Tata Communications Limited (NSE: TATACOMM) Q1 2026 Earnings Call dated Jul. 18, 2025
Corporate Participants:
Unidentified Speaker
A.S.Lakshminarayanan — Managing Director & Chief Executive Officer
Kabir Ahmed Shakir — Chief Financial Officer
Analysts:
Unidentified Participant
Sanjesh Jain — Analyst
Aditya Suresh — Analyst
Vibor Singhal — Analyst
Presentation:
operator
Good afternoon everyone and a warm welcome to you all. Thank you for participating in the Q1 FY26 earnings call for Tata Communications. My name is Sudeshna Patnaik and I’ll be your host for the call. We are joined by our MD and CEO, Mr. Amol Lakshmi Narayanan and our CFO, Mr. Kabir Ahmed Shakir and our Head of Investor Relations, Mr. Rajiv Sharma. The results for the quarter ended 30 June 2025 have been announced and the data pack is available on our website. We will begin today’s call with opening remarks from Lakshmi on the business performance and the outlook followed by Kabir on the company’s business financial performance.
All participant lines will be muted for the duration of the call. There’ll be an opportunity for you to ask questions after the management remarks. Some of the statements made in today’s call may be forward looking in nature and are subject to risks and uncertainties. The company does not undertake to update these forward looking statements publicly. With that I would like to invite Lakshmi to share his views. Thank you. And over to you Lakshmi.
A.S.Lakshminarayanan — Managing Director & Chief Executive Officer
Thank you Sudeshna. Let me begin by welcoming you all to the Q1 FY26 call. Our overall revenues came in at 5,960 crores, a 0.5% Q on Q D growth and a 6.6% year on year growth primarily impacted by the SARC region and the onerous deal exit. In TCTS data Revenue grew by 9.4% year on year. EBITDA grew by 1.3%. Q on Q and Rupees 1137 crores. EBITDA margin came in at 19.1% an improvement of 30 basis points. Q on Q on the order book. Happy to share that. We have a good start to the year and our order book is up.
A healthy double digit Q on Q. The growth is robust across India and also the international regions. Our funnel continues to be healthy and well diversified across the core and digital services. We won one of the largest multimillion dollar captive SOC deals in India. The deal involves the establishment and management of a full fledged captive SOC and the implementation and integration of multiple advanced security tools and other complementary security solutions. We also won a multimillion deal from a leading technology player for diverse network connectivity solutions for their APAC to Europe Americas DC DC connectivity. He also won an order for a greenfield Wi Fi 6 network deployment for a global battery player at the new factory location in India.
Data revenue in Q1 is at 5,130 crores, 0.7% Q on Q growth and 9.4% year on year. Core connectivity business came in at 2,620 crores, a sequential decline of 1.4% Q on Q and an increase of 2.7% year on year. Core continues to be impacted by the SARC related issues. Digital revenues came in at 2,510 crores, increased by 2.9% Q on Q 17.4% year on year. The growth was broad based and all parts of the digital portfolio reported a healthy double digit year on year growth. Next gen connectivity, Cloud and Security fabric reported upwards of 25% year on year revenue growth.
Our interaction fabric has not only seen a healthy growth in enterprise segment. Even the share of non SMS traffic, invoice and other channels continues to see growth, a long term trend which we have been highlighting for several quarters. We are taking a critical view of the margin profiles of all the CIS deans and that has resulted in improvement in NR margins for the digital portfolio. This quarter Media segment stood out on quarterly performance basis with 11% Q on Q growth and also recorded the highest ever ACV. This quarter we signed a multi year deal with a prominent broadcaster in India for the playout services.
This would be leveraging Tata Communications media platform for multiple live sports channels. To sum up, we are happy with the progress that we are making across our portfolio. We believe that there is immense white space and we have the right capabilities and we are making the right investments to address the same. Now let me hand it over to Kabir for a detailed discussion on the financial results.
Kabir Ahmed Shakir — Chief Financial Officer
Thank you Lakshmi and welcome all for this call on our financial performance. Q1FY26 revenue growth came in at 5,960 crores, degrowth of 0.5% quarter on quarter and a growth of 6% 6.6% year on year. Normalizing for Forex impact. The revenue DE growth is 1% Q on Q and improved by 4.3% year on year. Data revenue for the quarter came in at 5130 crores, growth of 0.7% QQ and 9.4% year on year. Digital revenues for the quarter came in at 2,510 crores, growth of 2.9% quarter on quarter end healthy 17.4% year on year. It is encouraging to see all parts of the digital portfolio trending at healthy double digits.
