A 75% crash but this small cap isn't done yet

Summary: A brutal fall has pushed this small-cap company out of market favour. But it’s not completely done yet. Rather, it is laying the groundwork for future growth with industry tailwinds at its back. Here’s how.

Not long ago, Tejas Networks was seen as India’s answer to global telecom equipment giants. India needed indigenous telecom gear. The government was pushing hard. BSNL, its largest customer, was rolling out 4G nationwide. And Tejas, freshly acquired by Tata Sons, thus had scale, credibility and the right policy winds at its back.

FY25 seemed to confirm that this wasn’t just hype. Revenues and profits ballooned. A company that had struggled for years to break out of its niche suddenly looked like a full-fledged telecom equipment contender. The market responded the only way it knows how: by sending it to dizzying heights.

And then came an equally significant reversal. The stock today is down more than 75 per cent from its peak of July 2024. The reason? After a spectacular FY25, the last few quarters have seen the company’s financials run into trouble.

The year that skewed expectations

To understand Tejas’ fall, it helps to first understand why FY25 was so extraordinary. The numbers were powered almost entirely by one thing: execution of BSNL’s large, time-bound 4G rollout. For the first time in its history, Tejas was operating at a serious scale.

That matters. When volumes rise sharply in a manufacturing and technology business, operating leverage kicks in. Fixed costs such as R&D, engineering teams and manufacturing infrastructure get spread over a much larger revenue base. Margins expand quickly, profits don’t just improve; they explode.

The market treated FY25 as a new baseline not realising this was more a peak execution year—an unusually concentrated burst of deliveries, not a smooth, annuity-like growth phase. When that distinction became clear, the narrative unraveled and so did the stock.

Why it’s turning losses now

Once the bulk of BSNL deliveries were completed, revenues were bound to fall and they did. Follow-on orders haven’t arrived as quickly as hoped. International wireless deals have lingered in trials and pilots. Revenue recognition has turned lumpy again just as it had been for much of Tejas’ history.

Costs, meanwhile, haven’t retreated. Tejas has continued to spend aggressively on product development, talent and infrastructure. The story has thus flipped from growth to slowdown, profits to losses, promise to pressure. And nowhere is that pressure more visible than on the balance sheet.

Rising debt bruising the balance sheet

Tejas’ rising debt has been a major culprit behind spooking the market. The sharp increase in borrowings have been driven largely by working capital stress.

Telecom equipment is a cash-hungry business. Equipment must be built well before it’s delivered. Inventory gets built up. Payments, especially from government-linked customers, take time. Cash gets trapped between production and collection.

For Tejas, this cycle has stretched uncomfortably. Inventory has stayed high and receivables are taking longer to convert into cash. Thus, borrowings have been used to bridge the gap.

This means that execution risk has gone up. In the next phase, managing cash flows will matter as much as winning new orders.

What the market might be overlooking

While investors have focussed on falling revenues and rising debt, something else has been happening in the background. Tejas has been laying the groundwork for its next act.

First, the investment push

R&D spending has stepped up meaningfully. Senior talent has been brought in across wireless, optical and data networking. The product portfolio has widened—4G, 5G, O-RAN, optical transport, routing and data-centre networking.

This matters because in telecom equipment, capability comes before scale. Products must be built, tested and proven long before meaningful orders arrive.

Second, the overseas pivot

International revenues still account for barely 8 per cent of the total, but that is precisely where management wants the mix to shift. The BSNL 4G rollout gave Tejas something it had long lacked: proof of execution at national scale in a mission-critical network.

That reference is not just useful for future BSNL upgrades including 5G, but also when pitching to overseas customers who value live deployments over slide decks.

Third, industry backdrop is still favourable

Data consumption continues to surge, now turbocharged by AI-driven workloads. Networks must become faster, denser and more energy-efficient. 5G adoption across emerging markets is still in its early stages. Governments are actively looking to diversify away from Chinese vendors.

India itself is investing heavily in broadband, railways, defence communications and data-centre infrastructure. Tejas operates across all these opportunity pools. Few Indian companies have such a broad and strategically aligned product footprint.

And then there is BSNL

The state-run operator remains central to the story. Tejas told Mint that it is closely engaged with BSNL and the government on the next phase of network expansion. The management reportedly indicated that additional 4G sites are expected to be rolled out, reducing the risk of inventory obsolescence and supporting further deployments.

If those plans materialise, BSNL could once again act as a stabilising anchor.

Headwinds that still warrant attention

Still, the risks are real and structural.

The telecom equipment business has long, unpredictable sales cycles. Trials don’t always translate into commercial orders. Even when they do, timelines slip. Global competition is intense with entrenched players willing to sacrifice margins to defend market share.

But the biggest risk is concentration. Tejas’ dependence on BSNL remains high and BSNL itself is a struggling business. Any delay in BSNL’s rollouts can ripple quickly through Tejas’ order book and cash flows.

Execution adds another layer of complexity. Scaling across multiple technologies like wireless, optical, routing, etc., while expanding into new geographies is operationally demanding. Working capital, already stretched, will remain under pressure as the company balances inventory build-up with slow collections.

This is not a business where progress arrives neatly quarter by quarter. Volatility comes with the territory and investors will need patience. 

So, where does that leave Tejas?

Tejas Networks isn’t a fallen hero. But it isn’t a clean compounder either. It occupies an awkward middle ground.

It is still in a build-out phase, investing heavily today for outcomes that may only show up years from now. Success will hinge majorly on execution, turning capability into repeat global orders and keeping cash flows under control while doing so.

Investors are better off waiting and watching right now. Tejas remains a company that could still surprise on the upside but only if its preparation translates into sustained scale.

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Also read: Why market is betting big on Laurus Labs even at 85x P/E

This article was originally published on January 23, 2026.