Tata Communications’ stock took a significant hit, falling nearly 6% after the company reported its financial results for the second quarter of FY25. While the company showed robust year-on-year (YoY) growth, the quarter-on-quarter (QoQ) decline in profit margins raised concerns among investors, leading to the sharp drop in share price.
Key Financial Highlights:
- Revenue Growth (YoY):
Tata Communications’ income from operations increased to ₹5,781 crore in Q2 FY25, up from ₹4,897 crore in the same quarter last year (Q2 FY24), representing a year-on-year growth of 18.03%. This reflects the company’s ability to drive revenue growth despite challenging market conditions. - Revenue Growth (QoQ):
On a quarterly basis, revenue grew by 2.15%, from ₹5,633 crore in Q1 FY25 to ₹5,781 crore in Q2 FY25. The increase shows the company’s consistent revenue generation. - Net Profit (YoY):
Tata Communications reported a net profit of ₹227.27 crore for Q2 FY25, a slight increase compared to ₹221.26 crore in Q2 FY24, marking a year-on-year rise of around 2.7%. - Net Profit (QoQ):
However, net profit for the quarter dropped significantly from ₹332.93 crore in Q1 FY25 to ₹227.27 crore in Q2 FY25. This represents a steep 31.7% decline in quarterly net profit, a key factor contributing to the decline in the company’s stock price. - Expenses:
Total expenses also increased significantly, rising to ₹5,503.47 crore in Q2 FY25 from ₹4,599.59 crore in Q2 FY24. The rise in operating costs has exerted pressure on the company’s margins. - Profit Before Tax:
Tata Communications recorded earnings before tax of ₹278 crore in Q2 FY25, down from ₹330.98 crore in the previous quarter, signaling short-term profit margin pressures.
Market Reaction:
The decline in QoQ profitability has caused concerns over the company’s ability to manage rising expenses, leading to a nearly 6% drop in the company’s share price. As of mid-day trading, Tata Communications shares were down, reflecting investor caution amidst the declining profit margins.
