Apr'25 View on Tata Communications Ltd

Tata Communications was incorporated on March 19, 1986 as VSNL. In February 2002, the Government of India, as per their disinvestments plan, sold 25% of their holding in the company to the strategic partner. Consequently, the company was taken over under the administrative control of TATA. [1] It is the leading global digital ecosystem enabler. It has a leadership position in emerging markets, and an infrastructure that spans the globe. It delivers managed solutions to multinational companies and service providers. It partners with 300 of the Fortune 500 companies with their state-of the-art solutions, including a wide range of communication, collaboration, cloud, mobility, connected solutions, network and data center services. Expectation to be decided based on Q3 result analysis as below • TCOM’s Q3FY25 adjusted EBITDA came in line with our estimates. • Deal closures have slowed recently due to macro headwinds. • Guidance maintained for margins to gradually inch up to 23-25% by FY27E. • Restructuring of non-core businesses has progressed well during Q3 & should help strengthen the balance sheet. • SELL rating; await acceleration in data revenue growth. • We cut our SoTP-based fair value to Rs1,600 (from Rs1,645). Q3FY25 Earnings update: Positives: • Adjusted EBITDA margins, at 20% (183 bps qoq), signal sequential improvement. Negatives: • Adj. Revenues (2.4% yoy, 1.6% qoq), were marginally below our estimates. • Core-connectivity’s revenue fell 0.9% qoq due to price erosion and the lingering effect of cable cuts. • The conversion rate dipped in Q3FY25 from H1FY25.