Tejas Networks, the home-grown telecom networking equipment manufacturer promoted by Silicon-Valley based serial entrepreneur Gururaj ‘Desh’ Deshpande, has evinced interest in setting up a join venture (JV) with Indian Telephone Industries (ITI Ltd) to produce next-generation optical fibre networking and transmission equipment. Tejas has had a technical collaboration with ITI in area of synchronous digital hierarchy (SDH) products for the last five years.
Tejas is understood to be looking at the JV as the next step in its existing technology collaboration with ITI. The company is primarily looking at the JV targetting the domestic telecom equipment market estimated to be about $20 billion and growing by leaps and bounds due to the opportunities in the telecom services space.
If the proposed JV sails through, Tejas will hold a majority 74 per cent stake in the JV as specified in the bid document. When contacted, Sanjay Nayak, CEO and MD of the Bangalore-based company, said the company was mulling a JV with ITI subject to various conditions laid down by ITI. He, however, declined to elaborate on the kind of investment the company is planning to make saying it was ‘premature’ to discuss those things.
Tejas, founded in 2000 by four technology professionals including Sanjay Nayak, Kumar N Sivarajan, Arnob Roy and Gururaj Deshpande, reported revenues of Rs 650 crore during fiscal 2008-09, a growth of 80 per cent over the previous fiscal. The domestic market contributes about 75 per cent to the company’s revenues. Tejas exports to over 50 countries including the US, Philippines, Japan, Brazil and countries in Europe and South East Asia.
The company which deferred plans for a public issue last year in the wake of the global slowdown, has so far raised about $75 million in private equity funding from investors like Battery Ventures, Cascade Capital Management, Mayfield Fund, Intel Capital, Goldman Sachs and Sandstone Investments. Investors hold close to 50 per cent in the company.
ITI, trying to come out of the huge losses it incurred over the years, had earlier floated bid inviting Indian and global companies in the telecom equipment space to set up JVs at its plants in Rae Bareli, Naini and Bangalore. The bid which was supposed to be closed towards the end of this month, has been extended till 5th of February this year.
As for the information available with Business Standard, US-based telecom equipment maker UTStarcom is in the process of responding to the bid to set up a JV with ITI. The proposed JV will give UTStarcom which has premier customers in India like the BSNL, a local manufacturing capabilities. Besides, ITI’s existing partners including Alcatel-Lucent and Huawei are also said to have shown interest for the JV even though it is not yet clear whether they have applied for the bid.
In June this year the government announced plans to write-off Rs 2,820 crore losses accumulated by ITI to enable the company to hive off its viable units for private partners. Prior to this, the government offered a bailout package to the tune of Rs 1,025 crore was given during fiscal 2005-06.
ITI has six manufacturing units, including three in Uttar Pradesh (Mankapur, Rae Bareily and Naini), one each in Srinagar in Jammu & Kashmir, Palakkad in Kerala and the main facility in Bangalore. Three of the six units are said to be profitable. The government holds around 93 per cent in the 61-year-old telecom behemoth, while the rest 7 per cent is largely held by the public.
