Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.
Tata Communications Limited (NSE: TATACOMM) Q3 2026 Earnings Call dated Jan. 21, 2026
Corporate Participants:
A.S.Lakshminarayanan — Managing Director and Chief Executive Officer
Kabir Ahmed Shakir — Chief Financial Officer
Analysts:
Vibhor Singhal — Analyst
Aditya Suresh — Analyst
Sanjesh Jain — Analyst
Vineet Manik — Analyst
Balaji Subramanian — Analyst
Avnish Tavari — Analyst
Presentation:
Operator
Ladies and Gentlemen, good day and welcome to the Tata Communications Limited Q3FY26 earnings conference call. The results for the quarter ending 31 December 2025 have been announced and the data pack is available on our website. Please note all participant lines will be in the listen only mode and this conference is being recorded. We have with us from the management team Mr. Amur Lakshmi Narayanan, MD and CEO Mr. Kabir Ahmed Shakir, CFO Mr. Rajiv Sharma, Head of Investor Relations and Ms. Sudeshna Patnaik, DGM Investor Relations.
We will begin the call with opening remarks from Mr. Lakshmi Narayanan on the business performance and outlook followed by Mr. Shakar on the company’s business and financial performance. Post that we will open the floor for questions in the event that the management line drops. We request participants to stay connected while we reconnect them to the meeting. Please note 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.
I now hand the call over to Mr. Lakshmi Narayanan. Over to you sir.
A.S.Lakshminarayanan — Managing Director and Chief Executive Officer
Thank you. Good evening everyone. You would have seen the announcement that the Board has approved the appointment of Mr. Ganesh Lakshman as the CUMD designate subject to regulatory approvals on my retiring in April. I congratulate Ganesh and wish him with every success. It’s been a privilege to steward the company through a phase of transformation, strengthening the digital fabric, increasing our customer relevance and building a platform poised for growth and long term value creation. As we progress through the remainder of the year into April, my focus remains firmly on execution and continuity.
This quarter’s performance reflects not just delivery in the moment, but the resilience and strategic optionality we have deliberately embedded into the business for the next phase of growth. This quarter we acquired a majority stake in Commotion, a leading AI native enterprise SaaS platform. Adoption of the platform within both products and processes will accelerate the AI integration across the digital fabric. In CIS Commotions, strong capability integrated with Calera channels will be a powerful proposition.
The platform is natively secure for enterprise usage and runs on our VAYU cloud. With this we aspire to be a full stack AI platform provider with best in features and prices globally. Deep diving into the quarter performance we are very pleased by the growth momentum coupled with with the margin expansion that we’ve been able to achieve, we are seeing a momentum across the data business driven by Core Connectivity as well as Digital Portfolio. Our overall revenues came in at rupees 6189 crores up 1.5% Q on Q and 6.7% year on year.
EBITDA grew by 4.6% Q on Q and 4% Y on Y to Rs 1228 crores. Overall EBITDA margins came in at 19.8% and improvement of 60 basis points Q on Q. I’m very pleased to share that we had an excellent order book this quarter with very healthy double digit Q on Q and Y on Y growth. A large part of this order book growth comes from Core Connectivity on the back of a deal with one of the largest OTT content providers. To add more color to the deal, we’ll build an India leg of a major global subsea build spanning five different continents.
Our funnel remains robust and about 70% contributed by digital Portfolio. We continue to be making progress with our deeper with fewer strategy as we are seeing a steady uptick in the number of million dollar customers during the year especially in the 10 million plus category. Coming to our financial performance data, revenues grew by 3.5% Q on Q and 9.3% year on year. Core connectivity business came in at rupees 2,700 crores up 2.4% Q on Q and 4.2% YNY. The revenue growth in Core is driven by the implementation of more than half the large hyperscaler DCDC connectivity deal that we had announced earlier.
Digital portfolio at 49.6% of data revenues is up 245 basis points year on year and is in line with our strategy to drive relevance quotient. Digital revenues came in at rupees 2,659 crores, increased by 4.6% Q on Q and 15% year on year. The growth was driven by Interaction Fabric and Cloud and Security Fabric on the back of some large deals and benefited from usage driven seasonality. Interaction fabric which comprises 52% of the digital portfolio reported a growth of 10.4% Q on Q and 17.9% year on year.
