India’s Tata Communications posts 59% profit slump on higher costs

(Reuters) – Indian network services provider Tata Communications reported a 59% drop in second-quarter profit on Thursday, weighed down by higher costs.

Consolidated net profit for the company, a subsidiary of the Tata Group, fell to 2.21 billion rupees ($26.56 million) for the quarter ended Sept. 30, from 5.32 billion rupees a year ago, marking its fourth straight decline in quarterly profit.

Expenses rose 16% to 46 billion rupees, led by a 15% jump in network and transmission costs.

Meanwhile, the company’s mainstay data services segment, which contributes over 80% to its total income from operations, saw its revenue jump 14% on robust demand in its core connectivity and digital portfolio segments.

Income from operations increased 10% to 48.73 billion rupees.

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

Margins on earnings before interest, taxes, depreciation and amortization (EBITDA) stood at 20.8%, falling 465 basis points (bps) year-on-year, following a slew of acquisitions, including U.S.-based communications platform provider Kaleyra in June.

Analysts had earlier flagged that margins may fall short of the company’s previous projection of 23%-25% for fiscal 2024 due to the acquisitions. In April, the company said its margins for the fiscal could be at the lower end of its projection.

Shares of the Mumbai-based company closed down 0.5% ahead of its results on Thursday.

($1 = 83.2036 Indian rupees)

(Reporting by Aleef Jahan and Rama Venakat in Bengaluru; Editing by Janane Venkatraman and Sonia Cheema)