Tata Communications dips 1.3% despite fastest quarterly growth in 9 years

For the reporting period, Data Revenue grew 28.5 percent YoY to Rs 4,618 crore. Digital Portfolio Revenue grew 78.2 percent YoY and India Enterprise revenue grew 10.4 percent YoY.

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Shares of Tata Communications fell 1.3 percent as investors rushed to book profit at the open on January 19, a day after the company reported its fastest quarterly growth in nine years. The stock closed 6 percent higher at Rs 1,800 after the earnings announcement. At 9:20am on January 19, the stock was trading at Rs 1,746.20.

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In a regulatory filing, Tata Communications reported a 24.4 percent year-on-year growth in revenue of Rs 5,633 crore.  EBITDA (earnings before interest, taxes, depreciation, and amortisation) for the reporting period also grew 5.3 percent on-year. PAT for the period declined 88.6 percent to Rs 45 crore as against Rs 394 crore last year.

For the reporting period, Data revenue grew 28.5 percent YoY to Rs 4,618 crore, while digital portfolio revenue surged 78.2 percent and India Enterprise revenue 10.4 percent.

Also read: Tata Communications posts fastest quarterly revenue growth in 9 years

“We are pleased to report another quarter of robust growth as data revenue crossed the Rs 4,000-crore mark with digital services contributing 45 percent, in line with our strategy… We remain confident about our medium-term ambitions,” Lakshminarayanan, MD and CEO of Tata Communications, said in a note.

Talking to CNBC TV-18, Lakshminarayanan said that they maintain their aspiration for double-digit margin for Kaleyra in the medium term. While they saw a slowdown in data revenue relative to last few quarters, deal funnel has hit an all-time high.

What brokerages say

CLSA has an ‘outperform’ call on the stock with a target price of Rs 2,045 per share. According to the brokerage, the company which reported a 29 percent increase in the data revenue segment in-line estimates. The reported EBITDA for the period  was also above estimates.

Motilal Oswal has a ‘neutral’ call on the stock with a target price of Rs 1,770. According to the brokerage, the management’s endeavour to drive growth has diluted margins, including the loss-making acquisitions. “However, the company has reiterated its long-term focus on margin-accretive growth,” MOSL analysts wrote in a note.

The brokerage has raised estimates to factor in a higher EBITDA run rate from the acquisition and now expect revenue and EBITDA CAGRs of 15 percent and 16 percent over FY24-26. “At a P/E of 23x and EV/EBITDA of 8.5x on FY26E EPS, we see limited upside,” they added.  The consolidated EBITDA growth, according to the report was backed by – the integration of Kaleyra EBITDA which turned EBITDA positive in its first quarter post acquisition in October 2023.

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