Betting on good R&D! Vijay Kedia shows the way & makes a killing

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Betting on good R&D! Vijay Kedia shows the way & makes a killing


NEW DELHI: If a company is investing heavily on R&D over and over again, does it make sense to buy its stock?

Seasoned investor Vijay Kedia entered Tejas Networks last year, and the scrip has since become one of his top three equity bets.

Explaining his investing thesis for the stock, the Dalal Street veteran says Tejas is among a few companies, which spend about 10 per cent of their revenues on research and development.

“Tell me one company in India you know that spends say 10 per cent of its revenue every year, year on year in R&D. Tejas is one of such companies,” Kedia told ETNOW during an interview. He hastened to add his view is not a recommendation to buy the stock.

Kedia bought the stock in the Rs 40-60 range.

On Friday, the scrip traded at Rs 137 on BSE, up 246 per cent from the price at which Kedia started buying the stock. Even at Rs 60 apiece, his investment made him 130 per cent returns.

Can one still buy it? “I cannot say if you can buy Tejas at Rs 110 or Rs 120 or Rs 130. Please do your homework,” Kedia said.

Tejas has been spending 10 per cent of its revenue on R&D and has so far invested more than Rs 1,200-1,300 crore on it this far.

In June-July, the stock was available at a market-cap of Rs 400-500 crore and the company had Rs 300 crore cash in the bank.

“They have developed a product — it takes time – which you cannot build in a hurry if you have to compete with Nokia or Ericsson or Huawei. This is what Tejas is doing. It takes time, because in India R&D spends are very low. They are nothing compared with what international companies are doing,” Kedia said.

He said the product that Tejas has developed is used in fibre-to-home and 3G, 4G and 5G services. “They have good technical knowledge and are competing with all Fortune 500 and Fortune 50 companies in the world. Because of Atmanirbhar, Mr Modi’s vision of India, the time has come to look at such companies. That is why I have bought the stock. I may go wrong, I do not know,” he said.

Data showed shares of Tejas Networks have risen 385 per cent from their 52-week low of Rs 28.50 hit in May, 2020.

Kedia was first seen entering Tejas in the June quarter with a 1.52 per cent stake purchase. By the end of September quarter, he increased his holding to 4.21 per cent. The company is yet to report December quarter shareholding data.

“In April and May, I many sleepless nights and I thought the world had come to an end. I had just 5-6 per cent in liquid cash. I sold some shares at whatever price. After that I did not buy anything meaningful in quantity. I bought maybe Ramco Systems and Tejas and some NIIT. But that was at very low prices. Intellect Design, again, was another stock I bought at a very low price. Now, they have gone up from my buying prices. So, please be careful and do not buy with your eyes shut. Do your homework,” he told ETNOW.

Tejas is not a widely tracked stock and had just one ‘outperform’ rating as per publicly available Reuters Eikon database as of Wednesday, January 6.





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