Tata Communications Debt increased on 10.0% and Net Debt / EBITDA surged on 0.3x from 3.8x to 4.1x

27-05-2016 • About Tata Communications ($TATACOMM) • By InTwits

Tata Communications reported FY2016 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 11.2%. At the same time it's in pair with industry average of 10.0%
CAPEX is quite volatile: ₹2,651m in FY2016, ₹2,697m in FY2015, ₹2,201m in FY2014, ₹5,083m in FY2013, ₹3,614m in FY2012
The company has potentially unprofitable business model: ROIC is 5.5%
It operates with high leverage: Net Debt/EBITDA is 4.1x while industry average is 4.1x

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

Revenue and profitability

The company's Revenue increased on 3.2%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased slightly on 0.54 pp from -0% to -0.54% in FY2016.

Net Income margin decreased slightly on 1.0 pp from 0.0065% to -1.0% in FY2016. During the last 5 years Net Income margin topped in FY2014 at 0.57% and was declining since that time.

Investments (CAPEX, working capital and M&A)

In FY2016 Tata Communications had CAPEX/Revenue of 10.0%. Tata Communications showed almost no change in CAPEX/Revenue from FY2013 to FY2016. It's average CAPEX/Revenue for the last three years was 10.1%. The company maintained rich investment policy and has spent a big chunk of EBITDA (67.5%) to CAPEX.

Leverage (Debt)

Company's Net Debt / EBITDA is 4.1x and Debt / EBITDA is 4.7x. Net Debt / EBITDA jumped on 0.3x from 3.8x to 4.1x in FY2016. Debt increased on 10.0% while cash surged on 22.1%. Net Debt/EBITDA followed a declining trend at -0.6x per annum in FY2012-FY2016.

Tata Communications has short term refinancing risk: cash is only 45.7% of short term debt.

Management team

Pratibha K Advani is a the company's CFO. Pratibha K Advani has spent 5 years at the company.

Financial and operational results

Tata Communications ($TATACOMM) key annual financial indicators

mln. INR	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	141,961	172,130	176,679	199,090	205,548	3.2%
EBITDA	17,915	20,597	26,255	29,897	30,335	1.5%
Net Income	-7,947	-6,233	1,014	13	-2,118	-16,521.7%
Balance Sheet
Cash	3,061	9,233	16,695	16,212	19,789	22.1%
Short Term Debt	16,125	31,679	39,438	54,689	43,292	-20.8%
Long Term Debt	94,693	91,946	97,506	76,068	100,514	32.1%
Cash flow
Capex	22,007	17,563	18,124	20,144	20,484	1.7%
Ratios
Revenue growth	19.0%	21.3%	2.6%	12.7%	3.2%
EBITDA growth	46.2%	15.0%	27.5%	13.9%	1.5%

EBITDA Margin	12.6%	12.0%	14.9%	15.0%	14.8%	-0.3%
Net Income Margin	-5.6%	-3.6%	0.6%	0.0%	-1.0%	-1.0%
CAPEX, % of revenue	15.5%	10.2%	10.3%	10.1%	10.0%	-0.2%

ROIC	-0.2%	0.2%	3.7%	6.0%	5.5%	-0.5%
ROE	-27.1%	-33.6%	9.1%	0.2%
Net Debt/EBITDA	6.0x	5.6x	4.6x	3.8x	4.1x	0.3x

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.