Tata Communications at 50x earnings but 12x EBITDA

Tata Communications Limited trades at 49.99 times earnings against a sector near 20, but 11.8 times EBITDA. My 23 September post covered the Q1 numbers; this one covers the price. Q1 FY27 numbers (consolidated, 22 July): Revenue: Rs 6,582.82 crore, up 10.5% YoY EBITDA: Rs 1,230.14 crore, up 8.2% YoY; margin 18.7% vs 19.1% PAT: Rs 130 crore, down 43.9% YoY from Rs 232 crore after Rs 106.36 crore of exceptionals Net debt Rs 10,400 crore, 2.12 times EBITDA; DoT licence fee demand of Rs 7,513.71 crore contingent, not provided The P/E is high because PAT is thin, not because growth is rich: depreciation, interest and the exceptionals sit between EBITDA and PAT. Enterprise value is Rs 57,910 crore (market cap Rs 47,510 crore plus net debt), 11.8 times annualised Q1 EBITDA. The stated objective is double-digit reported EBITDA growth this year; Q1 did 8.2 percent. Tata Communications [][***** shares closed at Rs 1,659.33 on 1 October on StockGro (NSE Rs 1,685.50), 20 percent below the 52-week high. P/E 49.99; sector P/E 19.68. My view: hold, not a fresh entry; it replaces the 23 September levels, withdrawn on 3 October. At 11.8 times EBITDA for 8 percent growth the price assumes the guidance is met; the DoT demand is 16 percent of market cap. Holders stay into the Q2 results; the date is not yet intimated, last year it was 15 October. Fresh money waits for Q2 reported EBITDA growth of 10 percent or better at a 19 percent margin; then I turn constructive near Rs 1,650, the zone Lovelesh Sharma flagged on 3 October. My exit is a close below Rs 1,323, the 2 April low. Disclosure: Vijay Kumar Gupta, SEBI Registered Research Analyst, INH000020226, Vijay Gupta Advisory. SEBI registration and NISM certification do not guarantee performance or assure returns. Securities markets are subject to market risks. No holdings in the subject company.