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ICICI Securities Report
Tata Communications Ltd.'s Global Data Services business has seen 11.6 percentage point expansion in Ebitda margin to 28.2% in FY21, which has helped it improve Free Cash Flow and Return On Capital Employed.
We have deep dived to understand the costs, which have helped in margin expansion, and see if they are sustainable.
Network cost has added 340 basis points to margin and we expect an upside from operating leverage.
Employee cost added 175 basis points to margin, and considering it is 19.8% of revenue, we see more headroom for margin.
Other expenses added 600 basis points to margin of which repair and maintenance has been a drag. We see flattish R&M cost in coming years.
Margin of 100-120 bps within other expense was on account of Covid-related savings, which will return on normalisation.
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