Tejas Networks Ltd. Earnings Call Presentation

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Pauline Whitehead
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1 Tejas Networks Ltd. Earnings Call Presentation 3 rd August,

2 Safe Harbor Statement Certain statements in this release concerning our future growth prospects are forward-looking statements, which involve a number of risks, and uncertainties that could cause actual results to differ materially from those in such forward-looking statements due to risks or uncertainties associated with our expectations with respect to, but not limited to, our ability to successfully implement our strategy and our growth and expansion plans, technological changes, our exposure to market risks, general economic and political conditions in India which have an impact on our business activities or investments, changes in the laws and regulations that apply to the industry in which the Company operates. The Company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the Company.

3 Our Customers Active Equipment Passive Infra Telecom Industry Eco-system: Where we fit RJio, Airtel, Idea, RCOM Telecom Operators BBNL, BSNL, PGCIL, Railtel Government/PSU Tata Comm, Spectranet, ACT Internet Service Providers Nokia, Ericsson, Huawei Wireless Access Tejas, Ciena, Infinera, ALU Optical Transmission Cisco, Juniper, Arista Switches & Routers Indus, Bharti Infratel, GTL Tower Operators Sterlite, Amara Raja, Luminous Cable & Accessories TCIL, HFCL, L&T System Integrators

4 Massive Growth in Data Consumption 2020 Total Network Traffic VOIP Compliance Driven Corporate Back-ups VPN Internet of Things >1M Petabytes/Year Cloud Services On-Demand HD Video Social Networking Video and Mobile Web ~340k Petabytes/Year 2015 Total Network Traffic Source: Ovum 4

India: Pent-up Demand for Data and Optical Bulk of our investments, almost all of our investments is going behind 4G and fiber our capex guidance for FY18 stands similar to FY17 at nearly $3 billion,

5 India: Pent-up Demand for Data and Optical Bulk of our investments, almost all of our investments is going behind 4G and fiber our capex guidance for FY18 stands similar to FY17 at nearly $3 billion, CEO, Bharti Airtel 5x Source: Ovum in order to support the burgeoning demand for mobile broadband services Idea increased its fiber network by nearly 53,000 km from 95,100 km in Q1FY16 to 148,100 km in Q1FY18.., CEO, Idea Cellular Under-invested in fiber; Lagging in data usage Fiberization essential for 4G/5G; Microwave is inadequate Source: Ovum Strong catch-up expected in optical equipment capex 5

Increased use of Data- driver for our Growth FIBER REACH X DATA CAPACITY 20%->40%->60% -> 80% Growing %age of Cell Sites getting fiberized 10G ->Nx10G->100G -> Nx100G Greater bandwidth required from

6 Increased use of Data- driver for our Growth FIBER REACH X DATA CAPACITY 20%->40%->60% -> 80% Growing %age of Cell Sites getting fiberized 10G ->Nx10G->100G -> Nx100G Greater bandwidth required from each Fiber Node Tejas is focusing on high-growth Metro & Access segments Intra-city networks is where there is need for large investments in both capacity and fiber-reach Inter-city backbone- investments only for upgrade in capacity Significant investments by government in rural areas for delivering broadband connectivity Source: Ovum 6

7 Our Focus: from Access to Metro Core Devices Inside Home Home Fiber/GPON Tejas Access Equipment Tejas Optical Transport Equipment Fiber/GPON Home Devices Inside Home Wireless Access Cell Tower (LTE) Cell Tower (LTE) Wireless Access LTE/Fiber Fiber Fiber Fiber LTE or Fiber Office Office LAN inside Office Fiber Fiber LAN inside Office Access Metro Core Access End-to-End Management Metro from a single platform Core (across all products) Speeds Nx10G => 100G Speeds 100G => Nx100G Speeds Nx100G => 400G Tech PTN, SDH, GPON, LTE Tech DWDM, OTN,PTN Tech ROADM, OTN, SDN Products TJ1400, TJ Products TJ1400-7, TJ1600 Products TJ1800, TJ COMMUNICATE RELIABLY at LOWEST COST 7

Our Differentiated Products- Software Defined

Seamless Network Transformation Incorporates

Effective Software Upgrades Programmable

Advanced Software and Hardware Integration

Networks Benefits to Customers Lower lifecycle

market-specific requirements Future- Ready

advantage Ability to sell the same product

8 Our Differentiated Products- Software Defined Hardware Multi-gen Support (2G to 3G to 4G) Seamless Network Transformation Incorporates Key Requirements of Emerging Markets Cost Effective Software Upgrades Programmable Silicon Chips with Common Software Code Base Advanced Software and Hardware Integration Caters to SDN and NFV Enabled, CPO Transport Networks Benefits to Customers Lower lifecycle cost Upgrade for new features and capacity Seamless evolution to next-generation communication architectures Customized to meet market-specific requirements Future- Ready Products Benefits for Tejas Time-to-market advantage Ability to sell the same product globally Reduced R&D costs design re-use Ability to sell upgrades on installed base 8

9 New India-based Business Model for High-tech Product Firms; Long-term Advantage against Global Peers Strengths of Tejas Business Model SALES Advantage against Global Peers Outsourced Asset-light Manufacturing; Unlimited scale through EMS for incremental costs COST OF GOOD SOLD (COGS) Tejas Gross Margins are close to those of global peers in spite of predominant Indian COGS revenues Bulk of R&D costs is on manpower; quasi-fixed costs Leveraged Sales Model through OEMs and 24x7 India-based customer support World-class financial performance R&D SELLING GENERAL & ADMINISTRATIVE (SG&A) OTHER COSTS PROFIT AFTER TAX (PAT) SG&A SG&A costs are half that of global peers with India-based operations R&D OTHER COSTS Benefits of India-based R&D; 4-times R&D for same cost 9