This reflects our digital fabric participation expanding to multiple wallets inside the customer environment. While core connectivity revenues declined this quarter, our core connectivity continues to grow and outgrow the market growth. EBITDA for the quarter came in at 1,137 crores, up by 1.3% quarter on quarter and flat on a year on year basis. Our EBITDA margins for the quarter were 19.1%. EBITDA margin improved as digital losses have narrowed and subsidiaries are doing better. This is in line with our broader strategy to get digital business profitable over the medium term. Overall data EBITDA margins came in at 17.2% down 30 basis points quarter on quarter impacted by decline in core connectivity revenues.
The PID for the quarter came in at 232 crores. Net debt at the end of Q1 is 10,124 crores. Net debt increase is due to the working capital effects that you see in Q1. Normally cash capex came in at 633 crores. FCF for the quarter was minus 621 crores on a year on year basis. FCS was impacted by capex investments this quarter in AI, cloud and tax refunds that were there in Q1 of FY25 which are not there this quarter. Net debt to EBITDA stands at 2.2x. ROCE came in at 15.4% and ROC as you all know is based on a 12 month rolling numbers on the subsidiary performance.
TCGS revenue came in at 197 crores, declined by 33% Q on Q and a 29% year on year. This was primarily due to the impact of the settlement in case of an onerous contract exit that we already announced earlier. The structural actions taken together with the exit of the onerous contractor is reflected in the EBITDA margin improving to 23.9% and improvement of 1200 basis points quarter on quarter and over 1500 basis points year on year. Our focus continues to be around improving profitability and creating capacities across the organization for capturing future growth. The multiple interventions undertaken in FY25 allowed us to free up the balance sheet enabling us to multiply resources to capture growth and our focus remains intact.
Let me now ask Sudeshna to open the forum for Q and A.
Questions and Answers:
operator
Thanks Kabir. We’ll wait for a minute for the question queue to assemble. Interested participants may click on the raised hand icon at the center bottom of the pane on WebEx application to join the Q&A. The first question is from the line of Sanjay Chen Sanjesh, you have been requested to unmute yourself.
Sanjesh Jain
I hope you can hear me right?
A.S.Lakshminarayanan
Yeah, yeah, thanks.
Sanjesh Jain
Thanks. A few questions first on the first thanks for the opportunity. Few questions on the CO connectivity side. It’s been 34 quarter we have been trending between 2 to 3% earlier Red Sea, then cable Card and now the SARC region. Can you help us understand really what’s happening in the SARC region and what has been the growth in the segment X of sarcastic now why is it important is that I think globally this segment has been declining. We have been doing quite well in this segment with a 5% growth for last few years. This is the only year where I think the CO connectivity has shaken up in terms of growth.
So just curious to understand what’s happening in the segment and are we still confident of achieving that profile? Can the first real estate group.
A.S.Lakshminarayanan
Yeah Sandesh, as you rightly said the core connectivity has had impact all through last year because of the cable cuts and they recover and then the SARC issues are hitting us now. So if I take the SARC issue out our data center data center connectivity wins are there some of the wins? We are under implementation and we will see the revenue coming in in the later part of this year. Even now in my commentary now I just mentioned about when in the data center data center connectivity space. So there are opportunities. We still believe that the low to mid single digit growth in core connectivity is possible.
In fact we are doubling up our efforts there and examining on the back of in the last four years in BFSI segment we have grown very well as we call out in the IR day we’ve nearly doubled and we’re looking at all the hotspots in the BFSI space and see what we need to do. So there is a lot of focus on the core connectivity because we see that there is market opportunity and it also gives us the margin cushion that we need to continue to invest and grow the the digital business.
Sanjesh Jain
And what exactly is the SARC issue?
A.S.Lakshminarayanan
The SARCAs. Yeah, I mean we all know that they are going through various issues economically and otherwise. So there have been payment delays as a result of which we have stopped doing business. There are issues of non payments that are there. So a combination of many of these is what is hitting us. So that is a sensitive region and we are very carefully navigating to ensure how much service we provide and what we can collect.
Sanjesh Jain
That’s clear. But what’s happening on the NR margin? It’s come down by 200 basis point in last 45 quarters. I can understand revenue. I thought cost was more because cable cut was there. I think cost continues to inch up in the direct in the CO connectivity, what’s happening there?
