Tejas Networks surges 10% on strategic pact with Bharat Electronics

Shares of Tejas Networks were locked in upper circuit of 10 per cent at Rs 105 on the BSE on Tuesday after the company announced that it has signed a Memorandum of Understanding (MoU) with the state-owned defence solution provider Bharat Electronics (BEL).

The trading volumes on the counter doubled with a combined 1.4 million equity shares changing hands on the NSE and BSE till 11:48 am. There were pending buy orders for around 50,000 shares on both the exchanges, data shows.

The stock of Tejas Networks has recovered 62 per cent from its all-time low level of Rs 65 touched on November 15, 2019.

“The MoU envisages strategic cooperation, covering the use of Tejas’ optical transmission, access and data-switching products for domestic & export markets by jointly capitalising on the emerging opportunities in defence communication, strategic communication, smart city, homeland security, metro and state network projects under the “Make-in-India” program”, Tejas Networks said in a statement.

The company has recently received purchase orders totalling over Rs 60 crore from BEL, towards supply and services of its optical and data networking equipment for various projects won by BEL, which includes the Kerala Fibre Optic Network, defence communication networks and smart city projects.

On Friday, November 22, rating agency ICRA reaffirmed the long-term rating for Tejas Netowrks' Line of Credit (LOC). The outlook on the long-term rating has been revised from 'positive' to 'stable'.

The revision in the rating outlook takes in to account the decline in Tejas Networks' revenue and profitability during H1FY20 on account of reduction in new orders from the government sector.

The rating agency said it could upgrade the company’s rating if it demonstrates an improvement in revenue and profitability through focus on increased revenue share from International and India Private segments. Specific credit metrics that could lead to upgrade TNL’s rating would include improvement in the working capital intensity, i.e net working capital (NWC)/operating income (OI), less than 50 per cent on a sustained basis.

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