Whalesbook
1. THE SEAMLESS LINK
This robust quarterly performance underscores Tata Communications' strategic execution in leveraging its digital capabilities. The company's ability to translate revenue growth into significant profit expansion highlights a strengthening operational efficiency and a healthy order book, signaling positive momentum heading into the latter half of the fiscal year.
The Core Catalyst: Q3 Financial Performance
Tata Communications delivered a strong third quarter for the fiscal year 2025-26, with consolidated net profit surging 54.8% year-on-year to ₹365.28 crore. This significant profit growth, which nearly doubled sequentially from ₹183.06 crore, was attributed to expanding margins and a robust order book. Revenue from operations for the quarter rose 6.7% year-on-year to ₹6,188.97 crore, up from ₹5,798.07 crore in the same period last year. Data revenue, a key growth driver, saw a 9.3% increase, bolstered by a 15% expansion in the company's digital portfolio. Consolidated EBITDA also saw an improvement, growing 4% year-on-year to ₹1,228 crore, though EBITDA margins slightly contracted by 52 basis points to 19.8%. An exceptional charge of ₹60.98 crore related to the implementation of new Labour Codes was recognized, impacting the net profit to some extent.
The Analytical Deep Dive
Motilal Oswal has maintained its valuation framework for Tata Communications, assigning a 9.5x FY28E EV/EBITDA multiple to its data business and a 5x multiple to its voice and other segments [cite:Rewritten News]. The brokerage also values the company's 26% stake in STT data centers at INR 39 billion (INR 136 per share). This valuation methodology has led to a revised price target of ₹1,790, a slight adjustment from the previous ₹1,830 [cite:Rewritten News]. Tata Communications' Price-to-Earnings (P/E) ratio hovers around 29-31x based on recent trailing twelve months (TTM) earnings. Compared to peers like Bharti Airtel (P/E ~36.85x) and Bharti Hexacom (P/E ~51.02x), Tata Communications' valuation appears competitive within the telecom services provider industry. The broader Indian telecom sector is experiencing robust growth, with increasing teledensity and internet subscriptions driven by declining data prices and expanding rural connectivity. The Economic Survey 2025-26 highlights the success of the Production Linked Incentive (PLI) scheme in boosting domestic manufacturing and exports within the sector, aligning with import substitution objectives. Tata Communications is actively involved in this digital transformation, focusing on AI-first digital infrastructure platforms to enhance future expansion and customer interactions.
The Future Outlook
Motilal Oswal's revised target price of ₹1,790 reflects a cautious optimism, acknowledging the company's growth trajectory while accounting for minor adjustments. The brokerage's valuation approach, which segments the business and assigns specific multiples, indicates confidence in the data segment's long-term potential. The company's recent performance, coupled with strategic investments in AI and digital infrastructure, positions it to capitalize on the evolving demands of the digital economy. Recent filings confirm the company's continued focus on investor relations and governance, with updates on board meetings and financial results being regularly disclosed. The company's proactive engagement with investors and analysts, as evidenced by its schedule of investor meet-ups, suggests a commitment to transparency and shareholder value.