A.S.Lakshminarayanan
It’s the same issue in terms of not being able to collect and therefore we have to provide for that.
Sanjesh Jain
So it’s the provision and not really the.
Kabir Ahmed Shakir
Two aspects to it. One provision actually comes below NR for NR itself. The SARC region is a high margin thing. So when that high calorie revenue comes out, the weighted average effect on the mix comes down. So a core connectivity as a whole we have on net and off net. I mean on net obviously is like 100% margin because all the costs are depreciation and they come below EBITDA and OFFNET is where we pay the last mile and, and other carriers that when we stitch up the solution. So that’s the weighted average mix and most of the SARC regions are all completely on net.
So therefore the weighted average maths works completely against you when that high margin business drops off.
Sanjesh Jain
So it’s simple that how much the revenue lost is equal to the net revenue lost. Right,
Kabir Ahmed Shakir
that’s one of them. And also seasonally you have renewals that come through and there is, you know, there is the churn and the price, you know, impact that happens through the renewal cycles, which is, which is biu, you know that, that goes through as well. So there are combination of those factors.
Sanjesh Jain
Okay, now that’s clear. And then this issue is done because I think SARC revenue largely should have been now factored in the base quarter from next quarter onwards. Sequential growth should be there for the. Would that be a fair assumption?
Kabir Ahmed Shakir
Yeah, large part is done, I would.
A.S.Lakshminarayanan
Say still have some.
Kabir Ahmed Shakir
Yeah, we still have, you know, a few continuing businesses there. We are watching very, very closely, you know, as to, as to their collections, you know, as well. And we need to be sensitive to it. So it’s a combination of multiple things. You know, Sanjish, the economy itself has forex pressures, right. And so therefore we need to carefully navigate that.
Sanjesh Jain
That’s, that’s pretty much clear. But congratulations on your digital business. I think this is the first quarter after probably few quarters where we have seen all the five segments or four segments firing quite well. What’s going. Right. We have good order book which is now getting executed and it across the value chain and we should see this trend sustaining for a while, right.
A.S.Lakshminarayanan
Sanjish? I think the, you know, I don’t think that we have done anything differently, Sanjish. I think the investments and the focus continues to be there but in the, in the digital portfolio there are some lumpy elements. When we talk about some of the you know the SOC deals and other deals that we talked about, there are lumpiness in that. So I think reading too much into quarter on quarter would be. I mean that is always what we have been saying. But overall we think that across the portfolio there is good traction and the relevance with all this portfolio is only increasing is what you would say.
Sanjesh Jain
You called out so many order book this time Lakshmi. Does that give more confidence on the order book building and revenue growth sustaining?
A.S.Lakshminarayanan
Yeah, the order book has been, I mean I don’t know whether it’s anything seasonal. In our business there is nothing much seasonal as far as order book booking goes. In the last year Q1, Q2 also we had some good order booking and then we have been building up the funnel and Q1 this year we have done good order booking as well and the funnel is also quite good. So no, I think it’s again a testament of our engagement with customers and increasing participation in deals is what I would say. Yeah, overall that is what is giving us the confidence to keep saying that we are in the right direction.
Sanjesh Jain
Lakshmi, when you say double digit growth, is it fair to assume that the order book has grown upwards of 20%?
A.S.Lakshminarayanan
Double digit is in general great when 10% but in this case I would say a healthy double digit.
Sanjesh Jain
So we take it about 20%. Right?
A.S.Lakshminarayanan
A healthy double digit.
Sanjesh Jain
Got it. Just two bookkeeping question last from my side. One on net date this time working capital seasonality appears to be quite steep. Generally it is 200, 300 crores of net debt increase we have seen in the Q1. This time around it has been 750 crores. Any different we have seen in this quarter there’s a much more, much higher intensity of the working capital consumption which has happened in Q1. Can help us explain that and, and also TCPS. What’s the game plan for that?
Kabir Ahmed Shakir
Yeah, I’ll. I’ll answer the working capital and I’ll hand over back to Lakshmi for tcts. Working capital has been a combination, you’re right. Seasonal, you know, Q1 renewals, you know and getting POS from customers and billing, you know that’s always been the nature of the beast. Plus this time there have been about 5, 4, 5, 10 key accounts where the credit period, you know, has been, you know, extended. So that was as a result of that almost 210 crores worth of billing was still in the not due bucket. So it was not due for payment.
