Tata Communications Q3 FY26 Earnings: Digital Growth and AI Integration

Ladies and gentlemen, good day and welcome to the Tata Communications Limited Q3 FI26 earnings conference

call. The results for the quarter ending 31st December 2025 have been announced and the data pack is available on our

website. Please note all participant lines will be in the listenonly mode and this

conference is being recorded. We have with us from the management team Mr. Amir Lakmi Narayan MD and CEO,

Mr. Kabir Ahmed Shakir, CFO, Mr. Rajiv Sharma, head of investor relations and Miss Sadeshna Patnayak,

DGM investor relations. We will begin the call with opening remarks from Mr. Lakshmi Narayan on the

business performance and outlook followed by Mr. Shakir on the company's business and financial performance. Post

that we will open the floor for questions. In the event that the management line

drops, we request participants to stay connected while we reconnect them to the meeting.

Please note some of the statements made in today's call may be forward-looking in nature and are subject to risks and

uncertainties. The company does not undertake to update these forward-looking statements

publicly. I now hand the call over to Mr. Lakshmi Narinan. Over to you sir.

>> Thank you. Uh good evening everyone. Uh you would have seen the announcement that the board has approved the

appointment of Mr. Ganesh Lakshmarin as the COMD designate subject to regulatory approvals on my retiring in April. I

congratulate Ganesh and wish him with very every success. It's been a privilege to steward the

company through a phase of transformation, strengthening the digital fabric, increasing our customer

relevance, and building a platform poised for growth and long-term value creation. As we progress through the

remainder of the year into April, my focus remains firmly on execution and continuity. This quarter's performance

reflects not just delivery in the moment, but the resilience and strategic optionality we have deliberately

embedded into the business for the next phase of growth. This quarter we acquired a majority

stake in commotion, a leading AI native enterprise SAS platform. Adoption of the platform within both products and

processes will accelerate the AI integration across the digital fabric. In CIS, Commotion's strong capability

integrated with Kalera channels will be a powerful proposition. The platform is natively secure for enterprise usage and

runs on our VU cloud. With this we aspired to be a full stack AI platform provider with best in features and and

prices globally. Deep diving into the quarter performance, we are very pleased by the

growth momentum coupled with the margin expansion that we've been able to achieve. We are seeing a momentum across

the data business driven by core connectivity as well as digital portfolio. Our overall revenues came in

at rupes 6,189 crores up 1.5% Q on Q and 6.7% yearonear. Evida grew by 4.6% Q on Q and 4% Y on Y

to rupees,228 crores. Overall AIDA margins came in at 19.8% an improvement of 60 basis points

Q on Q. I'm very pleased to share that we had an excellent order book this quarter with very healthy double-digit Q

on Q and Y on Y growth. A large part of this order book growth comes from core connectivity on the back of a deal with

one of the largest OTT content providers. To add more color to the deal, we'll build an India leg of a

major global subc build spanning five different continents. Our funnel remains robust and about 70% contributed by

digital portfolio. We continue to be making progress with our deeper with fewer strategy as we are seeing a steady

uptick in the number of million dollar customers during the year especially in the 10 million plus category.

Coming to our financial performance, data revenues grew by 3.5% Q1Q and 9.3% yearon year. Core connectivity business

came in at rupes 2,700 crores up 2.4% 4% Q on Q and 4.2% Y on Y. The revenue growth in core is

driven by the implementation of more than half the large hyperscala DCDC connectivity deal that we had announced

earlier. Digital portfolio at 40 49.6% of data revenues is up 245 basis points yearon

year and is in line with our strategy to drive relevance quotient. Digital revenues came in at rupes 2,659

crores increased by 4.6% Q on Q and 15% yearonear. The growth was driven by interaction

fabric and cloud and security fabric on the back of some large deals and benefited from usagedriven seasonality.

Interaction fabric which comprises 52% of the digital portfolio reported a growth of 10.4% Q on Q and 17.9%

yearonear. We see a a steady uptick in the nonS SMS business in the CIS in the new VS this quarter. Media business has

seen a degrowth of 16.6% Q on Q and a growth of 1% yearon year. NextG connectivity has sequential growth

of 3.9% Q on Q and 17% yearonear. We won an ISON deal for a large global wine company in France for a large

international airlines. We have been awarded a network transformation deal for 14 countries.

Deals such as these are helping us push our challenger positioning in the international market. Cloud and security

fabric reported a growth of 9.4% Q1 Q and 18.9% yearon year. We have a marquee win in the security portfolio. We have

won a large strategic deal for managed sassy with a large public sector bank in India. The strategic network security

transformation involves a comprehensive set of use cases including secure internet access, private access,

advanced data protection and zero day threat protection. We are seeing several large PSUs and government entities

planning a transition to unified Sassy stack and this deal places us well to pursue further such opportunities. It's

heartening to see that both nextgen cloud and security and media have grown 25% 19.6% and 15.1%

year to date and better than their fiveyear caggrs. Move and IoT fabric reported a decline

of 4.3% Q on Q and a growth of 5.5% yearonear. They had a significant uptick in the IoT revenue albeit on a small

base. One large steel company is deploying our safe pass connected worker solution. The solution enables real-time

monitoring and enhance worker safety across the plant. To conclude, I'm happy to see that data and digital

portfolio are gaining momentum. The strategic bets that we had called out thread span commotion global AI stack,

EDP, EI cloud and the MCC plus MCN. And some of these have already been launched and are seeing several customer

pilots and few will be launched over the next couple of months. Capability shift within the company is in both products

and processes is becoming very evident. We are very well positioned to build on this foundation with discipline, clarity

and ambition. I remain confident that the company's best chapters will be written with the strength of its people,

its partnerships and the trust of its shareholders. Thank you and over to you.

