Tata Communications shares up 9%; ICICI Securities double upgrades to 'Buy'

Tata Communications share price: Combined with the volume on the National Stock Exchange (NSE), volumes on Tata Communications stock stood at 3.13 million shares

Tata Communications share price soared in a subdued stock market session today, lifted by heavy volumes. The stock of the Tata Group company jumped 8.7 per cent to Rs 1,492 per share on the BSE in the intraday trade with 69,000 shares having changed hands till the time of writing this report.

 

By comparison, the counter’s two-week average volume on the BSE is 11,000 shares. Further, combined with the volume on the National Stock Exchange (NSE), volumes on Tata Communications stock stood at 3.13 million shares.

 

At 1:55 PM, Tata Communications shares were up 7.7 per cent as against 0.01 per cent dip in the BSE Sensex index.

 

 

Meanwhile, analysts at ICICI Securities have double upgraded the stock to ‘Buy’ from ‘Hold’ based on the stock’s “compelling risk-reward”.

 

“At the current market price, we believe Tata Communications deserves a double upgrade to ‘Buy’ due to strong pile-up of sales funnel; strong digital services portfolio with focus on serving cloud ecosystem and adoption of AI within the organisation; upside risk to connectivity demand from rising adoption of AI; financial discipline and sharp focus on capital allocation without compromising on growth investments; and compelling valuations,” it said in a report dated March 11, 2025.

 

According to the analysts, Tata Communications’ digital services revenue growth could likely accelerate in the March quarter of the current financial year (Q4FY25) with large deal execution kicking off. The growth, it said, shall sustain in FY26.

 

“The company has been building a strong sales funnel, and more large deal-wins are likely in the offing. We estimate a digital services revenue CAGR of 17 per cent over FY25–27 despite a low base,” the brokerage said.  ALSO READ: Zomato slips 5% on heavy volumes, stock falls below Rs 200 after 8 months

 

That apart, the brokerage believes bulk of cost’s heavy-lifting is now behind the company. Further, given that the company expects the rise in digital revenue/operating leverage to help break-even digital services at Ebitda, the brokerage estimates anchors digital services’ Ebitda to break-even in FY27 (compared to Rs 800 crore Ebitda loss in FY25), and a significant drop in cash-burns.

 

It also expects core connectivity revenue to grow at 5–6 per cent per annum, leading to a CAGR of 5.1 per cent over FY25–27, driven by volumes. Core connectivity Ebitda shall grow at a CAGR of 5.9 per cent over FY25–27 and Ebitda margin would improve by 60bps to 45.2 per cent in FY27 on operating leverage from other expenses.

 

That said, the brokerage believes the company’s ambitious revenue target for the data business, set at Rs 28000 crore in FY27 (vs Rs 141 crore in FY23), may be delayed by 12-18 months.

 

“Our estimate remains conservative; and factors in data revenue of Rs 24100 crore in FY27. Despite Tata Communications possibly missing its revenue target, the company is likely to achieve/or near guidance on other financial parameters – including Ebitda margin, RoCE, and net debt to Ebitda. This shows financial discipline,” it said. 

 

Tata Communications shares: Why ‘buy’ now?

According to ICICI Securities, Tata Communications stock has been hit by muted OB sales and weak sales funnel.

 

Over the past one year, Tata Communications share price has tumbled 30 per cent on the BSE. From its 52-week high level of Rs 2,175, which it touched on October 3, 2024, the stock is down 58.5 per cent.

 

However, the company has launched various products across digital portfolio catering cloud, and allied services. It provides a gambit of services, including networking tools, multi-cloud connectivity, SASE and IZO products; Private Cloud where demand in India is likely to rise, security, AI cloud, GPU-as-a-service.

 

“We believe Tata Communications’ efforts on cloud are under-appreciated. The recent stock price decline has made valuations compelling, and risk-reward favorable. The stock trades at FY27 FCF yield of 4.5 per cent; and FY27 EV/ Ebitda of 7.9x,” it said in its report.