And that is the reason why you see that change in working capital. Why don’t ask Lakshmi to talk on tcts.
A.S.Lakshminarayanan
So tcts, we’re very pleased to see the turnaround. Firstly on the margin profile, I think the discipline approach of now looking at the right deals to go after is paying dividend. Also our international component of the revenues is growing faster and higher than the India component and they are developing capabilities across wireless and wireline domains to serve the telcos. We also see quite a lot of work using AI in terms of their tooling and services. We see some of the synergies of the services of tcts and what tatacom takes to the market. So all of them are playing out quite well.
Sanjesh Jain
Thanks. Thanks Lakshmi. Thanks for all those answers and best of luck for the coming quarters.
Kabir Ahmed Shakir
Thank you.
A.S.Lakshminarayanan
Thank you.
operator
Thank you. Sangesh. The next question is from Aditya. Suresh. Aditya, you have been requested to unmute yourself. Please proceed with your question.
Aditya Suresh
Hi. Thank you for the opportunity. So the first question really was on the auto backlog and so thank you for providing those comments. I was just hoping if we could get some tie back to revenues. Right, so we have the backlog growth. Is there any things you can comment about visibly providing us a bit more visibility on the revenue outlook in itself? Maybe recurring revenues or how this kind of backlog is going to be executed over X number of years, so on and so forth.
A.S.Lakshminarayanan
So Aditya, one of the reasons why we don’t give out the actual numbers of the order book as others do is precisely because of the difficulty in time bath very clearly. I just want to give you some examples. I think I said last year in Q1 we won a very large deal, one of the largest in the core connectivity space and we will just be seeing the first revenues coming through in the later part of this year. So It’s a good 18 months time before we would see that There are some order books where as I said it has a higher component of one time charges and the lumpiness and there are order books which are more on the recurring nature, a combination of one time and the recurring nature.
And the third aspect of it is the usage business where we take a proxy order and then it actually based on the monthly recurring revenues that we get, sometimes the proxy approximately approximation is right, sometimes the proxy approximation is not so right based on the usage that eventually happens by the customer. And we are tightening the proxy algorithm to say how do we get to the right proxy number so we can have a more committed view of the order book. These are all the moving parts within the various parts of the business based on usage based on different fabrics and that’s the reason why, you know, we don’t give that breakout.
Aditya Suresh
No thanks. Thanks for that clarification, Lakshmi. But it would be fair to say that this large hyperscale order which you all have called out previously as well, that’ll basically be to boost the revenue in core connectivity. Would that be correct?
A.S.Lakshminarayanan
Yes, that is right. Yeah.
Aditya Suresh
Okay. And is it also fair to call out that core connectivity in India is growing faster, faster than your overseas operations?
A.S.Lakshminarayanan
Yes, that would also be right. But I wouldn’t hazard a guess. I haven’t looked at it that way.
Kabir Ahmed Shakir
No, Aditya generally. Right. Especially in this quarter because some of the SAG billing happens through PCL and some of them happens through tcipl. Right. So in a normal basis, if you actually look at it historically, you’re absolutely right. India has been growing while, you know, had the declining, you know, trend per se. But now with DC connectivity, you know, and all of those things, we are seeing those dynamics, you know, slightly change and there may be certain, you know, you know, issues very, very specific to, you know, you know, to us on the core connectivity part, which may have a very different in the short term.
But largely you’re right that India is where we will see the growth coming through. And especially now with AI, cloud and all of those things, we are quite, I would say, confident of getting them to the low to mid single digits, as Lakshmi said, clearly driven by India.
Aditya Suresh
Thanks, Kabir. And then for the next gen business, and then also cloud growth here seems to have accelerated in the past two quarters. In particular now when I was looking at some industry reports, it seems that space of growth is norm. So therefore there’s some merit to thinking that maybe the space of growth can contain, can continue. Would you agree with that comment? I mean, again, it just seems like a lot of the investments which I’ll be making is in the space. Thematically there seems to be a good alignment. The cloud business again is an area where you guys are focused on.
So I just want to see, do you all have any, do you have much visibility in the fact that this business could grow maybe at 25, 30% or low visibility? We’ll see how it goes.
