.80 | — | -3.97% |
| Dec'24 | 2,642.24 | — | 165.67 | — | 6.63% |
| Sep'24 | 2,811.26 | — | 275.18 | — | 10.36% |
| Jun'24 | 1,562.77 | — | 77.48 | — | 5.18% |
Employee costs in Q3 FY26 stood at ₹114.65 crores, down from ₹119.99 crores in Q3 FY25, indicating some cost rationalisation efforts. However, interest expenses surged to ₹71.70 crores from ₹62.76 crores, reflecting increased debt servicing burden at a time when revenue generation has faltered. Depreciation expenses remained elevated at ₹104.45 crores, marginally lower than Q3 FY25's ₹111.27 crores, suggesting the company continues to carry significant fixed asset costs that cannot be rapidly adjusted.
The profit before tax (PBT) for Q3 FY26 stood at -₹302.87 crores, compared to a positive ₹211.27 crores in Q3 FY25. Tax credits of ₹106.32 crores (effective rate of 35.10%) partially offset the losses, but the net profit still came in at -₹196.55 crores. On a sequential basis, the Q3 loss represents a 36.00% narrowing from Q2 FY26's loss of ₹307.13 crores, suggesting some stabilisation, albeit at deeply negative levels.
Operational Challenges: Structural Concerns Emerge
The company's operational metrics paint a picture of fundamental business challenges extending beyond cyclical weakness. The return on capital employed (ROCE) for the half-year period stood at -4.08%, marking the lowest level on record and reflecting the company's inability to generate adequate returns on the capital deployed. The average ROCE over recent periods has been -1.43%, whilst the latest ROCE stands at -4.83%—both deeply concerning for investors seeking capital efficiency.
Return on equity (ROE) tells a similarly troubling story. The half-yearly ROE deteriorated sharply, with the latest ROE at -12.26%, compared to an already weak average of 2.99%. This indicates that the company is destroying shareholder value at an alarming rate, with losses eroding the equity base accumulated during more profitable periods. For context, an ROE above 15% is generally considered healthy for manufacturing companies, making Tejas Networks' negative ROE particularly concerning.
⚠️ Critical Operational Red Flags
Debt-to-Equity Ratio: Surged to 1.29 times in H1 FY26, the highest on record, indicating mounting leverage at a time of operational losses.
Cash Position: Cash and cash equivalents declined to ₹61.26 crores in H1 FY26, the lowest level recorded, raising liquidity concerns.
Working Capital: Debtors turnover ratio fell to 1.24 times in H1 FY26, the lowest on record, suggesting collection challenges and potential working capital stress.
Interest Coverage: Average EBIT to interest ratio of -5.56x indicates the company is unable to service its debt obligations from operating profits.
The balance sheet has deteriorated significantly. Long-term debt, which was nil in FY2024, surged to ₹151.16 crores in FY2025. Current liabilities ballooned to ₹6,229.16 crores in FY2025 from ₹4,736.65 crores in FY2024, driven largely by trade payables of ₹1,183.95 crores and other current liabilities of ₹1,788.26 crores. This suggests the company may be stretching payment terms with suppliers to manage cash flow pressures.
The cash flow statement for FY2025 reveals troubling trends. Operating cash flow was negative at -₹491.00 crores, compared to -₹2,036.00 crores in FY2024, showing some improvement but still deeply negative. Changes in working capital consumed ₹1,767.00 crores, indicating significant cash tied up in operations. The company relied on financing activities, generating ₹1,286.00 crores, to partially offset operational and investment cash outflows.
Industry Context: Telecom Equipment Sector Headwinds
Tejas Networks operates in the highly competitive telecom equipment and accessories sector, which has faced significant headwinds in recent quarters. The company's dramatic revenue decline suggests it may have lost major contracts or faced project delays from key customers, likely including major telecom operators and government entities that constitute its primary customer base.
The Indian telecom equipment market is characterised by lumpy order flows, with large government and operator projects creating significant quarter-to-quarter volatility. However, the sustained three-quarter decline in Tejas Networks' revenue—from ₹1,562.77 crores in Q1 FY25 to ₹201.98 crores in Q1 FY26, and further deterioration in subsequent quarters—suggests structural issues beyond normal project cyclicality.
