Tata Communications Reports 58% Fall in Q2 Net Profit, Focuses on Revenue Growth

20 Oct 2023 , 11:30 AM

Tata Communications Ltd witnessed a nearly 2% drop in its stock price after reporting a 58% decline in net profit for the September quarter. The company’s net profit fell by 58% YoY to Rs 221.3 crore, with a 16% increase in expenses to Rs 4,600 crore, primarily due to network and transmission costs.

However, the data services segment, which contributes over 80% of total income, experienced a 14% revenue increase due to strong demand in connectivity and digital portfolio segments. Overall, income from operations grew by 10% to Rs 4,873 crore as Tata Communications prioritizes revenue growth over margins in the competitive cloud, cybersecurity, and networking market.

EBITDA margins dropped to 20.8% YoY, down 465 basis points, partly attributed to acquisitions, including Kaleyra in June. Tata Communications’ CEO, AS Lakshminarayanan, expressed confidence in long-term opportunities and investment in their product portfolio, with an expectation of a turnaround in the switch next year. The aim is to maintain a 23-25% margin in the medium term.

The company fast-tracked the Kaleyra Inc transaction to establish a new digital platform category, with Kaleyra as a wholly owned subsidiary, and assumed Kaleyra’s debt, although Kaleyra has a negative EBITDA that may impact future margins.

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