Tata Communications slips over 7% after Q1 profit drops 29%; margins contract
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Shares of Tata Communications fell as much as 7.63% in intraday trade on Wednesday after the company reported a sharp decline in its June quarter profit, despite posting double-digit growth in revenue. The stock hit an intraday low of ₹1,680 on the NSE before recovering some of the losses to trade around ₹1,753 in the afternoon.
The Tata Group company reported a consolidated net profit of ₹134.23 crore for the quarter ended June 30, down 29.3% from ₹189.98 crore in the year-ago period. Revenue from operations rose 10.5% year-on-year to ₹6,582.82 crore from ₹5,959.85 crore.
Operating margins under pressure
The company's operating performance remained steady, although profitability came under pressure.
EBITDA increased 8.2% year-on-year to ₹1,230.14 crore from ₹1,136.81 crore a year ago. However, EBITDA margin narrowed to 18.69% from 19.07% in the corresponding quarter last year, indicating higher operating costs despite healthy revenue growth.
Exceptional items impact earnings
During the quarter, Tata Communications reported exceptional losses of ₹106.36 crore, which weighed on the bottom line.
The one-time charges included provisions related to staff cost optimisation, losses arising from a fire incident at a co-located third-party data centre, and provisions for certain contractual obligations. The company also recognised a reversal related to provisions made under the new labour codes, partially offsetting the exceptional charges.
Data Services remains the growth engine
The company's Data Services business, its largest segment, generated revenue of ₹5,703.58 crore during the quarter, up from ₹5,151.72 crore a year earlier. Campaign Registry revenue also increased to ₹258.70 crore from ₹189.38 crore, while Voice Solutions and Transformation Services reported lower revenues on a year-on-year basis.
The earnings came as investors reacted to the weaker profit performance and softer operating margins, even as the company maintained healthy top-line growth. Tata Communications has not yet released an investor presentation or management commentary alongside its quarterly results.