Tata Communications – Q2FY23 First Cut

Tata Communications’ Q2FY23 performance was largely in line on operating front with margins remaining resilient while PAT beat was led by one off item (profit on sale of properties and provision reversal) and lower taxes.

Q2FY23 earnings summary

• Topline came in at | 4431 crore, up 6.2% YoY & up 2.8% QoQ, driven by the data revenues (forming ~79% of the revenues) was up ~11.2% YoY (up 4.6% QoQ) at | 3493 crore, tad better than expectations of 9% YoY growth. Voice segment continued to remain weak with revenues down 13.5% YoY (up 6.6% QoQ) at | 524 crore
• Consolidated EBITDA came in at | 1130 crore, up 1.5% YoY and up 4.9% QoQ. The consequent margin was at 25.5% (down 117 bps YoY and up 51 bps QoQ). The overall margin beat (vs. our expectations of 24.8%) was led by higher Voice margins which was at 19.3% up 890 bps, which we believe would have some one-off element. Data EBITDA margin was at 28.8%, down 20 bps QoQ
• The company reported a PAT of | 532 crore, up 11% YoY, aided by one off item (profit on sale of properties – | 46.7 crore and provision reversal – | 29.7 crore) and lower taxes
• There was a sequential increase in net debt by ~| 266 crore QoQ, largely owing to currency depreciation. The Net Debt to annualised EBITDA stood at comfortable levels of 1.5x as compared to 1.4x in Q1FY23

CT Bureau