Tejas Networks to raise $20 mn

Sandstone Capital expected to lead this round

Tejas Networks, the optical network products firm mentored by Gururaj (Desh) Deshpande of Sycamore fame, has almost tied up another round of funding to raise $ 20 million to deliver exponential growth. This round of funding is expected to be led by Sandstone Capital.

Tejas, barely six years old, is considered one of the most successful hightech Indian firms that designs its own 'boxes' and has this year been awarded the coveted CSIR diamond jubilee technology award which was first won by Indica (Tata Motor). The award celebrates outstanding technological innovation that has brought prestige to India.

Sandstone Capital, an India focused hedge fund, is led by Paresh Patel, a former associate of Deshpande who is chairman of Tejas. Patel is also on its board. Sanjay Nayak, CEO and managing director, Tejas Networks declined to comment on the name of the investor.

None of the existing investors in the startup is exiting and some are raising their investment at the new price set for the fresh investor.

This round of $20 million funding, when it happens, will take the total investment in the company close to $50 million from external investors such as Intel Capital, Gabriel Venture Partners, Battery Ventures, IL&FS, besides Deshpande and Sycamore Networks.

Tejas, which develops its own hardware products incorporating the latest technology, is doubling its turnover or more every year. Sanjay Nayak projected a turnover of around Rs 250 crore for 2006-07, up 90 per cent on the previous year's (2005-06) turnover of Rs 130 crore. The last itself was 176 per cent up on the 2004-05 turnover of Rs 47 crore.

"In the current year we will have over 20 per cent of market share in India. Our products are also gaining increasing acceptance globally and the share of our foreign revenue is rising rapidly, from 15 per cent last year to 35 per cent this year, even as overall revenue is rising fast," Nayak said.

"Tejas has also broken even from the first quarter of the current calendar year and we feel this is the time to invest aggressively in both growth and R&D to take the firm to the next orbit of growth," he added. As oversas sales become more important and volumes grow, margins are likely to improve.

To take care of the massive rise in volumes, Tejas, which has been using the contract manufacturing services of Flextronics, will be adding more manufacturers.

Nayak attributes the success of Tejas to having a clear picture of what it wanted to do from day one. It picked the right new technology standard, implemented its product faster than the competition, successfully tried out its products in India first and then went global.

The global foray has been as OEM supplier to some of the four major telecom network equipment manufacturers and also by slowly undertaking own label sales in emerging markets like Southeast Asia, West Asia and Africa.

"We first won respect in India and once you make it in the tough Indian market, you get noticed globally. This is particularly so when global telecom circles acknowledge the speed and manner in which Indian firms have managed their network rollout," Nayak explained.