Why is Tejas Networks Ltd falling/rising?

Recent Price Movement and Market Context

Tejas Networks has been under significant selling pressure, hitting a new 52-week low of ₹410 during intraday trading on 09-Jan. The stock has declined by 7.69% over the past week, markedly underperforming the Sensex, which fell by only 2.55% in the same period. Year-to-date, the stock is down 6.88%, compared to a more modest 1.93% decline in the benchmark index. This underperformance extends over longer periods as well, with the stock losing 62.12% in the last year while the Sensex gained 7.67%. Even over three and five years, Tejas Networks has lagged the market significantly, despite a strong five-year cumulative return of 207.12% which now appears to be eroding rapidly.

On the day of the decline, the stock underperformed its IT - Hardware sector peers, which themselves fell by 3.32%. Notably, the weighted average price for the day was closer to the low end of the trading range, indicating that more volume was transacted near the lower price levels. The stock is trading below all key moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages, signalling a bearish technical outlook. Despite rising investor participation, with delivery volumes increasing by over 15% compared to the five-day average, the selling pressure has intensified.

Fundamental Weaknesses Driving the Decline

The primary reason behind the steep fall in Tejas Networks’ share price is its deteriorating financial health. The company reported a drastic fall in net sales by 88.39% in the December quarter, with revenues plummeting to ₹306.79 crores. This sharp decline in top-line performance has been accompanied by substantial losses at the profit before tax (PBT) level, which fell by 257.15% to a negative ₹310.41 crores. The net loss after tax (PAT) also worsened significantly, declining by 218.6% to ₹196.55 crores in the same quarter.

These results mark the second consecutive quarter of negative financial performance, underscoring the company’s ongoing operational challenges. The weak profitability is further reflected in the company’s average return on equity of just 2.99%, indicating poor returns generated on shareholders’ funds. Additionally, the company’s ability to service its debt is strained, with a high Debt to EBITDA ratio of 12.63 times, signalling elevated financial risk and limited capacity to manage leverage effectively.

Such fundamental weaknesses have contributed to the stock being classified as risky, trading below its historical valuation averages. Over the past year, the stock’s profits have contracted by nearly 190%, a stark contrast to the broader market’s positive earnings growth. This has led to sustained underperformance relative to the BSE500 index across multiple time frames, including one year, three years, and the recent quarter.

Sector and Market Sentiment

The IT - Hardware sector itself has been under pressure, falling 3.32% on the day, which has compounded the negative sentiment around Tejas Networks. Despite increased liquidity and trading volumes, the stock’s inability to hold above key technical levels suggests that investors remain cautious. The rising delivery volumes indicate that while participation is increasing, it is predominantly on the sell side, pushing the price lower.

In summary, the steep decline in Tejas Networks’ share price on 09-Jan is a reflection of its weak quarterly results, poor profitability metrics, high leverage, and sustained underperformance relative to market benchmarks. The stock’s technical indicators and sectoral weakness further exacerbate the negative outlook, leading to continued selling pressure and a new 52-week low.

Limited Time Only! Subscribe for Rs. 12,999 and get 1 Year of MojoOne + an Additional Year Completely FREE. Don't miss out on this exclusive offer. Claim Your Free Year →