Tata dives into biz with Tejas stake

MUMBAI: Tata Sons Pvt. Ltd has agreed to buy a 43.35% stake in telecom gear maker Tejas Networks Ltd for ₹1,884 crore, as India’s largest conglomerate attempts to build a networking equipment business to capitalize on the massive spending by carriers to build 5G networks and curbs on Chinese vendors.

The transaction involves the sale of shares worth ₹500 crore and warrants worth ₹1,350 crore.

Tatas will own a 43.35% stake once the warrants are fully converted into shares.Tata Sons will buy the shares and warrants at ₹258 each.

The Tata group also offered to buy an additional 26% of Tejas Networks from public shareholders to comply with local takeover rules. In addition, Tata Sons will buy shares worth ₹34 crore from four senior executives of Tejas. Tata’s investment comes at a time the government is trying to promote local manufacturing of telecom gear through the productionlinked incentive scheme (PLI). The government has also mandated telcos to install equipment from trusted sources to prevent cyberattacks.

Curbs on Chinese vendors such as Huawei in India and many developed countries, including the US, UK and the European Union, over security concerns, have opened the door wider for firms such as Tejas to win business for cost-efficient equipment and software solutions.

“Tata-owned TCS is a formidable player in IT services.

However, Tata had little success in the retail telecom services business. Acquiring Tejas and entering the network equipment and hardware side of the business is a significant shift for Tata’s telecom business,” said Mahesh Uppal, a senior telecom expert.

“This is an excellent move for both firms. For Tejas it is certainly a big shot in the arm. It is one of the most credible telecom manufacturing companies in India. They also have a presence in some global markets. However, no company can thrive in the telecom equipment market without scale. Tatas will bring the resources to do just that.”

Tejas will utilize the capital infusion by Tata Sons to invest in research and development (R&D), sales and marketing, infrastructure, and to enhance its manufacturing capabilities to secure a larger piece of the network equipment pie.

“We are excited to partner with Tejas Networks, India’s leading telecom and network company, with a strong DNA of R&D. We look forward to working with the highly experienced management team of Tejas Networks and creating a full stack of globally competitive wireline and wireless products,” said Saurabh Agrawal, executive director of Tata Sons.

In February, India unveiled the ₹12,195 crore PLI scheme for telecom gear makers to make local manufacturing cost-efficient.