>> Thank you Lakshmi. Let me take you through the Q3 financial performance this quarter which reinforces a pattern

of continuous improvement with incremental gains and growth and margins flowing from better capital allocation

operating leverage and raises portfolio focus momentum across data revenue as both core and digital are participate in

growth this quarter Q3 FI26 revenues came in at INR 6189 crores growth of 1.5% quarteron quarter and growth of

6.7% yearonear normalizing for forex impact the revenue growth is up.5% quarter on quarter and 2.2% yearonear

data revenue grew at 3 and a half% quarter on quarter and 9.3% yearonear core connectivity revenues grew by 2.4%

quarteron quarter and 4.2% yearonear digital revenues grew by 4.6% 6% quarteron quarter and 15% yearonear. As

we look ahead, incremental growth will come from a number of strategic bets that are being commercialized. We will

begin to talk about these launches progressively over the next few months. Net revenue came in at 3,477 crores

growing at 1.9% quarteron quarter and 4.3% year on year. Overall net margin improvement improved was by 20 basis

points sequentially to 56.2% driven by core connectivity. EITA for the quarter came in at INR

1,228 crores up by 4.6% quarteron quarter and 4% on a year-on-year basis. Our EIA margins for the quarter were

19.8% and improved by 60 basis points year on sorry quarter on quarter. EITA margins have been on an upward

trajectory since uh the fourth quarter of FI25 and the 110 basis points improvement in EIA margins over the past

three quarters reflects the inherent momentum and our commitment to our ambition of 23 to 25% date. Data AIDA

came in at 1,3 crores up 5.1% quarteron quarter and 7.7% year-on-year. We are happy to note

the improvement in data eida margins to 18.9% up 30 basis points yearon year. As data

growth improves further with the rollout of new products, we will see margins benefiting from operating leverage.

PAT nearly doubled quarteron quarter and came in at rupees 365 crores and 42.3% on a year-on-year basis. PAD benefits

from interest in income tax refund this quarter. We are also taking a provision for labor code of 61 crores which is

reflected as an exception rate. Net for the quarter stood at 10,080 crores lower by 11% Q on Q. Netted to Eida came in at

2.16X from 2.45X the previous quarter. In FI 16 we invested in a telecom innovation

fund and during this quarter we monetized this investment and recorded gains. In parallel, we continue to

deploy capital into innovation opportunities aligned with our long-term strategy. Our commitment to funding

innovation remains structural and independent of individual monetization events. Our fit to grow model is

enabling us to deliver profitable growth while consistently reinvesting back into the business. FCF for the fter came in

at 150 crores up 3.9x quarteron quarter. The increase was driven by improvement in working capital

and tax refund in this quarter. Cash capex for the quarter is at 575 crores. Rosi came in at 14.4%.

Our Rosi is based on 12 month rolling numbers. Rosi is negatively impacted by TCR cost in Q2 and the continued

investments in ST. We believe that Rosi has now bottomed out and with margin expansion momentum, we expect gradual

recovery over the next few quarters. Coming to subs and real estate, the revenues for the quarter were down by

11.3% quarteron quarter and 5.6% year-onear. TCTS revenue came in at 191 crores down by 27.8% quarteron quarter

and 25.5% year-on-year. We exited from a low margin contract and that has impacted revenue this quarter. TCT's

AIDA for the quarter came in at 42 crores and Eida margins came in at 22.3%.

With our continuous subsidiary review, we've restructured the operations for TCTS over the quarters and now the

business is global with a larger focus on international clients. We've been able to turn around this business to

healthy double-digit margin in just under two years. TR revenue came in at 217 crores, up 7.3% quarteron quarter

and 27.3% year-on-year. TR Aida came in at 112 crores and Aida margins came in at 51.6% 6% and improvement of 7.5%

quarteron quarter end but down 21.1% year-onear with both core and digital contributing to growth and the upward

trajectory in margins is driving the overall momentum. This builds the right platform to drive

future growth. I will now ask the operator to open the forum for Q&A.

>> Thank you very much sir. Ladies and gentlemen, we will now begin the question and answer session.

Anyone who wishes to ask a question may click on the raise hand icon from the participant tab on your screen. We

request participants to restrict to two questions and then return to the queue for more questions. To rejoin the queue,

you may click on raise hand icon again. We will wait for a moment while the question queue assembles.

We take the first question from Mr. Vibore Single. So could you please unmute your connection and you

may ask your question now. >> Please go ahead sir. >> Yeah. Hi. I hope I'm audible.

>> Yes. >> Uh yeah. Uh thanks for the opportunity and congrats on a solid performance sir.

