What were the key highlights of the Q3 results announced by Tata Communications?

Tata Communications may have corrected on Wednesday but that was more because the government decided to exit its 26.12% stake in Tata Communication. That stake had come to the government via its sale of VSNL to Tata Communications. Now as part of the divestment drive, GOI wants to exit. But results were actually flattering.

Tata Communications net profits actually grew 5-fold to Rs.309.41 crore in the Dec-20 quarter on the back of lower costs. However, top line sales was almost flat in this quarter at TCOM with consolidated revenues at Rs.4,223 crore. Revenues from voice solutions were lower, but TCOM recorded growth in data and managed services in the current quarter.

For Dec-20 quarter, consolidated operating profits were up 144.2% at Rs.489 crore. This was largely triggered by a sharp fall in network and transmission costs as well as a sharp fall in other expenses. As a result, the operating profit margin or OPM expanded from a level of 4.74% in the Dec-19 quarter to a more comfortable 11.58% in Dec-20 quarter. PAT margins improved very smartly from 1.39% in Dec-19 to 7.33% in Dec-20.

There is just one area of concern for TCOM. It has a contingent liability risk since it has received a demand notice from the Department of Telecommunications or DOT to pay a sum of Rs.6,633 crore towards license fees on its Annual Gross Revenue or AGR charges. This pertains to the 11 years period between the years 2007 and 2018. Out of this total demand amount by the DOT, the company has only provided for a total risk of Rs.337 cr.