A.S.Lakshminarayanan
We have some visibility. So these two are different. The next gen connectivity, the drivers are very different from the time we book the order to time we deliver in the international markets. So for example, xcent connectivity includes our Isovan. And when we get an order for a global deployment for let’s say 200 sites, customer would phase it out by region. So the realization of the revenue is really in the hands of the customer at the speed at which they want to implement. So the conversion speed varies based on customer to customer and therefore even if you book the order the realization of the revenues is not very exactly predictable is what I would say.
But the opportunity, especially now also the Wi Fi 6 and LAN solutions are also part of the next gen connectivity. We see quite a lot of upside. I mean I did call out one of the deals that we won in the Wi Fi 6 phase and we’ve been saying that the LAN and the WAN will converge and that is where we see the opportunity to come the other on the cloud side. I mean the cloud and security is how we together report this time around. It’s more around the largest security deal that we won. But to the question on cloud and security we do believe there is, there is market and there is room for growth consistently in this space.
Aditya Suresh
Thanks Ashmi. And just one, one final bit was on the, the digital portfolio, the margins there. Now my understanding is that this is going to be the, the, the moderation losses and then the paths towards a positive margin is going to be driven by one is kind of just scale of operations and two is potentially any discretionary actions which you’ll take. So is there anything which you can provide in terms of maybe a scale of revenue which you need to kind of get to all is equal which would get you on this journey from minus, let’s say 10% margin towards zero.
A.S.Lakshminarayanan
It’s not only the scale, you’re right, the operating leverage comes from the scale but there are levers to get the cost down as well as we, you know, implement some of the AI for even you know, product code development and other areas. The second is also the mix within the product. So for example, if you look at our interaction fabric as we move more into non SMS revenues into voice, particularly the programmable voice and rcs, we believe the margins would grow both at the NR level and therefore fall through to the contribution margin and the EBITDA numbers.
So the levers are efficiencies within each of the business units. Second is the scale and the third is the mix. Within that portfolio itself there are things that we can do to, to deliver a more healthy margins.
Aditya Suresh
Thank you Lakshmi. Thank you Kabir. All the best.
A.S.Lakshminarayanan
Thank you.
operator
Thank you Aditya. The next question is from Vibor Singhal. You have been requested to unmute. Please proceed with your question.
Vibor Singhal
Yeah, hi, thanks for taking my question and congrats. Very solid performance in the we all been waiting for with the kind of that we’ve Delivered this quarter.
A.S.Lakshminarayanan
So I think your voice is coming a bit muffled. There’s some background noise or disturbance in the line.
Vibor Singhal
Better now?
A.S.Lakshminarayanan
Somewhat. Yeah.
Vibor Singhal
So yeah, so thanks for taking the question and congrats on a very solid performance. So just checking on the cloud business again. The cloud business here, if you see, seems to have been doing well for us. You mentioned that in this quarter the growth was probably driven by the security deal that we had that has started execution. But. Do you believe the cloud business, which is predominantly India for us, is there some kind of a change at the ground level that we might be seeing in terms of, let’s say, more adoption of cloud and more clients forthcoming in that sense, which could probably sustain this growth momentum or anything that you could talk about the headwind or tailwinds that you seek in this specific vertical.
A.S.Lakshminarayanan
So as the numbers are, as I said, and I repeat, it’s cloud and security put together. But specifically the question on cloud, how do we see the market? We definitely believe that there is a market for private cloud such as ourselves, which is where certain workloads can go to this cloud as opposed to a hyperscaler cloud to deliver the right value for the customers. And that is what we are targeting. I think that overall cloud migration there is much more applications that are waiting to go to the cloud and that is where we see the upside for us.
So we are targeting across all the enterprises and also the public sector opportunities.
Vibor Singhal
Right. And what would be the kind of enterprises that we are targeting in this kind of a cloud migration business? I mean a typical. Are they majority of them BFSI or do you see more retail or D2C companies also coming in force? Just a color on what kind of clientele would make up for this cloud opportunity that you’re talking about.
A.S.Lakshminarayanan
This is fairly across the board for us. We have set up a cloud for BFSI customers which we call as a fin cloud that complies with all the RBI regulations. We do have customers in the manufacturing space, we have customers in the logistics space. So we have fairly a distributed base of customers on our cloud.
Vibor Singhal
Right, right. Got it. Thanks Lakshmi. Just some more color on the CPAAS business as well. CPAAS business seems to be turning the corner. I think last year we had talked about the overall market being driven by the two leading players focusing more on profitability. Is that the trend that we have seen still? And we expect that to continue in upcoming quarters or there is some more focus on growth or let’s say profitable growth returning to the industry?