Uh so uh Lakshmi wish you all the best. uh and uh uh basically so my question was basically on uh the uh uh the growth

that we have seen uh in this uh quarter uh I think I think we're consistently now reporting uh kind of double-digit

growth in the digital uh business uh of course the breakup of that continues to vary across different verticals uh so do

you feel that the mix that we have at this point of time in terms of the CIS business and uh cloud and media this

kind of a trajectory of double-digit growth is sustainable over the coming quarters and we could probably up that

bit also in coming quarters and specifically on the media vertical we saw a sharp uh fall in this uh vertical

on a Q1Q basis. Uh uh I don't know I'm sorry if I missed your open uh if you mentioned something about that in your

opening remarks but if you could elaborate it's fallen from 390 crores to almost 312 cores in the last two

quarters itself. So any color on that and when do we expect this to get back? uh and then I'll have a couple of

followup questions for Kabir. >> Sure. Thank you. Um so talking about the digital growth uh

uh I think there is immense potential in in in all of the portfolios. our focus on the nextG connectivity.

Um, and as I called out in the commentary, the nextG connectivity has existing products. Uh, some of it we

recently launched and some we're going to be launching um, you know, even later this month on

the multi cloud networking. All of them are seeing very very good uh, traction. So that definitely has a potential to

grow uh, at the current or even increased rates. Uh similarly on the cloud and security

um um with the investments we are making on the AI cloud, AI studio uh strengthening our VU cloud proposition

uh all of that have uh good potential and again end of the month we are launching the the edge distribution

platform which is uh a a solution similar to what Cloudflare has. It aims to protect um those applications which

are web facing for our enterprises uh with a very low latency and um and a high uh performance um is what we will

be offering. Uh so that portfolio also has a lot of legs to grow. Uh coming to the the CIS portfolio um you know the we

think that can definitely grow double digits. Our aim is to expand beyond the SMS channels because the SMS channels uh

the margins are still not very good. Um so we are um you know we're launching the voice RCS um and and WhatsApp all of

these have been launched in different markets and we are seeing good progress being made. So that would expand. More

importantly, u the the capability that I called out with commercial when integrated with these channels uh with

voice AI uh and agentic capability to deliver better experiences uh if a customer is looking at marketing

campaigns to acquire customers or to serve their existing customers. All of that can be handled through a very

unified platform of agentic AI, voice AI running on VU cloud serviced by our own channels that again has um you know lot

of potential to grow um in in good double digits. Media um you know the the also if I look

at the the production capability the the media edge platform which we call as a media ecosystem those have excellent

potential to grow. This quarter has seen a um a slowdown largely because of the world athletics which uh that event

concluded and that was a fairly large contributor of revenue but overall in the long run we think that would uh that

would uh that would do. Um and end of the month we also will launch thread span a product that spans the uh the LAN

van cloud and security uh to bring a much more simplified management for enterprise customers. So all of these

products will have a lot of leg to grow on the move and IoT. Uh our focus is going to be largely to get this business

back to profitability. Um so we will bet on that more to you know to turn to profitability than to emphasize the

growth on that. So largely that is how I would see in the the mix of digital portfolio.

>> Got it. Got it. That was really helpful. Lakshmi uh on the collaboration in CIS vertical now since it's forms almost

more than half of our digital revenue. Uh I think we've seen a very good growth in all the three quarters of this

financial year. Last year we know that in the CPASS business there were a lot of uh pressure in the top line as the

global comp the global payers had also kind of got their volume they were struggling for volumes in search of

profitability. Do you think that phase is behind us now and going forward CPASS business specifically can continue to

grow and again on the media business uh given that we've reached a 300 crores of kind of topline uh in this quarter with

the completion of the world athletics event do you believe that this is the normal run rate or do you believe in the

absence of an event like world athletics we can probably take it up from current levels also given the kind of

initiatives that we are taking >> on the on the on the CIS business um I think the growth drivers as I called out

you know the uh you know SMS world over is growing in u in in 10 12%. Um I think we will be careful to focus our business

on enterprise segment and look at profitable deals there rather than growing that at any cost. Um um but as I

said there are other channels uh such as voice RCS which has got potential and that has got much headroom. Adoption has

been a bit slow in the market. So in the long run we believe the other channels will start to grow uh well uh and as I

said you know the the pull will be from the the AI platform uh that we talked about and that will ensure that you know

we can elevate our conversations to outcomes to uh to to our customers to be able to do their sales conversions or to

be able to deliver a better service and with a worldleading voice AI that the platform offers that all of that offers

a a great potential but do remember that in CPASS today the SMS portion is a very large chunk the newer portions are

smaller to begin with but that's where we will see much of the acceleration coming from

>> so that's as far as the and the and the the second big growth driver for us in the CIS business will also be on the on

the on the on the contact center side of the business where you know we launched a product called TX which essentially

sits on top of some of the existing contact center products right whether it's Genesis or Cisco or uh even AWS it

can sit on top of that uh and essentially help a great deal in the productivity to the customers

productivity of the agents is uh is improved and also you know customers are having to do a lot of customization on

these uh on these um contact center platforms and with our TX platform with all the integrations we've done that

customization efforts will go down and and we also also combining the the uh the commotions voice AI and AI

capabilities into the TX. So that will be another growth driver. So the growth drivers in the in the in the in the CIS

business would be the the entire the contact center space with TX integrated with AI um expanding to other channels

and the overall AI story uh that we are saying with the commercial. So those would be the key growth drivers. The

large part of the CPASS business is SMS and we think you know that the market is growing at 10%. And and we would we

would see how we can grow profitably with enterprise focus. So that would be the uh the focus that we would have on

the on the CIS side of the story. Coming to media uh again media is somewhat cyclical uh based on the events uh that

happens. Um but having said that u you know we are also expanding the media story beyond the uh the sporting

federations uh into the broadcasters. So we announced a large deal um last year with

uh in the Latin American market. Um that is one. Second is we won a fairly large deal in the US again in the broadcaster

segment. uh bringing together again the capabilities of um the switch commotion as well as the uh our media edge

capabilities to transform uh and and third even in India with one of the broadcasters today we are responsible

for a lot of um live uh sporting events uh play out and that we are doing um from this very building

that we are sitting in uh today uh all of that u are new capabilities which are the uh the accelerators of the growth uh

for for media business. Some of it will be steady. It's not that seasonal but the the traditional business that we've

been doing for federations are seasonal and bit cyclical but the business has good potential to grow in the long term.

