Tejas Network lists at issue price

Tejas Network had a better debut that the previous one- at least it got listed at the IPO price of Rs.257. But after this lackluster listing, it rose 5% to Rs.271 but is now at Rs.266; what we need to see if it ends the day at over the issue price.

The IPO had been subscribed 1.88 times with HNIs subscribing to the giant share of 48%, followed by retail investors at 31%.

In our IPO Analysis, we had minced no words and had in fact asked investors to avoid the issue. We had found it be valued expensive and had stated, “At Rs 257 per share, company’s market cap will be Rs. 2,350 crore while EV will be Rs. 2,536 crore, which discounts historic FY17 performance by a PE multiple of 27x and EV/EBITDA multiple of 14.6x. Estimating 20% growth in FY18, PE and EV/EBITDA mutiples are 19x and 12x respectively, which is quite stretched. On Rs.1,000 crore topline, sales multiple of 2.5x for actually a software cum hardware company is quite steep! While the company does not have strict listed comparable, smaller peer D-Link, being an MNC enjoying debt free status, is ruling at FY17 sales multiple of 0.45x, EV/EBITDA multiple of 11x, and PE of 18x. Tata Group’s smaller IT networking company Nelco is also ruling at FY17 EV/EBITDA multiple of 10x and sales multiple of 1.3x. Thus, Tejas Networks IPO is steeply priced, in addition to a weak balance sheet.”