Tata Comm slumps on buzz Govt to sell entire 26% stake

Tata Communications tumbled 6.28% to Rs 1059 on reports that the government will sell its entire 26.12% stake in the company, erstwhile Videsh Sanchar Nigam (VSNL).

According to the reports, the government will offload its stake in the ongoing financial year, through offer for sale and strategic sale routes. A 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. The transaction is to be completed by 20 March 2021.

Public sector VSNL was privatised in the year 2002 by disinvesting 25% shareholding along with transfer of management control to the strategic partner, Panatone Finvest. Following the strategic disinvestment, the name of the company was changed to Tata Communications.

The government of India held 26.12% stake while Panatone Finvest held 34.80% stake in Tata Communications (TCL) as on 31 December 2020.

Meanwhile, Tata Communications announced its Q3 earnings after market hours yesterday. On a consolidated basis, the company posted 428.1% jump in net profit to Rs 309.15 crore on a 0.1% decline in net sales to Rs 4,222.83 crore in Q3 FY21 over Q3 FY20.

EBITDA was Rs 1,046 crore in the third quarter, an increase of 37.5% year-on-year (YoY) on the back of robust growth and margin expansion in data business and cost optimisation initiatives.

Profit before tax in Q3 December 2020 stood at Rs 381.48 crore, up by 288.7% from Rs 98.15 crore in Q3 December 2019. Tax expense during the quarter increased by 86.5% YoY to Rs 99.14 crore.

The company's net debt has come down on the back of strong free cash flow generation. Net Debt to EBITDA was at 1.9x as compared to 2.9x for same quarter last year. CAPEX for Q3 FY21 was Rs 339 crore as compared to Rs 490 crore in Q3 FY20.

Announcing the results, A.S Lakshminarayanan, MD and CEO, Tata Communications, said, "Our disciplined execution has helped us deliver good results in a seasonally weak quarter. Our Secure Connected Digital Experience (SCDx) offering continues to be relevant as we reimagine the New World for our customers. At the same time, our investments in products and services are positioning us well in our customers' digital transformation journeys, an example being our investment in Oasis."

Kabir Ahmed Shakir, chief financial officer, Tata Communications, said, "We continue to deliver on our goal of profitable growth. Both profitability and cash flow generation has improved significantly in the last few quarters on the back of cost efficiencies and improved business processes. This agility has given us headroom to compete more effectively in the market and cater to our customer's changing needs."

Tata Communications is an Indian telecommunications company.

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