>> Got it. Got it. Uh thanks a lot for the those detailed answers Lakshmi. Uh Kabir just got two questions uh uh from on the

financials. So the uh if I look at the overall uh the consolidated margins as well as as well as let's say the data

margins they have expanded Q1Q uh but uh I mean the highly demanding analysts that we are I believe the spa the pace

of the margin expansion still appears to be a bit on the softer side. Uh I think and specifically now that now digital is

almost half of the data revenue. Uh do you do you see this uh uh the the pace of the margin expansion pick up in the

coming quarters and how could digital how would how far uh do you think are the digital margins uh let's say from

breaking even either individually or any other color that you can provide on the break even point for the digital sub

subdivision. >> Thanks. Thanks. Don't ever apologize for being uh being the pushy and demanding

you know analyst that you are. You make us better. So really love the the conversations that we always have. Um so

I think it's a it's a it's a good question. Great question. But I would also say on a serious note we are

walking and chewing at the same time we are doing repairs with the mains on you know as far as the digital portfolio is

concerned. I mean Lakshmi talked about CIS um and you've seen CIS growth CIS also become you know bigger but this is

also a business when we actually bought from Kera um had um a lot of elements in the business where we wanted to move

away from traditionally you know acquiring volume for the sake of acquiring volume but to going into more

profitable so we wanted to change the mix of the business you know and um and it's taking you know time this I would

say in the last two three quarters really kudos you know to the team and the business um they have are changing

the color of of both the NR profile that we're getting from CIS also the cost profile that we have some very hard

calls being taken on that to to improve the the profitability so I would say I'm quite pleased with the the progress that

that CIS is making um and and since we are hungo about it is why you know commotion also has happened not just for

CIS and I think commotion has the has the AI capability that it can infect positive ly the rest of the

organization, you know, as well. But we do believe that would be a a a very good um a very good I would say um niche that

we can have where the the conversation with our customers can shift away from price to value. I mean that's what you

know um the capability commotion can actually bring in. We have this good engine you know of SMS. But the moment

you add the intelligence layer you know and composible you know layers on top of that and the unique capabilities of

voiceto that we have and then suddenly you know the kind of opportunities it can give us uh as a healthy margin you

know kind of opportunities will give us is is immense and we are excited about it. So that's you know um you know on

CIS um likewise I can go you know into each and every you know business we are taking both surgical actions in terms of

removing the cost structure and making them fit to compete today while also having the eye on the ball to invest you

know for the future. So horses for courses for different businesses and that was one example. The five strategic

bets that we called out on the investor day Lakshmi alluded to couple of them just now. U we are excited about the

launches that they will bring. These are all SAS based you know margins. The margin profile the NR profile of this

are going to be like a typical SAS company profiles not the kind of NR profiles that you have seen

traditionally in TACOM. Um so we are quite excited about this. Um so mix operating leverage cost reduction you

know uh is I would say a combination of all of those things. Internally uh we have a first tracker of each of these

digital businesses when they will get the LOB margin before the you know the general cost gets allocated to them.

when do they get break even and positive and destination on that that and when do they get to EITA and that is a varying

you know um timeline depending on each of the portfolio segments um and and that's the consolidated of that is what

we gave in the investor day that we are in that trajectory um I must admit you know we are a little slower than than

what we wanted because in this particular quarter for example I mean we did take I mean we don't call that out

because we are as I said we are walking chewing gum we we gotten out of an own honorous contract in you know in CIS for

example the the costs of it are already absorbed you know even though the contract expires you know next quarter

that costs are already been taken you know in this in this quarter itself so so the the multitude of actions that are

being taken uh I'm quite confident that we will should get to you know digital break even you know um in the in the

near to medium term and um by you know by our ambition time frame we should have the digital portfolio at its

destination margin >> right right just for a second I thought you will not say near to me and you'll

probably give me a quantified timeline of months or quarters but I get that uh if I can push my luck which of the

subverticals in digital do you think will break even first >> I mean you you're really pushing my luck

and uh yeah I mean CI is definitely yes I think we have a tab you know for for that to to happen and

as Lakshmi said media is cyclical right um there are event based we have very good logos and then we need to utilize

those logos and get the cost structure fit for purpose you know as well um so very clearly these two um our business

is where you know clearly our focus is um to get them into into the black >> got it got just one last bookkeeping

question from my side the TCR margins have been all over the raise 72% 44 51% as a modeling exercise where do you

think the equilibrium will be for the TCR and what should we take for the margins going forward

>> I'd mentioned before it's it's it's mid mid50s is what ideally it should settle down at there are there are some

business model things that we are working on you know and uh and this is all wip um you know as we have and once

those get fractified you know uh is when we will have a complete clarity on you on what it is. We had already indicated

that those margin levels were you know were high and we will you know come down you know at a to a reasonable level. In

the last quarter itself I had mentioned to one of the questions that was raised that it should be in the mid-50s

>> mid-50s. Got it. Got it. Great. Thank you so much for uh taking my questions and wish you all the best.

