Why Is Macquarie Bullish on Tata Communications Despite Leadership Transition?
About Tata Communications
Tata Communications is a global digital ecosystem enabler with operations spanning data connectivity, cloud, security, IoT, and collaboration services. The company plays a critical role in global enterprise digital infrastructure, supporting hyperscalers, enterprises, and governments across more than 190 countries.
Over the past few years, Tata Communications has steadily transitioned from a traditional connectivity-led model to a data-centric digital services platform. This strategic shift is now translating into stronger growth visibility, margin expansion, and improved capital efficiency.
Macquarie’s Latest View
🔹 Maintain Buy recommendation
🔹 Target price at ₹2,210
🔹 Data business revenue CAGR of ~11% forecast over FY25–FY28E
🔹 EBITDA margin expected to expand by ~400 bps
Macquarie acknowledges the planned CEO transition but believes it does not alter the company’s strategic trajectory. Operational execution remains strong, with consistent improvement across growth, margins, and return ratios.
Data Business Driving Structural Growth
| Parameter | Macquarie View |
|---|---|
| Revenue growth | ~11% CAGR over FY25–28E |
| EBITDA margin | Expected to expand to ~23% |
| ROIC | Improving from ~12% to ~20% |
The brokerage highlights that operating leverage, improved service mix, and disciplined capital allocation are key drivers behind the sharp improvement in profitability and returns.
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|
Strengths
🔹 Data-led revenue mix 🔹 Strong operating leverage 🔹 Improving ROIC profile |
Weaknesses
🔻 Capital-intensive business model 🔻 Exposure to global enterprise spending cycles 🔻 Leadership transition risk |
Despite these risks, Macquarie believes the company’s execution track record and structural demand for digital connectivity mitigate downside concerns.
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Opportunities
🔹 Rising global data consumption 🔹 Cloud, IoT, and security services 🔹 Hyperscaler partnerships |
Threats
🔻 Pricing pressure in connectivity 🔻 Global macro slowdown 🔻 Technology disruption risk |
Valuation and Medium-Term Outlook
Macquarie views Tata Communications as a structural compounder, supported by sustained data growth, margin expansion, and a sharp improvement in capital efficiency. The brokerage believes the company is well positioned to deliver steady shareholder value over the medium term.
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Investor Takeaway
Derivative Pro & Nifty Expert Gulshan Khera, CFP®, believes Tata Communications represents a high-quality digital infrastructure play with improving profitability and return metrics. While leadership transition remains a near-term monitorable, the company’s data-led strategy and execution discipline support long-term positioning. More structured market insights are available at Indian-Share-Tips.com, which is a SEBI Registered Advisory Services.
Related Queries on Tata Communications
Why is Tata Communications focused on data services?
How important is ROIC expansion for Tata Communications?
Does CEO transition impact long-term strategy?
What drives EBITDA margin expansion?
Is Tata Communications a long-term compounder?
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.
