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  • 19 Jan 2024
  • ICICI Securities

TATA COMMUNICATIONS: WEAK PERFORMANCE ON UNDERLYING BASIS

TATACOMM - 1675 Change: 7.20 (0.43 %)

News: Topline came in at ₹ 5633 crore, up 24.4% YoY & up 15.6% QoQ, driven by the consolidation of Kaleyra and Switch (YoY basis impact only). The underlying data revenues was muted at ~6.6% YoY (down 0.7% QoQ) at ₹ 3831 crore. The underlying Digital Platforms segment of Data business witnessed growth of 11.4% YoY and 0.8% QoQ at ₹1312. The reported digital platform segment saw a growth of 88% YoY owing to Kaleyra (₹ 787 crore revenues in Q3) and Switch impact. Voice segment continued to remain weak with revenues down 16.4% YoY (down 1.3% QoQ) at ₹423 crore. Consolidated EBITDA came in at ₹ 1090 crore, up 1% YoY with margin at 19.5% (down 430 bps YoY and down 130 bps QoQ). The underlying EBITDA was flat QOQ at ₹ 1024 crore with margin of 21.7%, flat QoQ, down 210 bps YoY. Underlying Data EBITDA margin, which was at 24.4%, up 50 bps QoQ, and down 200 bps YoY. Adjusted PAT at ₹ 230 crore was down 42% YoY. There was a sequential increase in net debt by ~₹ 2347 crore (US$ 275 mn) to ₹ 9310 crore largely due to Kaleyra acquisition (acquisition cost of $ 250 mn).

Views: While revenue growth is visible on reported basis, the underlying revenue growth has again tapered to sub 10%, alongwith margin weakness. Tata Communication remains a key beneficiary of overall digitisation at enterprise levels, albeit continues to disappoint as growth-margin construct is not in sync.

Impact: Negative