Tata Communications Faces 58% Decline in Q2 Net Profit Amid Strategic Investments

Tata Communications Ltd encountered a significant setback in its second-quarter financial results, reporting a substantial 58% year-on-year (YoY) decline in net profit, which amounted to ₹221.3 crore for the quarter ending on September 30, 2023. This dip was attributed to the company's concerted efforts to invest in acquisitions focused on long-term growth.

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Tata Communications Ltd encountered a significant setback in its second-quarter financial results, reporting a substantial 58% year-on-year (YoY) decline in net profit, which amounted to ₹221.3 crore for the quarter ending on September 30, 2023. This dip was attributed to the company's concerted efforts to invest in acquisitions focused on long-term growth.

Comparing the figures to the same quarter in the previous year, Tata Communications had posted a much higher net profit of ₹534.26 crore. These numbers were disclosed in a regulatory filing made by the company. Interestingly, CNBC-TV 18 Poll's predictions had estimated a quarterly profit of ₹325 crore, underscoring the challenges faced by the company in meeting market expectations.

Despite the dip in profit, the quarter's total revenue stood at ₹4,872.5 crore, representing a 10% increase when compared to the same period in the previous fiscal year, which reported revenue of ₹4,430.74 crore. Once again, CNBC-TV18 Poll's forecasts had predicted a revenue of ₹4,860 crore for this quarter.

At the operational level, EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortization) amounted to ₹1,015.4 crore for this quarter. However, it fell short of CNBC-TV18 Poll's prediction of ₹1,050 crore. The EBITDA margin was reported at 20.8% for the reporting quarter, slightly below the anticipated margin of 21.6%.

One of the highlights of Tata Communications' performance was the data business revenue, which saw a commendable YoY growth of 14.4%, reaching ₹3,995 crore. Tata Communications Managing Director and CEO, AS Lakshminarayanan, expressed his satisfaction with this performance and reiterated the company's commitment to long-term opportunities. He emphasized that Tata Communications would persist in investing in its product portfolio to enhance its value proposition for enterprises.

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During the quarter, the company announced the acceleration of the Kaleyra Inc. transaction, which marked the establishment of a new digital platform category called the "Customer Interaction Suite." This came about as Kaleyra became a wholly-owned direct subsidiary of Tata Communications after a reverse merger with TC Delaware Technologies Inc.

Tata Communications took over all of Kaleyra's outstanding adjusted gross and net debts, totalling approximately ₹1,810.22 crores and ₹1,561.24 crores, respectively, as of the acquisition date. Notably, Kaleyra was delisted from the New York Stock Exchange as a result of this transaction. Tata Communications clarified that the financial results for the quarter and half-year ending on September 30, 2023, did not include the impact of this acquisition.

These financial results were released after the close of the market hours, causing Tata Communications Ltd's shares to decline by ₹11.15 or 0.62 per cent, ending at ₹1,775.55 on the BSE.