Tata Communications EBITDA jumped on 13.9% in 2015 and Revenue surged on 12.7%

28-07-2015 • About Tata Communications ($TATACOMM) • By InTwits

Tata Communications reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:

Tata Communications has high CAPEX intensity: 5 year average CAPEX/Revenue was 12.1%. At the same time it's in pair with industry average of 10.1%.
CAPEX is quite volatile: 2,697 in FY2015, 2,201 in FY2014, 5,083 in FY2013, 3,614 in FY2012, 2,017 in FY2011
The company has potentially unprofitable business model: ROIC is at 6.0%
It operates with medium-size leverage: Net Debt/EBITDA is 3.8x while industry average is 3.8x

Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Tata Communications ($TATACOMM) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	119,320	141,961	172,130	176,679	199,090	12.7%
EBITDA	12,253	17,915	20,597	26,255	29,897	13.9%
Net Income	-7,769	-7,947	-6,233	1,014	13	-98.7%
Balance Sheet
Cash	7,219	3,061	9,233	16,695	16,212	-2.9%
Short Term Debt	32,093	16,125	31,679	39,438	54,689	38.7%
Long Term Debt	52,560	94,693	91,946	97,506	76,068	-22.0%
Cash flow
Capex	17,100	22,007	17,563	18,124	20,144	11.1%
Ratios
Revenue growth	-58.0%	19.0%	21.3%	2.6%	12.7%
EBITDA growth	21.0%	46.2%	15.0%	27.5%	13.9%
EBITDA Margin	10.3%	12.6%	12.0%	14.9%	15.0%	0.2%
Net Income Margin	-6.5%	-5.6%	-3.6%	0.6%	0.0%	-0.6%
CAPEX, % of revenue	14.3%	15.5%	10.2%	10.3%	10.1%	-0.1%
ROIC	-2.6%	-0.2%	0.2%	3.7%	6.0%	2.3%
ROE	-19.1%	-27.1%	-33.6%	9.1%	0.2%	-8.9%
Net Debt/EBITDA	6.3x	6.0x	5.6x	4.6x	3.8x	-0.7x

Revenue and profitability

The company's Revenue jumped on 12.7% in FY2015. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.6 pp from 9.0% to 10.6% in FY2015.

Net Income marign decreased slightly on 0.57 pp from 0.57% to 0.0065% in FY2015.

Capital expenditures (CAPEX) and working capital investments

The company's CAPEX/Revenue was 10.1% in FY2015. Tata Communications showed decline in CAPEX/Revenue of 5.4 pp from 15.5% in FY2012 to 10.1% in FY2015. Average CAPEX/Revenue for the last three years was 10.2%.To fuel this fast growth Tata Communications invested a large share of EBITDA (67.4%) to CAPEX.

Return on investment

The company operates at low ROIC (5.98%) and ROE (0.23%). ROIC increased on 2.3 pp from 3.7% to 6.0% in FY2015. ROE decreased on 8.9 pp from 9.1% to 0.23% in FY2015.

Leverage (Debt)

Debt level is 3.8x Net Debt / EBITDA and 4.4x Debt / EBITDA. Net Debt / EBITDA dropped on 0.7x from 4.6x to 3.8x in FY2015. Debt decreased on 4.5% in FY2015 while cash decreased on 2.9% in FY2015.

Appendix 1: Peers in Telecom - Alternate Carriers

Below we provide Tata Communications benchmarking against other companies in Telecom - Alternate Carriers industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Tata Communications stock price chart

Tata Communications financials

mln.	FY2010	FY2011	FY2012

Revenue	283,770	119,320	141,961
EBITDA	10,124	12,253	17,915
Net income	-5,977.400	-7,769.000	-7,946.500
CAPEX	27,738	17,100	22,007
Debt	73,087	84,654	110,818
Cash	2,841	7,219	3,061

About Tata Communications

Tata Communications Limited provides communications services service providers and enterprise customers worldwide. The company operates through Global Voice Solutions, and Global Data and Managed Services segments. It offers international and national voice and data transmission services; internet dial up and broadband services; and other value added services, as well as leases and sells bandwidth on undersea cable systems. The company also offers network services, such as VPN, Internet, international private line, enterprise adaptive network service, and WAN Ethernet services; media services, including media management, video connect, content flow, satellite broadcasting, and video-focused CDN services, as well as content delivery, and sports and live events delivery; and data center services comprising co-location, managed hosting and managed database, and storage and backup services, as well as cloud-based IT solutions. In addition, it provides managed security services, such as network, application, and data protection controls; vulnerability management controls; and testing, assessment, and audit controls, as well as content aggregation and management services, which include live classroom, and live darshans. Further, the company offers voice, network, mobile, unified communications, data centre, and partner services to service provides and system integrators. The company was formerly known as Videsh Sanchar Nigam Limited and changed its name to Tata Communications Limited in 2008. Tata Communications Limited was founded in 1986 and is based in Mumbai, India.