Tata Communications confident of reaching 23% margin in two years

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Tata Communications’ margins have fallen to 20% over the past few years, but MD and CEO Amur S Lakshminarayanan is confident it will reach 23% in the next two years.

In an interview with CNBC-TV18, he shared that the company plans to strategically evaluate its subsidiaries to enhance margins and restore them to the 23-25% range over the next couple of years.

The company’s earnings before interest, tax, depreciation, and amortisation (EBITDA) margin declined to 20.2% in FY24 from over 25% in FY22.

In January-March 2024, the margin was down 160 basis points sequentially, and 410 basis points year-on-year (YoY). This was largely due to EBITDA losses in recently acquired US-based companies, Kaleyra and The Switch.

During the same period, the growth in data revenue, which accounts for nearly 82% of consolidated revenue, was also weak sequentially due to continued challenges from the global slowdown.

Lakshminarayanan said the company is on course with the ambition to double data revenue to ₹28,000 crore by FY27 from ₹14,000 crore in FY23.

Brokerage firm Kotak Securities, however, believes achieving both the revenue and margin targets is a tall ask.

Also Read | Tata Communications shares extend losses for eighth straight day, down over 5%

While there are still delays in new orders, Lakshminarayanan says their deal participation has improved significantly, which raises hopes they will be able to close large deals.

The company’s net debt to EBITDA also increased to 2.16 times due to the recent acquisitions.

However, Lakshminarayanan reiterated the aim to get the leverage to under 2 times in the near term without specifying a timeline. 

Also Read | Tata Communications sees slight dip in Q4 profit, declares dividend of ₹16.70 per share

The current market capitalisation of the company is ₹49,584 crore.

For more, watch the accompanying video

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow