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Result Analysis: Tata Communications Ltd. (CMP: Rs.1383) Result Update: Q3FY23

Tata Communications is an Indian telecommunications company engaged in the next level of intelligence powered by Cloud, Mobility, Internet of Things IoT, Collaboration, Security, Media services and Network services. The company’s global network includes one of the most advanced and largest submarine cable networks. Tata Communication is in the top 5 IP providers on 5 continents and offer public and private network connectivity to more than 240 countries and territories.

 


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    Stock Details
    Market Cap. (Cr.) 39413
    Equity (Cr.) 285.00
    Face Value 10
    52 Wk. high/low 1430 / 856
    BSE Code 500483  
    NSE Code TATACOMM
    Book Value (Rs) 31.84
    Sector Telecomm-Service
    Key Ratios
    Debt-equity: 19.67
    ROCE (%): 13.30
    ROE (%): 35.53
    TTM EPS: 62.39
    P/BV: 43.4
    TTM P/E: 22.17

    Result Highlights:

    • Tata Communications’ Consolidated Revenue has increased by 8.21% YoY and 2.2% on QoQ basis to Rs.4528 cr. in Q3FY23.

    • Operating profit has decreased by 0.47% YoY and 4.63% on QoQ basis to Rs.1077cr. Operating profit margin of the company stood at 23.8%, declined sequentially as well as on YoY basis by 170bps and 207bps respectively due to the tepid revenue growth and increased employee expense.

    • Finance cost of the company has increased significantly by ~26% on QoQ and 47% YoY basis to Rs.123 cr. in the quarter.

    • Net Profit for the Q3FY23 has come at Rs.387 cr. compared to Rs.527 cr. in the Q2FY23 and Rs.388 cr. in the Q3FY22. A decline of 26.6% QoQ and 0.26% on YoY basis.
    • Consolidated capex for the quarter stood at Rs.391 cr. compared to Rs.400 cr. in the previous year same quarter.

    • Company’s Revenue from Voice solutions which accounts 11% in the total revenue, has decreased sequentially by 3.6% and 8.7% on YoY basis.

    • Data services segment revenue has increased by 2.9% QoQ and 11% YoY backed by consistent delivery in core connectivity and digital platforms and services. The segment is currently accounts 79.7% in the total revenue.

    • Revenue% from India has increased sequentially by 50bps while decreased by 50bps in the revenue from Rest of the World.

    Financial Performance:

    Shareholding Pattern:

    Particulars %
    Promoters & Promoter Group 58.86
    FIIs 17.66
    DIIs 13.93
    Public 8.18
    Others 1.37

    Management Commentary:

    • Commenting on the December results, A.S Lakshminarayanan, MD and CEO, said, we are pleased to deliver another strong quarter with broad based growth in our Data business across India and international markets. Our expanding portfolio of digital fabric capabilities is enabling us to drive deeper customer engagements improving our funnel and order book.”

    • Kabir Ahmed Shakir, CFO, said, “This was another quarter of a growth momentum in our Data Portfolio, reflective of our investments in our people and innovative solutions, in line with our customer’s evolving digital needs. Our focus on financial prudence has allowed us to drive inorganic expansion of our global footprint.”

    Outlook:

    Tata Communications has reported overall muted performance in the December’22 quarter with stagnated growth of 2.2% in Revenue and degrowth of 26.6% in the Net Profit compared to September’22 quarter. Rising interest cost (by ~25% QoQ) has majorly impacted the net profits of the company and on the revenue front, rising competition and prevailing macro headwinds have added additional pressures. Company’s revenue% from other geographies has declined in the Data services segment for the quarter. The company has recorded 11% YoY growth in the data services segment and 6% YoY growth in the core connectivity portfolio in Q3FY23. The management remains positive with the expanding order book and customer engagements. For the nine months of FY23 Tata Communication has reported the earnings of Rs.51.58 and we expect the company to close the FY23 at the eEPS of Rs.68.7. Based on the estimated earnings the expected PE of the company is 20x at the CMP of Rs.1383.

    Results:

    Particulars (In Rs. Cr.) Q3FY23 Q2FY23 Q3FY22 QoQ% YoY% 9MFY23 9MFY22 FY22
    Revenue from Operations 4,528 4,431 4,185 2.20% 8.21% 13,270 12,462 16,725
    Other Income 31 37 19 -16.03% 63.56% 301 69 332
    Total Income 4,559 4,467 4,204 2.05% 8.45% 13,571 12,530 17,057
    Network and transmission expense 1,616 1,563 1,530 3.40% 5.61% 4,737 4,659 6,199
    Employee expense 921 870 734 5.80% 25.49% 2,598 2,272 3,040
    Other Expense 914 868 838 5.34% 9.04% 2,651 2,349 3,258
    EBITDA 1,077 1,130 1,082 -4.63% -0.47% 3,284 3,181 4,227
    EBITDA Margin (%) 23.8% 25.5% 25.9% -1.70% -2.07% 24.7% 25.5% 25.3%
    Finance Cost 123 98 83 25.46% 47.00% 300 270 360
    Depreciation & Amortisation expense 555 552 542 0.58% 2.28% 1643 1616 2205
    Exceptional Items 76 8 76 27 6
    Profit Before Tax (PBT) 431 593 484 -27.40% -11.00% 1718 1391 2000
    Tax 44 66 96 -33.82% -54.51% 269 279 522
    Profit After Tax (PAT) 387 527 388 -26.60% -0.26% 1449 1112 1478
    PAT Margin (%) 8.5% 11.9% 9.3% -3.35% -0.73% 10.9% 8.9% 8.8%
    EPS (in Rs.) 13.82 18.68 13.87 -26.02% -0.36% 51.58 39.18 51.99
    Segment Revenue (In Rs. Cr.) Q3FY23 Revenue% Q2FY23 QoQ% Q3FY22 YoY%
    Voice Solutions 506 11.2% 524 -3.6% 554 -8.7%
    Data Services 3,609 79.7% 3,507 2.9% 3,247 11.1%
    Payment Solutions 50 1.1% 46 8.4% 44 13.9%
    Transformation Services 358 7.9% 347 3.3% 337 6.3%
    Real Estate 50 1.1% 49 0.9% 44 12.4%
    Less: Inter Segment Revenue 43 1.0% 43 1.9% 41 6.3%
    Total 4,528   4,431   4,185  
    Source: Company website, EWL Research

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