Tejas, HFCL move to tackle component woes
MUMBAI: Local telecom gear manufacturers Tejas Networks Ltd and HFCL Ltd are changing strategies to limit the impact of severe component shortage on their order books, amid intense competition from European vendors Nokia and Ericsson.
Supply chain constraints, geopolitical conflicts, increased input costs and pandemic-related volatilities have led to a sharp fall in the revenues of telecom equipment makers, at a time global disruptions open up new business opportunities for Indian manufacturers.
“To counter it, we have placed orders for entire FY23, which is 12 months ahead of time,” said Sanjay Nayak, chief executive officer, Tejas Networks. The company has a large and dedicated order book and thus will be able to recover the revenues it had lost in FY22 this financial year, he said.
In a recent earnings call, Nayak highlighted shortages in low-cost and high-cost components in FY22, which disrupted manufacturing, despite the company having a robust order book. Tejas’ revenue dropped 37.2% to Rs126.5 crore in the March quarter, resulting in a loss of Rs49.6 crore.
HFCL also recorded a fall in revenue and profit for the
March quarter, even as full-year numbers were higher year-onyear ( y- o- y). Its net profit dropped 21% y-o-y to Rs68 crore for the March quarter, while revenue was down 15% to Rs1,183 crore. The company has started to seek orders at higher prices to soften the blow of high input and freight costs, it said.
“We’re now asking customers to give orders at increased prices, to which customers are also responding because they also know that input prices have gone up. So, we’re balancing it out in the coming quarter,” HFCL managing director Mahendra Nahata said in an analyst call.
Large global players place component orders of tens of billions of dollars years in advance, but Indian players lag far behind not only because of their scale but also the far smaller revenue streams, according to industry executives.
“They place orders at most a quarter in advance and if supplies of any component gets hit, their entire output gets choked and limits the ability to complete orders. They not only lose business but the market to other players,” said a senior executive who did not want to be named.
Sector watchers said that companies need to come together when putting in supply orders from component vendors, most of which are in China and Taiwan, such that the scale can become bigger..