A.S.Lakshminarayanan
No, we know as I said industries also, they recognize that can’t be erased to the bottom. So there is that recognition which is augering good for everybody else. We are very focused on a very profitable growth. In fact, this quarter, as Kabir called out, we cut down on some of the revenues in order to see how we can make it more profitable and our efforts would be that. And secondly, as I said, as we move across other channels, other non SMS channels, the profitability will grow as well. And third is obviously which we haven’t talked much about, is the intelligence layer where we can bring a lot more of platform and software capabilities.
That is a big upside that we are in very, very early stages there and that’s where our focus and investments are.
Vibor Singhal
Got it, got it. Thanks for that. Lakshmi Kavi Just two questions from my side. The digital business has grown almost 17% kind of growth Y&Y for the past two quarters. Given the target that you had outlined in the analyst meet about taking this business to first to a breakeven and then to a positive margins, do you believe the 17% growth is basically a good growth for you to basically chart out that trajectory or in your opinion you would need slightly higher growth for this business to basically, basically move the trajectory that you are expecting margins to take profit?
Kabir Ahmed Shakir
Well, firstly, as you all have observed, this is a quarter, first quarter where all engines have started to fire. And as Lakshmi said, it’s not something magical that we’ve done this quarter. We just been consistent, you know, at it in terms of our input and effort and focus, you know, and this quarter I started seeing, you know, that that benefit come through. Am I happy with 17? Yes. You know, would I want more? Absolutely, yes. I think this is a business which needs to be looking at 25 to 30% kind of growth and that’s the kind of potential that that exists.
But at the same time, as Lakshmi called out, we are making that calibrated effort. CIS in particular, when we called out in our commentary, there were certain low margin deals that we chose not to renew and focus on a profitable growth. So had we continued with that renewal, then our growth would have looked slightly higher, about 2, 3%, even higher. But the margin profile and the NR would have tipped and EBITDA would have been probably flattish. So it’s a very calibrated view that we are actually taking tower by tower, sector by sector. And that’s how we are moving at Vibor.
If you have to say in some substance is the combination of this level of growth with this level of profitability, the Right. Move forward. Yes, I think that’s the focus that we have.
Vibor Singhal
Right, right. So if I were to just maybe peel the onion a bit more. Kabir. I mean I know there are multiple businesses in the digital, so every, but every business has its own peculiar characteristics in terms of profitability. But let’s say, if I were to, let’s say take an example of a cloud business or a media business, typically how it works in let’s say a technology company is that if growth comes in, your utilization increases and that automatically provides an operating leverage for basically margin expansion. I would assume a similar thing would play out in cloud as well.
But any other, I mean, are there similar levers that you see in let’s say media business also where growth automatically provides you that operating leverage and margin expansion opportunities?
Kabir Ahmed Shakir
See, there are three levers that we need to be cognizant of and it changes. And the weightage of the three, all three present in all businesses and the weightage changes. Yes, more volume coming through. There are elements of fixed costs that get applied over larger base. So operating leverage kicks in. Absolutely no point for guessing that the second element is also the mix of the profitable SKUs that we’re able to sell within itself. So if just doing an SMS to selling more value added channels, WhatsApp and RCS and more, and that drive and changing the mix of the business will also result in healthier margin profile.
And finally, I would say in businesses like cloud, when instead of just selling it, the moment we move from day one and day two service wraps as well and we give a complete holistic solution, that’s when the margin profile also will pick up and also the customer stickiness and our ability to really develop and grow with the customer also will come. So I would say all elements are important and they are important in all facets. If I double click on media, media will have elements of, you know we talked about the World Athletic deal last time as well.
So it has more pre and post that we can bring into the equation to be able to add value to the customer. So the nuances might vary, but yeah, there are three, four levers. Not just scale alone.
A.S.Lakshminarayanan
I think just to add to what Kabir said on the media side particularly, I think there are different types of opportunities in media. There are some, I mean the one that I called out in my commentary is a playout opportunity, a channel playout opportunity that works everything on our media cloud and that will have a different profile. The one where we are going into a new customer such as the World Athletics and beginning to manage the full value chain of the contribution, the distribution and the production. Now for the first time and that’s a five year deal, there will be some transitional elements that we will have in the first year before we fully transition to our production based technologies and so on.