Sector Positioning: Underperformance Accelerates
Over the past year, Tejas Networks' stock has declined 62.12%, dramatically underperforming the broader Telecom Equipment & Accessories sector, which fell 15.41%. This 46.71 percentage point underperformance indicates company-specific challenges rather than sector-wide weakness. The company's market capitalisation of ₹7,688.00 crores positions it as the fourth-largest player in its peer group, but this ranking masks the severe operational deterioration.
The company's five-year sales growth of 72.17% reflects the strong expansion witnessed through FY2025, when annual revenue reached ₹8,923.00 crores. However, this historical growth trajectory has reversed sharply, with the current run-rate suggesting FY2026 revenue could fall below ₹1,200 crores if recent quarterly trends persist—a level last seen in FY2023.
Peer Comparison: Valuation and Quality Concerns
Comparing Tejas Networks to its sector peers reveals significant quality and valuation concerns. The company's return on equity of 2.99% (average) ranks at the bottom of its peer group, substantially below competitors like Indus Towers (24.02% ROE), Optiemus Infrastructure (14.44% ROE), and HFCL (8.84% ROE).
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity | Div Yield (%) |
|---|---|---|---|---|---|
| Tejas Networks | NA (Loss Making) | 2.24 | 2.99 | 1.17 | 0.59 |
| Indus Towers | 12.21 | 3.16 | 24.02 | 0.46 | — |
| ITI | NA (Loss Making) | 19.26 | 0.71 | 0.78 | — |
| HFCL | 355.99 | 2.40 | 8.84 | 0.29 | 0.15 |
| Sterlite Tech | 1,142.11 | 2.22 | 6.21 | 0.69 | — |
| Optiemus Infra | 59.76 | 5.74 | 14.44 | 0.21 | — |
Tejas Networks' price-to-book ratio of 2.24x appears reasonable on the surface, trading below the peer group average of approximately 6.60x. However, this seemingly attractive valuation metric is misleading given the company's current loss-making status and negative return on equity. The company is destroying book value through sustained losses, making the P/BV ratio a poor indicator of investment merit.
The debt-to-equity ratio of 1.17 for Tejas Networks is significantly higher than most peers, with only ITI (0.78) amongst the loss-making companies showing comparable leverage. Quality peers like Indus Towers (0.46), HFCL (0.29), and Optiemus Infrastructure (0.21) maintain substantially lower leverage ratios whilst generating positive returns on equity.
Valuation Analysis: Value Trap, Not Value Opportunity
Tejas Networks' valuation metrics present a classic "value trap" scenario—superficially cheap multiples masking fundamental deterioration. The company's P/E ratio is not applicable given current losses, whilst the EV/EBITDA ratio of 177.59x and negative EV/EBIT of -32.50x reflect the market's deep scepticism about near-term profitability recovery.
The company's valuation grade has deteriorated from "Attractive" to "Risky" as of October 27, 2025, following a series of downgrades throughout the year. This shift reflects not merely stock price decline but fundamental reassessment of business quality and earnings sustainability. The enterprise value to sales ratio of 2.26x might appear reasonable for a technology company, but it fails to account for the dramatic revenue contraction and negative operating margins.
The stock trades at ₹418.60, down 64.37% from its 52-week high of ₹1,175.00 and just 2.10% above its 52-week low of ₹410.00. This proximity to annual lows, combined with sustained bearish technical trends and deteriorating fundamentals, suggests the stock remains vulnerable to further downside rather than presenting a recovery opportunity.
Book value per share stands at ₹214.17, implying the stock trades at approximately 1.95x book value. However, this book value is rapidly eroding through sustained losses. If the company continues to generate quarterly losses of ₹150-200 crores, the book value could decline by 25-30% over the next four quarters, making even the current P/BV ratio unsustainably high.
