Tata Communications :

Summary of Q1 FY24 Earnings Call:

Strategy & Future Plans :

• The company’s Reimagine strategy is being executed effectively, reflecting in financial results.
• Focus on data revenue growth momentum and enhancing customer relevance.
• Investments made may impact short-term margins but aiming for ROCE above 25%.
• Unique strengths recognized by customers for addressing cost and revenue outcomes.
• Emphasis on pivoting the collaboration portfolio to stabilize growth.
• Focus on strengthening customer experience journey for enterprises.
• Cloud and security offerings globally and in India.
• Continued investment in AI, ML, video, and storage capabilities.
• Emphasis on strategic M&A for growth and value creation.
• Emphasis on transforming the collaboration portfolio by introducing products like Tata Communications GlobalRapide.
• Strategic focus on stabilizing the degrowth in collaboration by pivoting from usage-based to product and services model.
• Expansion of offerings like Tata Communications DIGO and InstaCC to fuel growth in the collaboration and managed CPaaS segment.
• Aim to strengthen the customer experience journey for enterprises through strategic investments and partnerships.
• Positive outlook for growth in the media segment, with deepening customer engagement and potential synergies from the Switch integration.
• Continued investment in cloud and security offerings, with a strong emphasis on India’s IZO Cloud proposition and global security solutions.
• Confident in the growth potential of all Digital Portfolio offerings.
• Planned enhancements to cloud capabilities, including AI, ML, video, and storage features.
• Strong demand drivers in cloud, multi-cloud, connectivity, and customer experience.
• Acquisitions like Switch and Kaleyra to contribute to growth in international markets.

Financial Performance:

• Q1 reported revenue: INR 4,771 Crores, up 10.7% YoY and 4.4% QoQ.
• Data business revenues: INR 3,912 Crores, up 17.1% YoY and 6.6% sequentially.
• Digital Portfolio (DPS and incubation combined) revenues: INR 1,415 Crores, up 37.5% YoY and 16.6% QoQ.
• EBITDA: INR 1,024 Crores, 21.5% margin.
• PAT: INR 382 Crores. ROCE: 26.3%.

Business Segment Performance:

• Core Connectivity business revenues grew 8.1% YoY and 1.6% QoQ.
• Collaboration Portfolio grew 13.4% QoQ and 19.4% YoY.
• Media business revenues increased 103.9% sequentially and 108.7% YoY.
• Next-Gen connectivity offerings revenues up 14.9% QoQ and 46.6% YoY.
• Cloud, Hosting, and Security grew 23.9% YoY.

Subsidiaries Performance:

• TCTS (telecom market-focused) and TCPSL (franchise model) showed stabilization and turnaround strategies.

Margins and Profitability:

• Despite acquisition impact, aim to maintain EBITDA margins in the range of 23-25%.
• Kaleyra acquisition may have short-term margin dilution, but synergy benefits expected.

UCAAS : Unified Communications (Current Growth Driver)
Digital Portfolio and Growth:

• Collaboration portfolio transitioned to product and services model.
• Transition from usage-based to product and services portfolio in the collaboration segment.
• Stabilization of degrowth in collaboration portfolio.
• Introduction of Tata Communications GlobalRapide stabilized degrowth.
• Growth driven by products like Tata Communications DIGO and InstaCC.
• Media segment growing well, boosted by media EDGE capabilities.
• Cloud and Security offerings also showing growth potential.
• Emphasis on becoming relevant to enterprise customers’ digital transformation.
• Robust growth observed in the digital portfolio, showcasing the effectiveness of the product and services approach.

CS : Connected Solutions
Media Segment Performance:

• Positive growth in media segment.
• Deepening engagement with customers.
• Potential for further growth with Switch integration.
• Positive growth in the media segment, including potential for further growth through integration with Switch.
• Media EDGE solution, serving as a key driver for performance.

Tata Communications MOVE Platform:

• Softness observed in MOVE platform.
• Platform addresses different segments including auto connectivity.
• Temporary softness observed in the Tata Communications MOVE platform’s growth.
• Acknowledgment of various segments in the MOVE platform’s target audience, including auto connectivity.

Cloud
Cloud and Security Offerings:

• Focus on IZO Cloud in India.
• Private cloud’s unique value proposition.
• Global security offerings with strong growth potential.
• Strategic focus on IZO Cloud in India and global security offerings.
• Emphasis on private cloud’s unique value proposition.
• Plans for incorporating AI, ML, video, and storage capabilities into cloud offerings.

Q&A Highlights:

• Clarified sustainable growth in data business, no impact from semiconductor issues.
• Core Connectivity growth due to investment in capabilities and APAC market demand.
• Potential turnaround strategies for subsidiaries TCTS and TCPSL.
• Cloud and Security offerings targeted for India and global markets.
• Ambition to achieve EBITDA margins of 23-25% despite acquisitions.