So some of these profiles have different characteristics but I think Kabir gave you a broader picture.
Vibor Singhal
Yeah, pretty much. Lakshmi, I think that was a comprehensive answer. Just one last thing on Kabir, I missed your remarks about the increase in debt in this quarter. If you could just maybe repeat that. Was it due to some seasonality factor and do you expect that to come along in the coming quarters.
Kabir Ahmed Shakir
This quarter we had, you know, some investment on AI CapEx, you know as well and back to back and FCS was also sorry, I think this cross. But next quarter we have dividend as well. You know, let’s not forget that we have 700 crores of dividend payment that will be there next quarter. So you will see the improvement in net debt in Q3 onwards. I mean that’s the typical cycle that we actually follow. Q1 and Q2 has the stress in Q3 and Q4, the debt profile starts to get better.
Vibor Singhal
Got it. And in between if there is any action on the divestment or any other thing which is an ongoing excise then we might see some cash flows from.
Kabir Ahmed Shakir
Theta that I’m going to keep it completely outside. So any M and A activity buying on this one, I would like to keep it aside. We will. You know we had mentioned debt to ebitda coming under 2x that you know, with all things remaining same. You should see that coming to in the second half.
Vibor Singhal
Got it, Got it. Great. Thank you so much for taking my questions and wish you all the best.
Kabir Ahmed Shakir
Thank you Vibhu.
operator
Thank you Vibhu. To reiterate participants who want to ask their question, please click on the raise hand icon at the bottom pane. The next question is from Sriram Rajan Shreeram, you have been requested to unmute yourself. Please proceed with your question.
Unidentified Participant
Okay, thank you. Lakshmi, this is a question not specifically for the quarter but on your cloud business. A cloud is a fairly big market in India. It’s about say maybe four, five billion dollars. Who would you consider as competition? Would they say aws, Azure? They would count as your competitors or you have a different niche you’re operating in and what would be your differentiators?
A.S.Lakshminarayanan
Yeah, so on the cloud you’re right about the overall market size. See the nature of the private cloud and our differentiation comes from the fact. That. We have a very solid infrastructure as a service offering, we have some paas offerings which will not have all the bells and whistles that a hyperscaler public cloud would have. So we are targeting more those workloads in customers that are more stable in nature that doesn’t have the same elasticity requirements of saying it’s suddenly on a Friday it has to go up 200% kind of elasticity. So these are more stable workloads and we believe that for those stable workloads we offer a much better value proposition in terms of cost performance. The second is we offer a truly a unified proposition that we integrate our network and more importantly the security.
With hyperscalers, security is actually a responsibility of the customer, whereas when they work with us, we ensure that we make it completely secure for them. The unified nature of the service, including the network, cloud and security is another major key factor. Lastly, there are no hidden costs with us. We give them a more predictable cost and predictable performance. There are no build shocks with data egress costs and others that the customers. So these tend to be the key value propositions. Besides that, as I said, the more compliance with RBI regulations and the sovereign nature of our cloud are the key factors that the customers choose to work with us.
Unidentified Participant
Thank you Lakshmi. Very, very clear. Thank you.
operator
Thank you. This brings us to the end of the Q and A session. Balaji, I see that you just raised your hand. Balaji, I’m requesting you to unmute yourself. Please ask your question.
Unidentified Participant
Hi, thanks for the opportunity. Most of my questions have been answered. And congrats on the strong performance in. The digital portfolio piece. You know it would be helpful if you could just quantify what was the. You know, revenue impacts on the SOC related issue.
A.S.Lakshminarayanan
You don’t want to call out any customer specific issues because it’s a bunch of customers there. We can’t call out customer specific information. Balaji.
Unidentified Participant
Okay, sure. Thank you. And all the best.
Kabir Ahmed Shakir
Thank you. Thank you.
operator
Thank you. I would now request Lakshmi to please share his closing comments.
A.S.Lakshminarayanan
No, thank you all. It’s been quite a satisfying, satisfying quarter. We saw good data growth year on year, good digital portfolio growth as well as a tad improvement on the EBITDA margins. Had good order booking. Our funnel looks good. We have to just navigate the other conditions that are prevailing out there and we are very committed to keeping our heads down and executing on these. Thank you.
operator
Thank you Lakshmi. This brings us to the end of the call. In case of any queries, please Write to investor relationsatacommunications.com thank you for joining the call and you may disconnect your lines. Have a good day.