10 Strategic Priorities and Key Growth Drivers SALES INVESTMENTS R&D INVESTMENTS INDIA: USE INCUMBENCY TO BENEFIT FROM Continue Investments in High Growth Optical SPENDING Networking Segments PENT-UP DEMAND FOR DATA & GOVT. ENHANCE CURRENT PRODUCTS FOR Continue Investments in High Growth Optical FEATURES Networking Segments HIGHER CAPACITY AND MORE DATA 1 3 X GLOBAL: INCREASE SALES INVESTMENTS IN EMERGING MARKETS (AFRICA, SE-ASIA) & USA INVEST IN NEW PRODUCTS IN ADJACENT AREAS TO TARGET SPECIFIC APPLICATIONS 2 CONTINUE TO STRENGTHEN LEADERSHIP POSITION IN INDIA 4 10

11 Technology Vision and Strategy HOME ACCESS Continue Investments in High Growth Optical Networking Segments Focus Technologies: xpon, 4G-LTE/5G-IoT METRO CORE SME PACKET TRANSPORT MOBILE BACKHAUL MANAGEMENT ENTERPRISE SERVICES CONTINUE TO STRENGTHEN LEADERSHIP POSITION IN INDIA Focus Technologies: Converged PTN+OTN Switching Continue Investments in High Growth Optical Networking Segments Focus Technologies: Nx100G/Multi-terabit OTN Focus Technologies: SDN/NFV/vCPE solutions 11

Technology and R&D Strengths: Leading to Product Innovation

Network Protocols CAD Integration Engineering FPGA Design

R&D Skillsets R&D Staff with Masters/PhD Degrees USA 250+

Programmable hardware FPGA Standards Tejas is an active

working groups on Optical and 5G technologies 20+ Average

Embedded and Management code Tejas CEO is current co-chairman

12 Technology and R&D Strengths: Leading to Product Innovation High-speed Embedded Software Board Design TL9000 Quality Network Protocols CAD Integration Engineering FPGA Design Regulatory Testing Management Software 52% Workforce in R&D 41% R&D Skillsets R&D Staff with Masters/PhD Degrees USA 250+ Silicon IPs Patent Filings Others 337 Patents Europe India Programmable hardware FPGA Standards Tejas is an active participant in India s telecom standards bodies and technical working groups on Optical and 5G technologies 20+ Average Industry Experience of our Technical Architects 3Mn+ Lines of Embedded and Management code Tejas CEO is current co-chairman of India s Telecom Export Promotion Council World-class R&D Talent Intellectual Property Industry Leadership 12

Case Study: Tejas GPON Products in BharatNet (Phase-1) Fiber optic network reaching 100,000+ village (GP) across India 220,000+ kilometers of new fiber laid DHQ

Cable Operators GPON technology used for FTTx (Fiber to the Home/Premise) application Tejas is supplying solar powered GPON solution at nearly 40,000 locations OLT

13 Case Study: Tejas GPON Products in BharatNet (Phase-1) Fiber optic network reaching 100,000+ village (GP) across India 220,000+ kilometers of new fiber laid DHQ Guaranteed 100 Mbps broadband connectivity to every village office Block OTN/DWDM Ring Applications egov, e-health, e-education ONT Bandwidth to third-party ISPs, Telcos, Cable Operators GPON technology used for FTTx (Fiber to the Home/Premise) application Tejas is supplying solar powered GPON solution at nearly 40,000 locations OLT SDHQ(Block) CSP: Communications Service Provider ASP : Application Service Provider(Govt.,Google, Microsoft) DHQ: District Head Quarter ONT ONT GP SP 1 School OLT SDHQ(Block) ONT ONT 13

Q1 Update Financial Summary Revenues: 219.31 Cr (YoY 49.

(IP) Award in the category Top Indian Private Company

14 Q1 Update Financial Summary Revenues: Cr (YoY 49.0%) EBITDA: Cr (YoY 98.9%) Operating Profit: Cr (YoY 251.5%) PAT: Cr (NA) Awards Won 2017 National Intellectual Property (IP) Award in the category Top Indian Private Company (MSME) for Patents and Commercialization Clarivate Analytics India Innovation Award- Top 50 14

expenses (inclusive of depreciation) grew

15 Q1 18 vs Q1 17 Company registered sales growth of 49% on YoY basis Operating expenses (inclusive of depreciation) grew by 18% on YoY basis; however as a % of revenue reduced from 38% to 30% on YoY basis EBIDTA grew by 99% on YoY basis, benefitted by operating leverage Profit after tax was ` 20.1 cr in Q1 18 compared to loss of `1.7 cr in Q

16 Key Financial Indicators Amount in ` crore Particulars Q1 FY17 Q1 FY 18 Variance Revenue from operations % EBIDTA % Operating Profit % Profit after Tax (2) 20 EPS (Basic) ` (0.31) 2.78 EPS (Diluted) ` (0.31) 2.65 Cash flow from Operations 46 (16) (61cr) Net Worth cr Borrowings (298cr) Debt / Equity (0.95x) Net working capital cr Net working capital as % of LTM Revenue 57% 51% (678bps) Note: Cash and cash equivalents, Other Bank balances in current assets, and Borrowings in current liabilities not considered in computation of Net working capital 16

17 Thank you

Tejas Networks Ltd. Earnings Call Presentation (Q2 FY19)

Tejas Networks Ltd. Earnings Call Presentation (Q2 FY19) 24th Oct, 2018 www.tejasnetworks.com Safe Harbor Statement Certain statements in this release concerning our future growth prospects are forward-looking