Nuvama Institutional Equities raised the target price on Tata Communications to Rs 2,000 from Rs 1,900. This implies nearly 15% upside for the stock from current levels. The brokerage has maintained its ‘Buy’ call on the stock after the analysts met the company’s management. The broker continues to see the company to be an exciting play, which offers the best of both sectors, stability of telecom and growth potential of the IT services sector.
Nuvama on Tata Communications: Strategic transformation to optimise investment
The Tata Group company is undergoing a strategic transformation to a digital fabric provider, said Nuvama. Tata Communications is building capabilities around infrastructure, software and services, where most of the current investment is being deployed.
Nuvama on Tata Communications: Keen on inorganic growth
The company’s management stays keen on inorganic opportunities, but this is “not factored into FY28 data revenue guidance”. On the margins front, Tata Communications’ management remains optimistic and would refrain from acquisitions that would dilute its overall margins. Plus, the pickup in margins is likely to be led by cost optimisation measures and operating leverage.
Apart from core business, Tata Communications continues to expect great embedded value in the data centre business (26% stake) and remains committed to it.
“We continue to be positive on the unique technology and telecom play, expecting digital growth and consolidated margins to pick up sharply in FY26, leading to strong growth over FY26/27,” said Nuvama in a research note.
Also, the company expects the focus on M&A and non-core asset divestment to continue.
Tata Communications Q4FY25 results
The company reported a jump of 115% year-on-year in consolidated net profit of Rs 761.17 crore in Q4 FY25, compared with Rs 354.57 crore in the corresponding period of the last fiscal year. Its revenue from operations rose 6% to Rs 5,990.35 crore in the fourth quarter of FY25, as against Rs 5,645.07 crore in the same period a year ago. Also, the company declared a final dividend of Rs 25.
Tata Communications’ stock performance
The share price of Tata Group’s telecom subsidiary has risen 5% in the past five trading sessions. The stock has increased by more than 10% in the previous one month. However, the stock price of Tata Communications has fallen 6% in the past six months. Tata Communications’ share price has corrected by 8% in the last one year.