Why Did Motilal Oswal Retain a Hold Rating on Tata Communications?
Motilal Oswal has maintained a HOLD / Neutral rating on Tata Communications Ltd with a target price of ₹1,750, reflecting a balanced outlook on the company’s earnings trajectory and valuation metrics. The brokerage’s stance is based on the company’s stable operational performance and consistent execution in its core digital infrastructure business.
In the September quarter, Tata Communications reported nearly 7% year-on-year growth in data revenue, showcasing continued momentum in its enterprise connectivity and digital services segments. However, while the data EBITDA margin expanded, the TCR margin contracted slightly, indicating near-term pricing pressure and rising input costs.
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According to Motilal Oswal, Tata Communications’ management highlighted a stable order book for the first half of FY26, supported by strong traction in its digital portfolio and enterprise solutions. This segment continues to be a key driver of top-line expansion, particularly in data services and cloud connectivity.
Despite moderate margin fluctuations, the company has been able to sustain EBITDA growth through efficient cost management and higher-value service offerings. The brokerage also noted that Tata Communications’ transformation toward a digital-first enterprise has helped it mitigate the impact of cyclical weakness in traditional voice and transmission segments.
Looking ahead, Tata Communications aims to deepen its global connectivity footprint and expand enterprise solutions, leveraging its network backbone and cybersecurity offerings. Analysts expect growth to remain moderate, with profitability likely to stabilize over FY26–FY27 as capex intensity normalizes.
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While Motilal Oswal remains neutral in the near term, the firm believes Tata Communications is well-positioned for steady growth due to its strong execution capabilities, recurring enterprise contracts, and expanding global presence. However, sustained profitability and scalability of digital verticals will remain crucial for re-rating.
Investor Takeaway
Indian-Share-Tips.com Nifty Expert Gulshan Khera, CFP®, who is also a SEBI Regd Investment Adviser, observes that Tata Communications’ steady performance and expanding digital solutions base reinforce long-term stability. Yet, with valuation already pricing in optimism, near-term upside may remain capped unless margins improve further.
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Related Queries
- ✅ What is Motilal Oswal’s view on Tata Communications?
- ✅ How are data revenues shaping Tata Communications’ growth?
- ✅ Can digital services offset TCR margin contraction?
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
