Tata Comms’ Q4 net at ₹322 cr, company sees cautious clients

Consolidated revenue during the fourth quarter rose 24.6% year-on-year to ₹5,692 crore

Tata Communications’ net profit for the quarter ended 31 March surged to ₹321.52 crore, from ₹45.1 crore in the previous three months, but fell 1.5% from ₹326.42 crore in the same quarter a year ago.

Consolidated revenue for the quarter rose 24.6% year-on-year to ₹5,692 crore. Of this, revenue from data rose 26.9% to ₹4,656 crore. Earnings before interest, tax, depreciation and amortization (Ebitda) rose 2% to ₹1,056 crore, but margins declined to 18.6% from 22.6% a year ago. Profit margins also slipped 156 basis points to 5.6% for the quarter ended March.

For the full year, consolidated revenues jumped 17.5% to ₹20,969 crore, while data revenue crossed the ₹17,000-crore mark, rising 21.9%. However, profit nearly halved to ₹969.6 crore in FY24, from ₹1,800 in FY23, due to higher expenses at its overseas businesses. The company’s board recommended a dividend of ₹16.7 per share.

Macroeconomic headwinds due to conflicts and unrest in some parts of the world could potentially impact business. “While our funnel is good, the conversion is taking more time because our customers are cautious. With the conflict happening, the cautiousness will only increase. But despite the headwinds in the international markets, we’ve seen growth, albeit on a smaller base,” MD and CEO A S Lakshminarayanan said in an interaction with Mint following the results.

Margin pressures are likely to continue as the company is integrating its global acquisitions and also spending on its overseas operations to turn them around, he added.

“We’ve invested in our platforms organically. We’ve also invested inorganically through a couple of large acquisitions, and people have translated into a full year of costs for us,” he said. He added that the costs are likely to remain on the higher side since the company intended to increase its reach in the international markets following the acquisition of The Switch and Kaleyra.

“Our reach in international markets is very small, even though 50% of our revenue comes from international markets, and we have to do a lot more work to improve our reach and with feet on street. So those investments will continue,” he said.

He added that the non-profitable subsidiaries that were dragging the margins have to be turned around. It has also exited some non-profitable contracts.

The Switch and its existing business combined will become profitable this year while the Kaleyra acquisition, merged with the business in the US, is expected to turn profitable in two years.

He said that while plans for private 5G were not on the back burner with some proof-of-concepts already done for customers, the correct pricing for leasing spectrum from telcos for private 5G has to be determined.

“It has to all come together, giving spectrum at the right price points, government allowing enterprises to get spectrum directly, when will they (telcos) be ready and more importantly, the customers readiness,” he said. The company added that during the quarter ended March 2024, it received show cause-cumdemand notice for FY23 aggregating to ₹77.65 crore. Separately, it said that one of its subsidiaries had issued a termination notice to a customer – alluding to Vodafone Idea without naming it - and was in discussion on disengagement transition plan.

The carrying amount of trade receivables (including unbilled revenue and net of provisions) was ₹235.10 crores and ₹171.50 crore as on March 31, 2024 and March 31, 2023 respectively.

₹45.1 cr Profit earned by the company in the Oct-Dec quarter

1.5% Year-on year profit decline in the fourth quarter