Tata Communications aims to focus on growth while staying within the 23-25 percent margin range, Amur Lakshminarayanan, MD & CEO, Tata Communications told CNBC-TV18.
“Our goal is to stay within 23-25 percent but we are going to be focused on growth. We are making investments as required. So we have given higher guidance in terms of our capex, we are investing where it is required, but we will ensure that we deliver the return on capital employed (ROCE) that we have guided,” he added.
For the October-December quarter, Tata Communications reported a consolidated net profit of roughly Rs 394 crore, which is a tad bit (0.3 percent) less than the corresponding period a year ago.
Net profit in the third quarter of FY22 stood at Rs 395 crore.
On a sequential basis, the net profit declined 26 percent. For the three months ending in December 2022, Tata Communications' combined revenue came in at roughly Rs 4,528 crore, up 8.2 per cent year-on-year.
The company is bullish due to the deepening engagement with the customers.
“Our entire portfolio, which we call the digital fabric, resonates with our customers who are operating in this hyper-connected ecosystem. That's one thing that gives confidence. And the second thing is the investments that we said we would make to enhance our reach in terms of sales and marketing efforts, and especially the international geographies — those investments are beginning to pay results,” added Lakshminarayanan
Further, he said the cash integration efficiency in the company has significantly improved and Tata Communications has been able to fund the acquisitions announced while reducing debt.
“So we are in a very comfortable position. And our balance sheet strength today offers multiple options. Besides our cash generation, we have other assets that we can monetise in terms of properties and so on. So that gives us the option and the strength to be able to focus on growth,” said Lakshminarayanan.
Last month, Tata Communications (Netherlands) B.V., a wholly-owned indirect subsidiary of Tata Communications, announced the acquisition of a 100 percent stake in Switch Enterprises LLC for a total cash consideration of $58.8 million or Rs 486.3 crore.
In terms of the order pipeline, Lakshminarayanan mentioned that the situation has improved quite significantly but there are still some supply chain challenges.
“If something takes longer in the pipeline, we are wanting to push more through the pipeline so that some things will start coming out. And that is why we started investing in our sales. And we have enough in our pipeline today, our funnel is quite strong, and our win rates are inching up gradually. (All this is) resulting in deal closures, which are much above what we have been used to, “ added Lakshminarayanan.
Shares of Tata Communications closed at Rs 1,324, down by 4.26 percent from the previous close on the BSE.