Tata Communications reports soft performance; back ended costs impact marginsTATACOMM - 981 Change: 7.80 (0.80 %)
News: Topline came in at Rs 4263 crore, up 4.7% YoY & up 1.9% QoQ, largely in line with expectations with data revenues (forming ~77% of revenues) up ~7% YoY (up 2.1% QoQ) at Rs 3301 crore. Consolidated EBITDA margin was at 24.5% (down 40 bps YoY and down 135 bps QoQ). The company attributed the decline in EBITDA to higher expenses, which are back ended in nature (also reopening led costs such as admin and travelling expenses, in our view). Data EBITDA margin was at 29.3%, down 290 bps QoQ. The company reported a PAT of Rs 365 crore, up 22% YoY, aided by higher other income, which mainly included tax refunds and interest on the same. There was also sequential decline in net debt by ~Rs 444 crore QoQ on the back of healthy FCF.
Views: Tata Communication remains a key beneficiary of new normal of hybrid work structure, increased conferencing needs thereof and overall digitisation at enterprise levels. While revenue growth is on recovery trajectory along with continued cash flow generation and debt reduction, margin blip during the quarter, was dampener. We seek management commentary on the growth and margins trajectory ahead. The stock is available at ~18x FY24 P/E.