Tata Communications: Nuvama maintains ‘Buy’, raises target price despite muted Q1 FY26

Tata Communications Ltd reported a soft set of numbers for the first quarter of FY26, but Nuvama Institutional Equities has retained its ‘BUY’ rating on the stock. The domestic brokerage raised its 12-month target price slightly to Rs 2,020 from Rs 2,000 earlier, citing long-term growth potential in the digital segment.

In Q1 FY26, the company posted revenue of Rs 5,960 crore, reflecting a 0.5 per cent sequential decline but a 6.6 per cent increase year-on-year (YoY). The figure was broadly in line with Nuvama’s expectations. Data revenue rose by 9.3 per cent YoY, led by a 17.1 per cent growth in the digital segment.

The company’s consolidated EBITDA margin stood at 19.1 per cent, up 34 basis points (bps) quarter-on-quarter (QoQ), although down 125 bps YoY. Data margins for the quarter were at 17.2 per cent, down 31 bps QoQ and 210 bps YoY. Adjusted profit after tax (PAT), excluding exceptional losses, stood at Rs 250 crore, in line with the brokerage’s estimates.

However, reported PAT was lower at Rs 190 crore, impacted by exceptional items including Rs 20.44 crore towards staff optimisation and Rs 42.19 crore due to the sale of a subsidiary. Net debt rose to Rs 10,120 crore from Rs 9,380 crore at the end of Q4 FY25.

Nuvama noted, “We view the focus on the digital segment supported by healthy growth and margins as a step in the right direction. We continue to see Tata Comm as an exciting play, offering the best of both worlds — stability of telecom and growth potential of the IT services sector.”

Due to the exceptional loss in FY26, Nuvama has tweaked its earnings estimates, reducing FY26E EPS by 7.7 per cent and marginally increasing FY27E EPS by 1.6 per cent. The brokerage continues to value the Digital/Core/Others segments at EV/EBITDA multiples of 12x/9.5x/4x, respectively, based on FY27 projections.

“Management remains confident of expanding margins in the digital business via operating leverage, focus on profitable contracts and change in portfolio mix,” Nuvama added. It remains positive on Tata Comm’s long-term growth trajectory driven by a unique technology-cum-telecom positioning.

Meanwhile, shares of Tata Comm settled 1.89 per cent higher at Rs 1,764.45 on Friday.