Tata Communications LtdQ3 FY21Telecom - Services

Tata Communications Ltd

Q3 FY21 Earnings Call Analysis

Management growth scorecard

Revenue

Category 4

Margin

Category 3

Fundraise

N/A

Order

Yes

Capex

Yes

2 of 4 growth signals are positive.

Revenue guidance

Category 4

→Strategic focus on capturing growth opportunities as the world reopens and scales business quickly (Page 14).
→Sequential quarterly revenue growth of 1.7% after three consecutive quarters of decline, signaling recovery (Pages 5-6).
→Data revenue grew 1.1% quarter-on-quarter with broad-based growth across data and voice segments, except collaboration still recovering (Page 2).
→Double-digit growth in order book, indicating strong funnel and improved win rates, particularly in India and international markets excluding UK/Europe (Page 7, 2).
→Elevated attrition and supply chain issues causing execution delays, affecting near-term revenue conversion (Page 2).
→Investment focus on 5G private networks, SASE, Edge, and innovation incubations expected to support medium-term growth (Page 13).
→Medium-term EBITDA margin guidance maintained at 23%-25%, with reinvestments balancing profitability and growth (Page 12-13).
→Collaboration and CPaaS segments expected to recover post-COVID with new product launches like GlobalRapide (Page 4).

Category 3

→Tata Communications sees positive signs of recovery with sequential revenue growth after three quarters of decline, indicating improving underlying factors.
→The management is focused on delivering growth, with broad-based improvements across Data, Voice, and other segments.
→EBITDA margins are expected to be maintained in the medium term within the 23%-25% range, balancing profitability with reinvestment for growth.
→Losses in innovation/incubation businesses are reducing, but continuous investment will be made in emerging areas like 5G, SASE, and Edge to stay relevant.
→The company aims to improve Return on Capital Employed (ROCE) to 25%-30% over the medium term while maintaining a strong balance sheet ready for investments.
→There is cautious optimism on top-line growth acceleration, though macro challenges like talent shortage and supply chain delays may affect timings.
→Profit After Tax (PAT) grew 10.6% YoY with EPS at INR 14.9 for the quarter; improvements expected as growth scales up and below-EBITDA cost efficiencies continue.

Get access to all 5 sections — revenue, margin, fundraise, orderbook, and capex — for Tata Communications Ltd and 1,400+ other companies.

→Tata Communications is focused on maintaining a strong balance sheet and is committed to not diluting its shareholding in STT (holds 26%).
→Funding for investments including in STT India will be through internal cash flow generation, debt, and equity as required.
→The company has reduced net debt by INR 240 crore quarter-on-quarter and INR 870 crore year-on-year, indicating a focus on deleveraging.
→The CFO mentioned the CapEx guidance remains at around $250 million for the year.
→Management balances profitability with reinvestment for growth, indicating selective funding as needed.
→No explicit current or near-term plans for large new fundraising through debt or equity were disclosed in the Q2 FY22 call transcript.
→The emphasis is on optimizing existing resources and maintaining financial discipline while preparing to invest in future growth opportunities.

Yes

→Tata Communications reported a healthy double-digit growth in the order book for Q2 FY22 on both quarter-on-quarter and year-on-year basis.
→The order book growth is driven by both India and international markets, except for slow deal momentum in the U.K. and Europe, where improvement is expected soon.
→The company has seen a good double-digit order book growth in the Data business after a long time.
→The order book comprises many small deals; exact value or number of deals is not specified.
→Converting order book to revenue varies based on product types; some international network orders take longer to convert.
→Despite order book growth, challenges like price erosion and contract expirations are factors to consider when translating orders into revenue growth.
→The management expressed confidence that once economic conditions improve, growth in revenue aligned with strategic plans will follow.

Yes

→CapEx guidance for the year remains around $250 million (Page 12).
→Tata Communications is investing in innovation initiatives, including 30-40 projects across areas like 5G private networks, SASE, and Edge computing (Page 13).
→STT Global Data Centers (in which Tata Communications holds a 26% stake) plans to triple its data center capacity from 135 MW to 400 MW over the next 5 years, with capital investment estimated between INR 6,000-9,000 crore, funded via internal cash flow, debt, and equity (Page 9).
→Tata Communications is committed to reinvesting savings from cost optimization back into capabilities to drive growth (Page 13).
→The company is focused on strengthening cloud SOC, next-gen connectivity, and digital platforms, with ongoing investment in building proprietary content and solutions (Pages 4 and 13).
→Strategy emphasizes building a strong balance sheet to be ready for future growth investments (Page 10).

How does Tata Communications Ltd rank vs peers in Telecom - Services?

Pro feature

1Tata Communications Ltd

Rev 4Mar 3

See full Telecom - Services sector rankings

Want more stocks like Tata Communications Ltd?

Build an AI portfolio filtered by sector, market cap, and growth rank. Takes 2 minutes.