Shareholding Pattern: Institutional Exodus Continues
The shareholding pattern reveals concerning trends in institutional confidence. Promoter holding has declined gradually from 55.42% in September 2024 to 53.66% in September 2025, a cumulative reduction of 1.76 percentage points. Whilst this decline is modest, it occurs against a backdrop of severe operational deterioration, raising questions about promoter commitment during challenging times.
| Quarter | Promoter (%) | FII (%) | MF (%) | Insurance (%) | Other DII (%) |
|---|---|---|---|---|---|
| Sep'25 | 53.66 | 6.24 | 3.95 | 0.01 | 0.84 |
| Jun'25 | 53.73 | 6.14 | 4.22 | 0.01 | 0.50 |
| Mar'25 | 53.83 | 7.08 | 4.30 | 0.01 | 0.55 |
| Dec'24 | 54.01 | 8.04 | 4.36 | 0.01 | 0.29 |
| Sep'24 | 55.42 | 9.58 | 4.43 | 0.01 | 0.32 |
Foreign institutional investor (FII) holding has declined sharply from 9.58% in September 2024 to 6.24% in September 2025, representing a 3.34 percentage point reduction. This sustained selling by sophisticated foreign investors signals deep concerns about the company's near-term prospects and ability to return to profitability. The fact that FIIs have reduced exposure across four consecutive quarters—even as the stock price collapsed—suggests fundamental rather than tactical selling.
Mutual fund holding has also declined, albeit modestly, from 4.43% to 3.95% over the same period. With only 15 mutual funds holding positions, institutional interest remains limited. Insurance company holdings are negligible at 0.01%, indicating minimal interest from long-term institutional investors. Other domestic institutional investors (DIIs) have marginally increased their stake to 0.84%, but this appears to be opportunistic rather than conviction-based, given the small absolute position.
The non-institutional shareholding has increased from 30.24% to 35.30%, largely absorbing the stake reductions by promoters and institutional investors. This shift towards retail and non-institutional holders typically increases volatility and reduces the quality of the shareholder base, as retail investors often exhibit less patience during prolonged downturns.
Stock Performance: Severe Underperformance Across All Timeframes
Tejas Networks' stock performance has been catastrophic across virtually all meaningful timeframes. The stock has declined 62.12% over the past year, underperforming the Sensex by 69.79 percentage points. Over three years, the stock is down 30.75% whilst the Sensex has gained 37.58%, resulting in a negative alpha of 68.33 percentage points.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -7.69% | -2.55% | -5.14% |
| 1 Month | -10.83% | -1.29% | -9.54% |
| 3 Months | -29.59% | +1.71% | -31.30% |
| 6 Months | -39.86% | +0.05% | -39.91% |
| 1 Year | -62.12% | +7.67% | -69.79% |
| 2 Years | -51.46% | +17.08% | -68.54% |
| 3 Years | -30.75% | +37.58% | -68.33% |
The stock's technical indicators uniformly point to bearish momentum. Trading below all key moving averages—5-day (₹440.81), 20-day (₹452.16), 50-day (₹485.27), 100-day (₹536.42), and 200-day (₹623.54)—the stock shows no signs of technical support. The MACD indicator is bearish on both weekly and monthly timeframes, whilst Bollinger Bands suggest continued downward pressure.
The stock's beta of 1.35 indicates it is significantly more volatile than the broader market, amplifying both gains and losses. However, given the current bearish trend, this high beta works against investors, accelerating downside during market weakness. The stock's volatility of 45.09% over the past year is exceptionally high, reflecting the severe uncertainty surrounding the company's business prospects.
Recent delivery volumes show some increase, with delivery percentage rising from an average of 29.69% over the trailing month to 40.38% over the past five days. However, this uptick in delivery-based buying appears insufficient to reverse the entrenched bearish trend, particularly given the fundamental deterioration in business performance.
"With losses mounting, leverage increasing, and institutional investors exiting, Tejas Networks faces an uphill battle to restore investor confidence and return to sustainable profitability."
Investment Thesis: Multiple Red Flags Dominate
The investment case for Tejas Networks has deteriorated dramatically across all key parameters. The company's Mojo Score of 1 out of 100 reflects "STRONG SELL" status, with negative assessments across valuation (Risky), quality (Below Average), financial trend (Negative), and technical trend (Bearish).
