India’s Tata Communications posts 30% slump in profit as expenses weigh

BENGALURU (Reuters) –

Indian network services provider Tata Communications reported a 30% slump in first-quarter profit on Wednesday, hit by higher interest costs and lower foreign exchange gains.

Consolidated net profit for the quarter ended June 30, was 3.82 billion rupees ($46.6 million), compared with 5.44 billion rupees a year ago.

The company also plans to raise up to 18 billion rupees by way of a private placement of non-convertible debentures.

Total expenses climbed about 16% to 44.58 billion rupees as network and transmission costs rose.

The jump in costs outpaced the near-11% increase in income from operations to 47.71 billion rupees riding on the expansion of the mainstay data services segment.

The company, which has been on an acquisition spree to expand its offerings, had said in June that it aims to double its data business revenue over the next four years.

In December, it acquired American video production firm The Switch Enterprises and in June it bought U.S.-based communication platform provider Kaleyra in a near-$100 million deal.

Tata Communications has been focusing on revenue over margins as it seeks to grab a bigger share of the highly competitive market for cloud, cybersecurity and networking.

“We are on track with the execution of our strategy; and the strengthening of our portfolio will increase the relevance quotient with our enterprise customers,” A.S. Lakshminarayanan, managing director and chief executive officer, said in a statement.

In April, the company flagged that this fiscal year’s margins could be at the lower end of its previous projection of 23-25%. However, analysts have said that the margins may fall short of the range after the slew of loss-making acquisitions.

Margins on earnings before interest, taxes, depreciation and amortization (EBITDA) fell 352 basis points to 21.5% last quarter. Sequentially, it fell 117 bps.

The company is now in a position to fund investments and acquisitions, while “retaining focus on a healthy balance sheet,” Chief Financial Officer Kabir Ahmed Shakir said.

Shares of Tata Communications closed 1.03% up ahead of results.

($1 = 82.0500 Indian rupees)

(Reporting by Hritam Mukherjee in Bengaluru; Editing by Dhanya Ann Thoppil)