ICICI Securities
Target: ₹1,600
CMP: ₹875.55
Tata Communications’ (TCom) data services revenue grew at a CAGR of 5 per cent over FY19-22 to ₹12,800 crore, and in FY22 it was just 1.4 per cent. However, lead indicators provide enough confidence: rising contribution from million-dollar club — added 33 new logos to MDC, and now contributes 75 per cent of enterprise revenue, up 800 bps. Average revenue per customer was up 33 per cent, while churn reduced by 20 per cent; steady improvement in NPS, now at 84; funnel add continues with large-deal funnel growing by 13 per cent (45 per cent of total funnel), and win rates (conversion) have improved.
However, FY22 revenue was impacted by few factors: drop in usage-based revenue including SIP; and chip shortage has led to increase in equipment prices and lead time for delivery which has slowed deal decision making and execution.
The company has delivered on most parameters including EBITDA margin at 23-25 per cent, RoCE at 25-30 per cent and reduction in net debt in FY22. However, it has missed revenue growth guidance in data services (double digit). In addition, the company has reiterated that all the guidance for the next three years can have certain challenges.
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