>> Thanks. >> Thank you. That question was from Mr. Vibore Single

of Noama Equities. We will now move to our next question that's from Aditya Suresh of Mquaryi. Please go ahead.

>> Yeah, thank you. Um Lakshmi, first is congratulations and wishing you the very best. Um just for this quarter, I had

two questions. So first is any large customer Dwinds you'd like to call out this quarter? You'll typically give us

that million-doll customer journey. Any kind of update on those metrics? That's the first one. Um second is on the um

data center opportunity. We've seen quite a few large um hypers scale announcements in the past several

months. Could you maybe just talk through how you're seeing the data center opportunity and what this could

mean for your core connectivity segment um in India. Thank you. >> I didn't get the second question

properly. Uh Adita >> just on the data center opportunity Lakshmi um there have been quite a few

hyperscaler kind of announcements. uh uh is that translating into kind of um um or how are you seeing the data center

opportunity in India for your connectivity segment? >> No, I think the uh to take the second

question uh first the data center data center opportunity is great uh in India. Um we are continuing to be the leader in

that space and um and keeping the market share there. Um and even you know in my commentary I called out it's not a a

data center data center connectivity but it's a core connectivity deal that we announced. It's a fairly large deal to

help a an OTT content provider to land and uh and connect. Um so that's the uh that's a space in the core connectivity.

Um and in the core connectivity also you know we have seen an uptick in our uh you know uh because of the internet

traffic going up uh our internet related core connectivity products have seen an uptick this quarter. So the core

connectivity we'll see uh you know um we it had fallen in the last quarter because of the cable cuts. uh we do

still suffer from the cable cuts uh in the uh in the Red Sea area and it's not fully out of the woods or out of the sea

yet. Uh but despite that we've seen a good growth in uh in the in the core connectivity this quarter.

Um coming to the the color of some of the uh other deals uh uh you know I I did mention that in uh in UK and Europe

um we have won large network transformation deals with uh uh in France with in one of the uh a wine

uh player and one large international airlines again in that region. Um there are deals in the US in the in that

space. We are also having good amount of deals in the in in the in the Wi-Fi um space. We called out the deal on the

the security space on on on cloud which is which was somewhat muted for the last year and a

half. We have seen an uptick on um on the order booking uh this quarter. So I think the from a from an order booking

perspective it's been u fairly uh well rounded across all the all the fabrics is what I would say.

>> Thank you. >> Thank you. Our next question is from Sanjay Jane of ICA securities. Please go

ahead. >> Yeah. Hi uh good evening all and thanks for taking my questions. Uh first Laxmi

now that uh you are stepping back uh just one question you inherited a company with multiple challenges

probably you are leaving a company with multiple opportunities uh some of the things you think you

would have done better or different that you want to share that's number one number two how do you see this company

uh evolving or where do you see this company has the potential to reach in next 3 to 5 Yes.

>> Uh I think the first one is uh is a harder question. I need to reflect. I'm sure there are things that we could have

done better and uh and so on, but there's nothing specifically that occurs to my mind. um know because the

capability shifts um you know requires a number of things to fall in place right in terms of building that capability u

the significant amount of uh culture change um

all of that are are big ticket items so all of those you know uh I think the teams have done tremendous work um in in

getting to where we are today and It's kudos to the to the team to to get us where we are. Uh very pleased with the

the platform that we have for future growth. Um you know in terms of the product profiles um Kabir called out you

know that some of the strategic bets that we are calling out. Some of the new products are SASlike products.

um you know all of it are leveraging the um the the the native capability of uh of infrastructure be it network or

compute or or all these capabilities. So uh I think with this uh you know I'm very passionate about uh at the risk of

uh repetition I would say um about relevance to the customer and that was one of the major missions that we had to

say you know if you stayed where we are you know we are increasingly becoming irrelevant and commoditized. So uh today

um you know it's not just the million-dollar customers and my commentary has said you know there is an

uptake in that there is uptake in $10 million customers but that comes because we are you know we are able to have a

conversation with uh a CIO or co or today even with a CEO about how we can participate and help them in their uh in

their transformation and that's a that's a very big shift for us in terms of um you know the the

relevance and and with the relevance comes our ability to participate in opportunities and then with

participation comes the winning and execution that comes down the line right so I I do believe that uh you know we

are only scratching the surface uh we have a solid platform on which the company can grow and build

>> thanks thanks Lakshmi for that Um just one question to Kabir. Kabir uh the the digital portfolio net revenue still

appears to be quite soft whether I look at sequentially or YI. Um it's a decline. The revenue numbers

uh do give a a slightly better feeling of a 15% YI growth and 4 odd% sequential growth. But the story of net revenue is

quite different which is still not encouraging or which still doesn't put us to a path where we can go to a break

even at the EBIT level because if net revenue is declining which means our losses would have only expanded. Um how

do we correlate this and what is not getting translated from say a gross revenue to a net revenue and then to a

profitability? Yeah, I mean I need to probably then getting into specifics here which I

cannot uh suggest but I'll still you know try and you know give you some comfort as to what is going on you know

underneath this in this you know specific quarter as I alluded to Vipor's question earlier there was an owners

contract which we have chosen to exit because uh I mean in that particular market uh in CIS the WhatsApp cost is

even lower than the SMS cost and uh and therefore we've said look there's it just doesn't make sense for