Employee Count, Margins, and M&A:

• Employee count increased due to Switch acquisition and other offers.
• 128 employees added due to Switch acquisition.
• EBITDA margins declined due to mix effect, added people costs, M&A-related expenses.

Future Margin Expectations:

• Margin targets set between 23-25%.
• Acknowledgment of potential margin impact due to acquisitions.
• Return on capital employed and return on investment emphasized.
• Margin targets set between 23-25%, with flexibility based on strategic reasons.
• Emphasis on maintaining a robust return on capital employed and return on investment.

Aspirations for Revenue and Revenue Mix:

• Goal to double data revenues in four years.
• Emphasis on data business growth.
• Long-term focus on digital portfolio and growth in data business.
• Ambition to double data revenues in four years.
• Acknowledgment of the gradual decline of voice business in the overall revenue mix.
• Future growth primarily focused on the data business.

Sentiment Analysis:

• Management’s sentiment is optimistic and enthusiastic about the growth and positive performance.
• Clear confidence in strategic initiatives, especially in the digital portfolio and collaboration segments.
• Acknowledgment of challenges and softness in certain segments, but with a focus on transient nature and future scaling.
• The management views M&A as a significant driver of growth and value creation.
• The tone is proactive, with a strong focus on capitalizing on market trends and opportunities.

Disc : Studying

Looks like their capex is completely going into bulk manufacturing and they are not able to grow their IMFL segment even with a smaller base, only 5% growth is just not enough, unless and until they can’t ramp up the pace, I don’t think they deserve the valuation they have.

Disc: Exited today. Will see, what mngmt. will say in the concall.

One more quarter Q24 with very good results … any insight any one have … con call in awaited for Jun Q … waiting to hear management commentry

EIH Q1 concall highlights –

Sales- 498 vs 394 cr

EBITDA- 155 vs 97 cr ( margins at 31 vs 25 pc )

PAT- 106 vs 66 cr

Q1 occupancy rates at 70 pc. Corporate segment doing well

F&B revenues – 169 vs 163 cr

Flight catering and airport lounge revenues – 87 vs 45 cr

Net Cash position at 540 cr

Current corporate structure –

International Hotels- 07 ( All Oberoi Hotels, 05 owned, 02 managed )
Domestic Managed hotels by EIH- 06
Domestic Oberoi hotels- 06
Domestic Trident hotels- 03
EIH associated Hotels- 02 Oberoi + 07 Trident – all managed

Expansion plans for FY 24 – 02 hotels – 01 Vilas Hotel in MP ( 20 rooms ), 01 Rajgarh Palace also in MP ( 65 rooms )

LY – ROCE was 35 pc for owned Hotels, that’s where company’s focus continues to be

Currently do not have a beach front Hotel in India

As per capita income rises, will open the same. Also have a Site avlb with the company in Goa

Most of company’s overseas hotels are on the beachfront

Company gets a lot of its revenues from Intl travellers which often happens in Q3,Q4

Corporate ARRs are up 10 pc yoy

Have opened a new standalone restaurant and club. Initial response for both has been very strong

Company to soon share its detailed growth plan blueprint till 2030

Unlikely to take Debt/Equity beyond 0.2 to fund all expansions

ARRs in India for luxury hotels are a fraction vs international rates. As affluence in India grows, ARRs can only head higher. This shall also reduce seasonality as dependence on foreign tourists comes down

Company believes, the upcycle in Hospitality industry can last > 4-5 Yrs

One example-Oberoi New Delhi operates at ARR of around $200-250/night. Any comparable hotel in the west is not avlb at ARR< $ 1500-1800/night. Hence the headroom for ARRs in Indian luxury space is humungous

Imagine what will happen to profitability if ARR crosses $ 300/night !!!

Even Intl Oberoi hotels are averaging >$ 500 ARR/night

F&B revenues in Q1 were flattish as Oberoi Nariman Point drives a lot of banquet sales & most of its banquet rooms were under renovation. Will open in Nov 23

Moto GP Noida, World Cup, G-20 meet should add to demand this yr

Flight catering is shaping up well, growth prospects are strong

Company believes,there is enough space for growth in ultra luxury segment. Hence, not planning to venture into premium space by launching a new brand etc

Plus there is lesser competition here vs plain 5 star hotels

Disc: holding both EIH, EIH associated hotels. Biased

Titan Eyecare, a division of Titan Company, has forayed into a new vertical with the launch of its audiology segment in partnership with WS Audiology.
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As part of this collaboration, Titan has set up diagnostic tests at select stores aimed at assessing hearing capabilities and recommending suitable hearing aids (if needed).
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Having specialised in optometry for the past 15 years, Saumen Bhaumik, CEO of Eyecare Division at Titan Company explained that the company’s research extended to other sensory organs, such as the ears. The amalgamation of audiology and optometry has demonstrated success stories, and certain progressive regions globally have already entered this domain, he added.