We see a steady uptick in the non SMS business in the cis. In the new vents this quarter Media Business has seen a degrowth of 16.6% q on q and a growth of 1% year on year. NextGen connectivity has sequential growth of 3.9% q on q and 17% q. Year on year we won an ISOVAN deal for a large global wine company in France. For a large international airlines, we have been awarded a network transformation deal for 14 countries. Deals such as these are helping us push our challenger positioning in the international market.
Cloud and Security Fabric reported A growth of 9.4% Q on Q and 18.9% year on year we have a marquee win in the security portfolio. We have won a large strategic deal for managed SASE with a large public sector bank in India. The strategic Network security transformation involves a comprehensive set of use cases including secure Internet access, private access, advanced data protection and zero day threat protection. We are seeing several large PSUs and government entities planning a transition to unified SASE stack and this deal places us well to pursue further such opportunities.
It’s heartening to see that both next gen cloud and security and media have grown 25%, 19.6% and 15.1% year to date and better than their five year CAGRs move and IoT fabric reported a decline of 4.3% Q on Q and A growth of 5.5%. Year on year we had a significant uptick in the IoT revenue, albeit on a small base. One large steel company is deploying our SafePass Connected Worker solution. The solution enables real time monitoring and enhanced worker safety across the plant. To conclude, I’m happy to see that data and digital portfolio are gaining momentum.
The strategic bets that we had called out Thread Span, Commotion, Global, AI Stack, edp, AI Cloud and the mcc MCN and some of these have already been launched and are seeing several customer pilots and few will be launched over over the next couple of months. Capability shift within the companies in both products and processes is becoming very evident. We are very well positioned to build on this foundation with discipline, clarity and ambition. I remain confident that the company’s best chapters will be written with the strength of its people, its partnerships and the trust of its shareholders.
Thank you and over to you.
Kabir Ahmed Shakir — Chief Financial Officer
Thank you Lakshmi. Let me take you through the Q3 financial performance this quarter which reinforces a pattern of continuous improvement with incremental gains in growth and margins flowing from better capital allocation, operating leverage and raises our portfolio focus momentum across data revenue as both Core and Digital are participating in growth this quarter. Q3FY26 revenues came in at INR6189 crores, growth of 1.5% quarter on quarter and growth of 6.7% year on year. Normalizing for forex impact, the revenue growth is up 0.5% quarter on quarter and 2.2% year on year.
Data revenue grew at 3.5% quarter on quarter and 9.3% year on year. Core connectivity revenues grew by 2.4% quarter on quarter and 4.2% year on year. Digital revenues grew by 4.6% quarter on quarter and 15% year on year. As we look ahead, incremental growth will come from a number of strategic breadths that are being commercialized. We will begin to talk about these launches progressively over the next few months. Net revenue came in at 3477 crores growing at 1.9% quarter on quarter and 4.3% year on year.
Overall net margin improvement improved by 20 basis points sequentially to 56.2% driven by core connectivity. EBITDA for the quarter came in at INR12.28 crores up by 4.6% quarter on quarter and 4% on a year on year basis. Our EBITDA margins for the quarter were 19.8% and improved by 60 basis points year on sorry quarter on quarter. EBITDA margins have been on an upward trajectory since the fourth quarter of FY25 and the 110 basis points improvement in EBITDA margins over the past three quarters reflects the inherent momentum and our commitment to our ambition of 23 to 25% date data.
EBITDA came in at 1013 crores up 5.1% quarter on quarter and 7.7% year on year. We are happy to note the improvement in data ebitda margins to 18.9% up 30 basis points year on year. As data growth improves further with the rollout of new products, we will see margins be benefiting from operating leverage. PAT nearly doubled quarter on quarter and came in at rupees 365 crores and 42.3% on a year on year basis. PAT benefits from interest in income tax refund this quarter. We are also taking a provision for labor code of 61 crores which is reflected as an exceptional item.
Net debt for the quarter stood at 10,080 crores net lower by 11%. Q on Q net debt to EBITDA came in at 2.16x from 2.45x the previous quarter. In FY16 we invested in a telecom innovation fund and during this quarter we monetized this investment and recorded gains in parallel. We continue to deploy capital into innovation led opportunities aligned with our long term strategy. Our commitment to funding innovation remains structural and independent of individual monetization events. Our fit to grow model is enabling us to deliver profitable growth while consistently reinvesting back into the business.