us to you know continue anymore. Um and so we that alone was like a 100 basis points impact you know uh in the in the

quarter. Um likewise there were two other deals you know which we did and and depending on the kind of a delivery

schedule um those deals you know when they recognized you know both revenue and cost in this particular quarter came

at a dilutive you know margin profile. So that explains you know the the oneoff of NR you know in the quarter in the

digital portfolio. Um we actually u we examined it quite surgically you know uh on each of them. Uh none of them are

structural in nature you know. Um so that's should give you some comfort. Not necessary to say that we are happy with

with what it is but at least they are not structural and uh and hopefully we should learn from this and not you know

uh repeat this and we get to you know a profitable profile. So I would only enhance the same question, same answer

that I gave to before that we are you know seeing at least you know CIS to start with and then um then uh media

then these two business to to get to break even soon and to destination you know aida uh as well. So so forget the

oddities of of this quarter which are one of us. But Kabir just a larger question here.

Did we did we really get aggressive pushy to buy kalera because it's been now what more than one and a half year

close to two year and we are still cleaning up the book honorous contracts and all those things. uh so what's the

learning for us from the two acquisition we have did and which should implement for the future at least uh uh we should

we we don't repeat these things uh I wouldn't say we were aggressive or anything of that sort

this particular contract that I said is not doing it was a contract that we signed after the acquisition right so

okay let's also you know call performance out where you know where it really you know belongs and it's easy to

brush under the carpet and you know blame the past. That's that's not the case. I think we have a good capability

in Kalera. It's a great asset that came at a great value globally. Uh given the ambitions that we have with with

commotion with AI, you know, that we will bolt on top of that. This can really be a good asset, you know, for

us. uh we we fundamentally you know believe that um had we done you know stayed the course in this particular

place with DGO uh we would have burnt a lot more cash and we would have taken a lot longer to get to this level of

revenue right so so if you see from that perspective I think you know it is uh it is indeed you know a a good space that

we would be in we had estimated when we took kera that there will be certain channels I mean like 92% of the business

was A2B and 8% % was the other profitable channels. Um and even Lakshmi mentioned voice RCS for example has not

picked up you know um and not been adopted as much as we we thought it would uh with you know giants like

Google behind it. It's a matter of when and not if um so we are you know are we poised for all of those things. So if we

look at from those opportunities point of view you know and our business structure point of view um you know the

the the cost synergies we got it kind of almost you know on target the revenue synergies is what we knew that it's got

delayed by a year for multiple factors you know I would say uh more than you know 3/4 of the factors were external uh

rather than you know internal per se. So, so I would we still you know on hindsight if I go back yes you know we

do have got ker and let's not forget we are again for the sake of transparency and governance we have carved out TCR

you know and showing TCR separately it's a business which is profitable it has grown significantly from what we

actually bought before so so if I add the two together we are getting you know value from that business uh and we have

to be we have to be truthful and and see the numbers the way they are. >> No, no, that that I clearly appreciate.

K uh Lakshmi one on the order book. Uh it's been probably now four quarters or five quarters. We have been speaking of

a very strong order book. Uh when should we really uh see this hitting into a revenue growth um and translating into a

double digit IITA growth for us because we're still I think lagging significantly behind both on revenue and

ITA growth. So Sanjesh um I don't know whether we flagging strong order we flagged a

strong order booking in Q4 uh and Q1 of FI25 right and at that time of order booking I did say that uh one

of the large orders uh we will see the the revenues uh starting to come in in the later part of FI26 which is what you

are seeing this quarter a part of the revenue and I called out in my commentary uh which is one of the

reasons why the core connectivity has seen an uptick in growth. Uh and after that uh in the in in subsequent quarters

in FI25, I did say that the order booking was more in the stable region and and not gone back to the same levels

of increased order booking that we called out in uh uh in the in Q1 of FI25 and Q4 of FI24. Those are the two

quarters we called out uh exceptionally good order booking. So that's the data that is what we've been calling out

right and after that it's been a fairly stable order booking nothing to uh to to write home about it wasn't declining but

it wasn't uh back at that levels uh of order booking that we had called out I'm calling out this quarter that we had a

very good quarter of order booking u there was one order uh again in the core connectivity space that I have

elaborated but even if I removed that um um that large order uh in the rest of the business also there has been a good

uh uptick in terms of uh the order booking on a Q1 Q and on a year-on-year basis. So that's the that's the data

point as far as the order booking is concerned. >> No, I appreciate I'm telling that we

thought uh we were any which ways doing 14 15%. uh if I go by the historical red rate and that we had a couple of quarter

of very strong and then a very stable order book I thought that could have helped us to and and significantly we

called out that a lot of 70% plus are coming in the digital portfolio uh I thought we would have crossed 20% I

think for now quite a few quarter it appears that even on a low base or a favorable base last year x of

acquisition and the growth was quite muted uh on a on a favorable space and the stable to a better order book. I

thought we would have done better. So just wanted to understand how should we reconcile this or um is there a real

potential for us to grow beyond 20% because that is really what the company need to achieve the 28,000 crores of

revenue. >> Yeah. No, I think if you ask me if we have the potential to grow. Yes. I mean