The quality assessment has been downgraded to "Below Average" as of October 27, 2025, reflecting the company's weak long-term financial performance. The five-year EBIT growth of -60.05% indicates sustained profitability challenges, whilst the average ROCE of -1.43% and ROE of 2.99% demonstrate poor capital efficiency. The debt-to-EBITDA ratio of 7.94 and net debt-to-equity of 1.17 indicate concerning leverage levels, particularly given the current loss-making status.
Key Strengths & Risk Factors
✓ Key Strengths
- No Promoter Pledging: Zero per cent pledged shares indicate promoter confidence and financial stability at the holding company level
- Historical Growth Track Record: Five-year sales CAGR of 72.17% demonstrates the company's ability to scale operations during favourable market conditions
- Sequential Improvement: Q3 FY26 showed 17.18% QoQ revenue growth and 36.00% reduction in losses compared to Q2 FY26
- Dividend Payment: Despite losses, the company paid ₹2.5 per share dividend (0.59% yield), signalling some confidence in cash position
- Technology Capabilities: Established presence in wireline and wireless telecom equipment with in-house design and manufacturing capabilities
✗ Key Concerns
- Revenue Collapse: 88.39% YoY decline in Q3 FY26 revenue indicates severe order book depletion or customer loss
- Sustained Losses: Three consecutive quarters of significant losses totalling ₹697.55 crores in FY26 to date
- Negative Operating Margins: Operating margin of -43.81% in Q3 FY26 reflects fundamental cost structure misalignment
- Deteriorating Returns: ROE of -12.26% and ROCE of -4.83% indicate severe capital destruction
- Rising Leverage: Debt-to-equity ratio of 1.29 times at highest level whilst generating losses
- Liquidity Pressure: Cash position declined to ₹61.26 crores, lowest on record, raising going-concern questions
- Institutional Exodus: FII holding declined 3.34 percentage points over four quarters, signalling loss of confidence
- Working Capital Stress: Debtors turnover ratio at 1.24 times (lowest level) indicates collection challenges
Outlook: What to Watch
Positive Catalysts
- Order Book Announcements: Any significant new contract wins from telecom operators or government entities
- Cost Restructuring: Aggressive cost reduction measures to align expense base with lower revenue run-rate
- Revenue Stabilisation: Sustained QoQ revenue growth for 2-3 quarters indicating demand recovery
- Margin Improvement: Return to positive operating margins through operational leverage or pricing power
- Strategic Partnerships: Collaborations or joint ventures that could provide revenue visibility
Red Flags to Monitor
- Further Revenue Decline: Q4 FY26 revenue falling below ₹300 crores would signal continued deterioration
- Deepening Losses: Quarterly losses exceeding ₹200 crores in upcoming quarters
- Liquidity Crisis: Cash position falling below ₹50 crores or inability to meet debt obligations
- Additional Promoter Stake Sales: Further reduction in promoter holding below 53% would be highly negative
- Debt Covenant Breaches: Any announcements regarding loan restructuring or covenant violations
- Customer Concentration: Loss of additional major customers or project cancellations
The Verdict: Exit Recommended
Score: 1/100
For Fresh Investors: Avoid entirely. The company faces severe operational challenges with sustained losses, collapsing revenue, negative operating margins, and deteriorating balance sheet quality. Multiple quarters of recovery would be required before considering any investment, and even then, significant risk remains.
For Existing Holders: Consider exiting positions on any technical bounce. The stock has declined 64% from highs but remains vulnerable to further downside given ongoing losses, rising leverage, and institutional selling. Book losses and redeploy capital into quality businesses with positive earnings trajectories.
Fair Value Estimate: ₹280-320 (33% downside risk from current levels), assuming revenue stabilisation at ₹1,000-1,200 crores annually and return to breakeven operations—both highly uncertain outcomes.
Rationale: The combination of 88% revenue decline, sustained quarterly losses, negative operating margins, deteriorating ROE/ROCE, rising leverage, shrinking cash position, and institutional exodus creates an extremely unfavourable risk-reward profile. The technical picture is uniformly bearish, and fundamental recovery appears distant. Quality investors should avoid capital destruction and seek opportunities elsewhere.
Note- ROCE = (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results, and all investments carry risk of loss.
