Tata Communications surges nearly 9%; hits record high

Shares of Tata Communications, a global digital ecosystem enabler, hit a record high of Rs 1,542, and rallied 9 per cent on the BSE in Wednesday’s intra-day trade. The stock of the Tata Group firm surpassed its previous high of Rs 1,540 touched on October 19, 2021. It was included in the Futures & Options (F&O) segment from December 31, 2021.

On Tuesday, Tata Communications and Zain KSA announced that they had entered a strategic engagement to fuel digital transformation journeys of enterprises and government organisations in the Kingdom of Saudi Arabia (KSA). Zain KSA is a leading telecom provider established in the Kingdom of Saudi Arabia.

With this collaboration, the combined ecosystems will deliver solutions and platforms to remodel cities with smart street lighting, smart waste management, connected workplace, healthcare and connected cars, Tata Communications said in a press release.

This strategic engagement will serve Saudi’s enterprises and government institutions with advanced technologies such as IoT, 5G, Low Range Wide Area Network (LoRaWAN specification), Managed Security Services, SDWAN and many others. It will also support environmental sustainability measures and digital transformation of the region, it said.

For July-September quarter (Q2FY22), the company had delivered a sequential growth after three quarters of decline, which was a positive indicator. The management had said the second quarter of FY22 was marked by recovery with favorable underlying trends as economic activities normalized. The company’s performance in the second quarter demonstrated a continued improvement in revenue supported by improvement in profitability and build-up of free cash flow, the management said.

Meanwhile, IIFL Securities has initiated coverage on Tata Communications with a target price of Rs 1,568 (SoTP based) and an ADD rating.

Tata Communications is in the process of moving up the enterprise ICT stack, from being only a provider of connectivity and network services into becoming a digital solutions player offering cloud, hosting, security and IoT services, it said.

"After enduring a difficult period that saw FCF losses and subdued return ratios, Tata Communications has exited a few loss making, capex-heavy businesses. Under the new management, it has seen robust Ebitda margin expansion, healthy FCF generation and significant improvement in return ratios in the past 18 months. Revenue growth has remained elusive, though double-digit order book growth in 1HFY22 has been encouraging", the brokerage firm added in a report dated December 15, 2021.