I think the previous question I did elaborate uh in each of the areas. NextG connectivity there are some new products

uh and nextG connectivity by itself has been growing very well. Um in cloud and security I did call out the cloud was a

bit muted. We have been doing very well on security side but we have seen an uptick on the cloud um order booking and

we think that has got a great potential to grow. So each one of them the only platform I called out was the the move

on IoT uh where we are sort of looking at the business to pivot to profitability. Uh we are looking at how

the product lines within that um can be you know consolidate and rationalized a bit more. So u and that we want to get

that to a state of fitness before we uh we we focus terribly on growth on that side. other other portfolios whether

it's the nextG connectivity the cloud and security the CIS platform the media all of them have potential to grow you

know 20% or more >> got it got it uh thanks Lakshmi thanks Kabir for all those questions and and

and best of luck for the coming quarter Lakshmi all the best for your next journey

>> thank you >> thank you our next question is from Venit Manik of Karma Capital Please go

ahead. >> Uh firstly wishing you Laxmi very all the best for your future endeavors. Uh

most of my questions have been answered. Uh just two clarification uh needed. So uh one to Kabir on the TCPS part of the

revenue. Uh so where should we look at this bottoming out and from there how should we look at uh growth? So as we

said that most of our baggage has now been cleared. So how should we look at this segment uh from a topline

perspective going forward and uh the second thing uh also can you help us understand on the sudden increase in the

depreciation uh during this quarter uh what was the reason to it and how should we look at

the sustainable number going forward? >> Yeah, thanks Vinnie. Um let me answer the TCTS uh question first. Um we did

have two large businesses that TCTS did domestically in India. Um we got um out of that one of the contract which was

the largest one last year. We spoke about it um as well and um and that was a big topline drop that we did but it

came at a huge accurative margin uh percentage you know perspective because we were losing money in that particular

contract. The second one was this um this also was a was a lossmaking contract for how we have you know got

out of um so I would look at TCTS now in the the last seven eight quarters and I mean absolute kudos to the management

team they have done a phenomenal job in taking these hard calls and uh and managing you know our way out without

any issues to our customer and did the transition management very well even though they were losing no uh contracts.

This business is now largely international right and the margin profiles as you see from this particular

this quarter is in the 20s you know uh we are you know hoping that this business going forward also are going to

take business it's all very pure services of course in the telecom and the network space right but is going to

come with that kind of a you know margin profile uh if not better uh and focused towards export and towards international

operations that is how you should look at TCTS and now with the baggage gone we are looking you know to to task them

with with you know uh you know high growth targets which is what the team is capable of you know and um and it comes

with uh with uh with very less you know upfront investment or anything that we need to you know put in. So so we will

we will encourage the management team to to really go and realize the potential which which the quite a few deals are in

the pipeline. and we have visibility too uh and which we're encouraging management to do that uh on depreciation

your technical accounting point uh you know we need so I wouldn't really worry about it too much it was uh one specific

deal where you know it is the nature of an IRU uh if it is the nature of an IRU you know it doesn't sit in OPEX it goes

you know as depreciation it was uh effective 1 of April but the contract was signed on in October um so that's

the reason by the sudden increase that you see is the reclassification done from the 1st of April onwards because

only when the documentation was in place and the contract was signed with the customer could I affect such such

changes. Uh I wouldn't worry too much because you know we do we don't structure the deals driven by accounting

reasons. We structure the deals driven by customer needs and what the customer wants. Um in this particular case you

know once that deal was inked and the documentation was available this was the right accounting entry. So the team you

know uh went ahead and and and then restated it. It's such things like this have existed in the base as well you

know because it was and and that normally concludes within the quarter or maximum one quarter. I mean this time

the it just went through three quarters and that's the reason why you're seeing the impact.

>> Got it. So it will be one time in nature and from next quarter onwards we should see a normalized

>> depreciation. >> Absolutely. You're right. >> Got it. and and uh so we can say that in

TCTS the large part of cleanup has happened and there is not much left or do you still see there is some more

cleanup that is yet to happen? Well, there is no domestic business left. It's all international business, right? Um,

so I I I don't see, you know, none of those deals are lossmaking deals as as we have. Uh, but I will never say never

to any of those things because you never know in, you know, in these geopolitical situation, tariffs and, you know, and

various things that are that are in play. Uh, and you know, global M&A plays, you know, that really happens. uh

so we have to be watchful of of you know changing things but but I think the clear uh coaching to the to not just I

would say TCS but I would say even to the digital portfolio business teams and leadership is managing the you know with

resilience you know the the entire business as we navigate through these ups and downs and yeah so that's where I

will leave it at >> Got it got it got it thank you very much for your time

>> thank Thank you. Our next question is from Balaji Subramanyan of IFL. Please go ahead.

>> Uh thanks for taking my call. Uh good evening and uh all the best. Uh Lakshmi on your future endeavors. I just had a

quick couple of questions for Kabir. These are housekeeping in nature. You didn't say that uh this IU charges uh

you know have to be expensed below the ETA line item. uh would there be any change in the uh Qoq and Yi AIA numbers

that you reported which is 4% YI and 4.6% 6% QoQ if you make adjustments for this uh that is number one

>> go back and adjust uh you know balaji even the pre prior quarters also right >> so

>> doesn't work only in one quarter >> yeah so is there any you know bunched up impact this quarter that is what I was

trying to understand so will the underlying numbers be any different if the accounting treatment uh you know

were to be uh removed the impact of the effect of the accounting treatment were to be removed

>> if you take short-term yes if you like you know over you know a year no because it gets evened out

>> so any sense on you know how much that delta would be in on a quarteronquarter basis

