Tata Communications – Q1FY23 first cut, ICICI Securities

Tata Communications’ Q1FY23 performance was better than expected on operating front with margins remaining resilient, while PAT beat was led by one off tax refunds and related interests

Q1FY23 earnings summary

• Topline came in at | 4311 crore, up 5.1% YoY & up 1.1% QoQ, largely in line with expectations. The data revenues (forming ~78% of the revenues) was up ~7.6% YoY (up 1.2% QoQ) at | 3340 crore, as expected. Voice segment continued to remain weak with revenues down 4.7% YoY (up 4.6% QoQ) at | 561 crore.
• Consolidated EBITDA came in at | 1077 crore, up 9.2% YoY and up 3% QoQ. The consequent margin was at 25% (up 95 bps YoY and up 47 bps QoQ). The margin beat (vs. our expectations of 23.3%) was led by lower administrative cost which was contrary to our expectations of higher travel and other costs with full economic reopening. Data EBITDA margin was at 29%, down 30 bps QoQ. Voice segment margins was at 11%, up 400 bps QoQ.
• The company reported a PAT of | 544 crore, up 83.6% YoY, aided by higher other income which majorly included tax refunds and interest on the same and lower depreciation and interest costs.
• There was a sequential decline in net debt by ~| 812 crore QoQ on the back of a healthy FCF. The Net Debt to annualised EBITDA stood at comfortable levels of 1.4x as compared to 1.6x in Q4FY22.

Tata Communication remains a key beneficiary of new normal of hybrid work structure, increased conferencing needs thereof and overall digitisation at enterprise levels. While revenue growth is on recovery trajectory along with continued cash flow generation and debt reduction, margin resilience was a positive surprise. We seek management commentary on the growth and margins trajectory ahead. We will soon come up with an update post the conference call tomorrow. BCS Bureau