Tata Communications tanks 8% on weak Q3 result, govt stake sale report

Shares of Tata Communications, erstwhile VSNL, slumped 8 per cent to Rs 1,040 on the BSE in the intra-day trade on Wednesday on report that the government could sell its entire 26.12 per cent stake in the company through offer for sale and strategic sale route in the current fiscal.

According to a PTI report, the Department of Investment and Public Asset Management (DIPAM) said via a notice that part of the shareholding will be offered through OFS and the balance, including any leftover portion in the OFS, will be offered to strategic partner Panatone Finvest Limited. The transaction is to be completed by March 20, 2021, the DIPAM said.

Despite, today’s fall, the stock of Tata Communications has rallied 50 per cent in the past six months, and 140 per cent in one year, as against a 33 per cent, and a 20 per cent rise in the S&P BSE Sensex, respectively.

Meanwhile, Tata Communications reported 4.1 per cent quarter on quarter (QoQ) decline in its consolidated revenues at Rs 4,223 crore for the quarter ended December 2020 (Q3FY21) on the back of decline in the Voice and Data segments. Consolidated net profit was down 19.6 per cent sequentially at Rs 309 crore with analyst beat owing to lower depreciation and tax rate.

The company’s EBITDA (earnings before interest, taxes, depreciation, and amortization) margins contracted 150 basis points (bps) QoQ to 24.8 per cent. Adjusted for a around Rs 70 crore one-off benefit in July-September quarter (Q2FY21) related to COVID and another one-time benefit, EBITDA declined 4 per cent QoQ.

“While QoQ performance is weak with one-offs and deal conversion delays, year on year (YoY) 678 bps margins expansion continues to drive profitability growth. Tata Communication remains a key beneficiary of new normal of work from home, increased conferencing needs thereof and overall digitization,” ICICI Securities said in a note.

At 01:25 pm, Tata Communications was trading 7 per cent lower at Rs 1,055 on the BSE, as against a 0.55 per cent rise in the S&P BSE Sensex. A combined 1.7 million equity shares had changed hands on the counter on the NSE and BSE till the time of writing of this report.