>> I I mean I I don't want to call out the specifics I don't have it why don't you connect with Rajiv and I'm sure he can

explain the maths to you >> yeah sure and the second one is on the improvement in NR to GR ratio in core

connectivity so anything to call out there I think this time it was around 83% usually it's around 80 81% % so uh

anything to call out there >> it's it's I would say operating leverage growth and the mix of growth versus

international versus India >> as nothing specific to to call it >> got it got it that that's it from my

side thank you and all the best >> thank you our next question is from Anish Davari from Vicaria change LLP

please Go ahead. >> Hi >> Lakshmi. Uh congratulations and to bring

the company where it is or the transformation and wish you very best in future. I have two questions. One is uh

your successor Ganesh uh can you help us what were the change capabilities the board and you looked in uh where the

company's trajectory has been in last few years which we have transferred in terms of capabilities and everything so

what uh you are looking in the new leader so we can just help us understand how we should think this transition will

work out that's my first question >> yeah Anish um thank you for your wishes Um you know I would only talk about the

process you know it's been uh a while the NRC and some committees where the board um looked at extensive set of

um candidates and went through a a process to arrive at the um at the answers. We had clearly created a a set

of requirements in the job profile uh in agreement with the board uh which clearly is to see how to take this

company forward uh in terms of leveraging on all the changes that we made u bring more AI and capabilities in

the platform side and and grow the business. So um and and that's how the selection came about. Um so you know I

don't want to talk about anything specific. You will get to meet and hear from him soon but uh be assured that it

went through a process um to make sure that the company can move forward um at an accelerated uh pace.

>> Great. No this is super helpful. The second question I have that uh you have built great capabilities and I think the

growth is also uh you said in order book at least we seeing some science emerging uh what do you think this uh whole we

see the AI a big okay apex uh maybe it's right now hardware side u that piece uh you have been trying to grow this

company uh very very hard efforts you put in so in terms of headwind and tailwinds and as you as you leave this

footprint how are you seeing the overall outside the company's control kind of headwinds and tailwinds you're

experiencing in your platform >> you know um you know we've been calling that out even in IR if you see there are

you know two things one is the macro environment is not very helpful and that's continuously changing and the

uncertainties there means that uh you know the businesses are cautious but on the on the positive side or the

tailwinds are the huge uh changes that are brought about by AI um and the potential that AI offers to enterprises

uh to transform themselves. Uh and we are only scratching the surface as far as the enterprise adoption of AI goes uh

and they have to now build new class of applications that are intelligent. Um and and that would mean that uh the

entire digital infrastructure has to be um significantly um looked into and uh and transformed.

Um they have to look at uh you know the when I say AI adoption at scale many enterprises are still you know taking a

a very use case approach. Every use case is a project and each of the project takes a long time and that is where a

platform like commotion that we are bringing in brings a a more platform ccentric approach to AI. You know in a

sense we are trying to say that is a it's like an AI operating system. Uh so today as you pointed out it's more the

beneficiaries of AI are um you know uh the the the chip manufacturers the hardware uh and that's where bulk of the

spend is going uh and then the attention has come to the models uh models also you know there are not going to be too

many models large models are going to be you know consolidating and there going to be few and then the enterprises have

to look at uh you know doing their own small models, fine-tuning and building applications at scale for which they

need to bring a lot of data integration together uh put in a lot of guard rails so that the AI can be trusted. So all of

that is what I'm calling as a as a as a AI operating system that needs to sit on top of the current system of records and

and that's where our full stack capability with YUI cloud uh the strengths that we have in connecting all

of these u um you know uh clouds uh the the AI studio and the platform that sits in above uh will help customers to to

navigate these transformations. So, so largely that's the sort of the headwind and the tailwind and how we are

positioning ourselves to um to to prepare ourselves and prepare the customers for the future.

>> Just maybe one last piece this AI infrastructure capex uh you would uh uh doing that Nvidia kind of partnership is

there some traction you think uh there also you have a role to play as the in India uh AI infra infrastructure comes

up? Yeah, we do play. So, we have a partnership with Nvidia because of which we have launched our AI cloud uh and the

AI cloud. We are targeting uh more of enterprises. Um and as I called out in my commentary,

we are beginning to see uptick in the adoption of our AI cloud uh both for training as well as for inferencing.

Um we are also uh launching our AI studio that sits on top of the cloud for customers to build their own AI

application. So ours will be a fully integrated stack right from GPU to AI studio to building agentic AI with the

commotion platform. Um and and and that is our play in the market. >> Great. Thank you Lakshi and wish you

very best. >> Thank you. >> Thank you. That was the last question

for today. I now hand the floor back to Mr. Lakshmi Narinan for closing comments. Over to you, sir.

>> Um, thank you all again. Um, um, I know many of you called out to to wish me luck for my my stint after, but uh,

thank you for all your support and as I read out in my commentary, you know, we'll keep our heads down and executing

this quarter and, you know, we think we have a a great platform on which the company can go forward. I want to call

out that u you know the the momentum that we've seen on on the growth uh is something that we would want to build on

um and you know the the strength of the company is uh you know being very close to the customers the NPS scores are

great um and our relevance to the customers are increasing so with that you know we think you know we'll execute

with all the focus that we need to execute. Thank you so much for all your support.

Thank you on behalf of Tata Communications. That concludes today's conference. Thank you for joining us and

you may now click on the leave icon to exit the meeting. Thank you all for your participation. Goodbye.