Tata Communications Q2 Review - Subdued Results On Weak Core-Connectivity Growth: Motilal Oswal

Motilal Oswal Report

Tata Communications Ltd. reported weak results with consolidated Ebitda declining 1% QoQ (5% miss) and margins contracting 60 bp QoQ to 19.4%. The reported revenue/Ebitda were boosted by Rs 865 million prior period revenue recognition.

Reported data revenue grew 3% QoQ (inline) with a modest 2.5% QoQ growth in core-connectivity and ~4% QoQ growth in digital portfolio, driven by 34% QoQ growth in Incubation. Digital products and solutions revenue grew modest ~1.5% QoQ.

Tata Communication management indicated that the order book was up 25% YoY in Q2 on account of large deal wins with OTTs and hyper-scalers as well as the highest order booking in five years in international business.

The funnel continues to remain robust, though funnel additions have been subdued. Management has maintained its ambition of doubling data revenue by FY27 and bringing Ebitda margins back to 23-25% over the medium term.

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