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Revenue flat on QoQ basis but digital platforms and services, incubation services has shown some growth | Tata Communication Q3FY22 Conference Call Highlights

Revenue flat on QoQ basis but digital platforms and services, incubation services has shown some growth | Tata Communication Q3FY22 Conference Call Highlights

Published on 25 January 2022 .Views 0 .Comments 0
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  • Revenue for the quarter grew by 0.3% QoQ and declined by 0.9% YoY, coming in at INR 4,185 Crore. Sequential growth is due to pick up in business and improvement across all Data segments. YoY decline is primarily due to degrowth in Voice business
  • EBITDA for the quarter at INR 1,082 crore witnessing a growth of 3.5% YoY and a decline of 2.7% QoQ. Normalising for one-off benefit in Q2; EBITDA grew by 1.8% QoQ. EBITDA margin for the quarter was at 25.9%, margins improved by 110 BPs on YoY basis
  • Profit for the quarter was INR 395 crore as compared to a profit of INR 309 crore in Q3FY21, witnessing a growth of 27.8% YoY.
  • Net Debt at the end of the quarter was INR 7,189 crore, down by INR 572 crore QoQ and 783 cr YoY. This is on the back of a better working capital mix and robust operating free cash flow generation. Average cost of borrowing for the quarter was at 2.69%.
  •  Data – Data business revenue for the quarter came in at INR 3,233 Crore witnessing a growth of 3.4% YoY and 3.0% sequential growth. Data business continues to recover and all segments within Data have witnessed both sequential and YoY growth. Data Business EBITDA was at INR 1,041 Crore witnessing a growth of 3.6% YoY and a decline of 0.8% QoQ. EBITDA margins were at 32.2% - an increase of 10 BPs over same quarter last year.
  • Core Connectivity – Q3 revenue at INR 2,278 crore, witnessing a steady growth of 1.6% QoQ and 1.3% on YoY basis.
  • Digital Platforms & Services – Q3 revenue at INR 901 crore, witnessing a growth of 5.2% QoQ and 6.7% YoY. Except Collaboration, all sub-segments within Digital grew in double digits and witnessed a sequential growth in range of 7-20%. The underlying trends are positive for this business
  • Incubation Services – Q3 revenue at INR 54 crore, witnessing a growth of 26.4% QoQ and 67.0% YoY on the back of new deal wins and scale up of usage in existing accounts. The management indicated that potential in the incubation segment is huge. It has so far focused on limited use cases in IOT viz. worker safety, material, smart street lighting. Similarly, in the MOVE, only auto with limited connectivity management play was there. Going ahead, with growth in Net Foundry, more use case in MOVE/IOT and newer segments including semiconductor led working with pilot customer, it expects to scale up the revenues from this.
  • On the weakness in the collaboration segment (de-growth by 8.6% YoY), the company attributed it to industry structure, seasonality, work from home. The company expects it to improve going ahead with economic reopening and stable hybrid working environment.
  • Usage-based revenue, which contributes 25% of data revenue that has moderated, will pick up with economic reopening. The company indicated that the order booking was stable during the quarter as few orders were pushed to Q4. Funnel also remained stable but proportion of large deals have gone up in the funnel along with win rate.  
  • Growth to be driven by platforms viz. a) cloud, edge, security b) next generation connectivity c) NetFoundry d) MOVE & IoT, wherein each having robust market size growth potential of 15-25% CAGR in next four to five years
  • Management have guided for overall EBITDA margins range of 23-25% with benefits of staffing costs likely to normalise it hires/rehires.
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