Nithin’s Portfolio

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.

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