The brokerage said that Tata Communications’ digital business continues to show encouraging progress, with key parameters advancing well and order book growth remaining healthy.
The company has also been addressing challenges in Kaleyra and core connectivity, and progress on both fronts is improving visibility for growth and profitability.
Tata Communications has been investing $50-60 million annually in new product development and ramping up its sales force, while simultaneously absorbing losses from the Kaleyra acquisition.The company has deliberately diluted margins over the past two years to build long-term capabilities. It now expects profitability at Kaleyra to improve, with operating leverage aiding overall margin expansion in its digital services segment.
Reiterating its long-term guidance, Tata Communications expects to achieve data revenue of ₹28,000 crore with an EBITDA margin of 23-25% by FY28.
The company also remains confident about accelerating revenue growth, led by greater relevance among customers, deeper product penetration, multiple fabric deals, and a healthy order book.
At present, Tata Communications shares are up 2.31% at ₹1,651.30. Despite Monday’s gains, the stock remains down 5% year-to-date.