FCF for the quarter came in at 1050 crores, up 3.9x quarter on quarter. The increase was driven by improvement in working capital and tax refund in this quarter. Cash capex for the quarter is at 575 crores. Rosie came in at 14.4%. Our ROCE is based on 12 month rolling numbers. ROCE is negatively impacted by TTCR costs in Q2 and the continued investments in STT. We believe that ROCE has now bottomed out and with margin expansion momentum we expect casual recovery over the next few quarters. Coming to subs and real estate, the revenues for the quarter were down by 11.3% quarter on quarter and 5.6% year on year.
TCTS revenue came in at 191 crores, down by 27.8% quarter on quarter and 25.5% year on year. We exited from a low margin contract and that has impacted revenue this quarter. TCT’s EBITDA for the quarter came in at 42 crores and EBITDA margins came in at 22.3%. With our continuous subsidiary review, we restructured the operations for TCTS over the quarters and now the business is global. With a larger focus on international clients. We’ve been able to turn around this business to healthy double digit margin in just under two years.
TCR revenue came in at 217 crores, up 7.3% quarter on quarter and 27.3% year on year. TCR EBITDA came in at 112 crores and EBITDA margins came in at 51.6%. An improvement of 7.5% quarter on quarter end but down 21.1% year on year. With both core and digital contributing to growth and upward trajectory in margins is driving the overall momentum, this builds the right platform to drive future growth. I will now ask the operator to open the forum for Q and A.
Questions and Answers:
Operator
Thank you very much sir. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may click on the raise hand icon from the participant tab on your screen. We request participants to restrict to two questions and then return to the queue for more questions. To rejoin the queue, you may click on raise hand icon. Again, we will wait for a moment while the question queue assembles. We take the first question from Mr. Vibor Singhal, so could you please unmute your connection and you may ask your question now?
Please go ahead sir.
Vibhor Singhal
Yeah, hi. I Hope I’m audible.
Kabir Ahmed Shakir
Yes. Yes.
Vibhor Singhal
Yeah. Thanks for the opportunity and congrats on a solid performance, sir. So Lakshmi, wish you all the best. And basically, so my question was basically on the, the growth that we have seen in this quarter, I think, I think we’re consistently now reporting kind of double digit growth in the digital business. Of course the breakup of that continues to vary across different verticals. So do you feel that the mix that we have at this point of time in terms of the CIS business and cloud and media, this kind of a trajectory of double digit growth is sustainable over the coming quarters and we could probably up that bit also in coming quarters and specifically on the media vertical, we saw a sharp fall in this vertical on a Q on Q basis.
I don’t know, I’m sorry if I missed your open. If you mentioned something about that in your opening remarks but if you could elaborate, it’s fallen from 390 crores to almost 312 crores in the last two quarters itself. So any color on that? And when do we expect this to get back? And then I’ll have a couple of follow up questions for Kabish.
A.S.Lakshminarayanan
Thank you Ebor. So talking about the digital growth. I. Think there is immense potential in all of the portfolios, our focus on the next gen connectivity and as I called out in the commentary, the NextGen connectivity has existing products, some of it we recently launched and some we are going to be launching even later this month on the multi cloud networking. All of them are seeing very, very good traction. So that definitely has a potential to grow at the current or even increased rates. Similarly on the cloud and security.
With. The investments we are making on the AI cloud, AI studio, strengthening our Y cloud proposition, all of that have good potential. And again end of the month we are launching the Edge distribution platform which is a solution similar to what Cloudflare has. It aims to protect those applications which are web facing for our enterprises with a very low latency and a high performance is what we will be offering. So that portfolio also has a lot of legs to grow. Coming to the CIS portfolio, we think that can definitely grow double digits.
Our aim is to expand beyond SMS channels because the SMS channels the margins are still not very good. So we are launching the voice RCS and WhatsApp. All of these have been launched in different markets and we are seeing good progress being made. So that would expand more importantly the capability that I called out with commotion when integrated with these channels, with voice, AI and agentic capability to deliver better experiences if our customer is Looking at marketing campaigns to acquire customers or to serve their existing customers.
All of that can be handled through a very unified platform of agentic AI, voice AI running on Vayu cloud serviced by our own channels. That again has a lot of potential to grow in good double digits media. