Tata Communications' MD Reveals What Aided Q2 Revenue Growth, Reasons Behind Drop In Margins

Tata Communications reported a revenue growth in the September quarter of the current financial year, despite a drop in net profit and margin contraction, driven by multiple factors, according to its MD and CEO Amur Lakshminarayanan.

Tata Communications in its financial updates for Q2 said its revenue increased by 2% quarter-on-quarter for the three months ended September, reaching Rs 5,767 crore. The company delivered a mixed bag of results this quarter reporting a 32% quarter-on-quarter fall in net profit at Rs 227.27 crore.

Talking to NDTV Profit about the Q2 performance of the Tata Group company, its managing director and chief executive officer said there were primary drivers behind the revenue growth, despite poor margins and net profit.

“The biggest growth came from the interaction segment driven by the Kaleyra acquisition. The second major growth we had was from our IoT drive by our MOVE platform, which is an organic play, largely because we have had an increased usage of the platform on the back of increased vehicles as well as several SOTA campaigns that happened in the last quarter,” Lakshminarayanan said.

“In the next-gen connectivity, after two quarters of slower growth we saw in Q2 that the growth was picking up. These were the three big drivers of revenue growth that we saw in Q2,” added the top executive.

The Tata Communications CEO said growth in the September quarter was in line with expectations.

The Ebitda margin of Tata Communications contracted to 19.4% in the second quarter of FY 2024-25 from 19.9% in the previous quarter.

Commenting on the margins, the CEO explained that the core connectivity business of the company, which gives high margins, decelerated in growth, and this resulted in an overall dip in margins.

“In the coming quarters, we will see how we can recover from that and get the margins back to at least 20% by the end of the year. The two acquisitions we did were negative margin companies, and we are integrating and consolidating that, and it drags the margins down,” he noted.

Lakshminarayanan said even if there were factors affecting the margins of the company, the management was confident of maintaining its long-term aims.

“All of these will come into play, and we firmly believe that our guidance of 23-25% as our long-term ambition is still very executable,” he said.

Shares of Tata Communications were trading in the green on Friday, a day after the company posted its results. The shares climbed as much as 2.45% to an intraday high of Rs 1,875 apiece on the NSE.

However, the stock pared some early gains to trade 1.21% higher at Rs 1,852.25 apiece on the NSE at 1:12 pm, compared to a 0.27% rise in the benchmark Nifty.