Tata Communications is restructuring its IoT business, shifting focus from growth to profitability as the segment continues to underperform other digital verticals.
For the quarter ended December 31, 2025, the firm’s IoT business was the only digital segment to decline sequentially.
“We are looking at pivoting that business to focus more on how to make it fit for future growth and to make sure that the losses in that business are stemmed. So, there is a lot of effort going to make sure that that business is pivoted towards profitability,” Amur Lakshminarayanan, MD and CEO, Tata Communications, told FE.
He elaborated that these efforts include pruning products and narrowing the set of customer segments it serves, particularly reducing exposure to mobile virtual network operators (MVNOs) in overseas markets where long implementation cycles and delayed customer onboarding have weighed on revenues.
“The MoV platform is based on an acquisition that we did almost 8 years ago. That has got technology debt. And we have to make sure that the technology debt is cleared. That will help operationally a lot more efficient in the future,” Lakshminarayanan added. The MoV platform is part of the IoT segment.
Targeted Industry Focus
The firm has also identified areas where it will focus on. For example, the firm has identified auto and aviation (airlines) as client segments to double down on. Tata Communications will also sharpen its platform play within the IoT business.
“We announced a deal with BSNL, for example, for supporting their eSIM launch and M2M launches and so on. And it’s again a business segment and product that we will continue to support,” Lakshminarayanan explained. However, the priority will be to stabilise the business and stem losses before pursuing scale.
The firm’s revamped cloud business has begun to show signs of acceleration following a consolidation of offerings. After a prolonged plateau, interest has picked up in sovereign and AI cloud solutions, with improving customer additions and a steadily rising monthly run rate, particularly among enterprise clients.
For the fiscal third quarter, Tata Communications’ net profit almost doubled sequentially to Rs 365 crore (Q2: Rs 183 crore), benefitting from one-off gains on account of refunds, despite a Rs 61 crore provisioning on account of the new labour code. EBITDA margin continued to rise sequentially to 19.8%.
Labor Code Impact
“I would like to call out is how the (new labour code provisioning) number is relatively low for the size of the organisation that we are, Lakshminarayanan said. He explained that the firm had a few years back taken steps to reduce reliance on contract workers.
Tata Communications had moved to either absorb contingent workers onto its rolls or shift to outsourced models, lowering its provisioning requirement compared with peers of similar scale.
Tata Communications also announced the appointment of Ganesh Lakshminarayanan (Ganesh) as managing director and chief executive officer – designate as Amur Lakshminarayanan retires in April this year.
On acquisitions, the company reiterated its focus on targeted, capability-led deals rather than broad-based expansion. During the quarter, Tata Communications announced the acquisition of a majority stake in Commotion, an AI-native SaaS platform.
Management said the immediate priority would be to integrate the platform, build on its capabilities, and scale it within the Tata Communications ecosystem before pursuing additional transactions.
Headcount Rationalization Efforts
The firm’s headcount has been declining over the past three quarter, which Lakshminarayanan attributed primarily to exits from unprofitable contracts at subsidiary Tata Communications Transformation Services, which required from workforce rationalisation, as well as post-acquisition role overlaps at parent Tata Communications.
Management clarified that the reduction was driven by consolidation actions rather than large scale automation-led restructuring.
Looking ahead, the company flagged persistent macro uncertainty stemming from geopolitical tensions and trade conflicts, which continue to weigh on enterprise investment decisions.
While rupee depreciation supports reported revenues, margins remain exposed to cross-currency movements between the dollar, pound sterling and euro, limiting any meaningful forex-led upside.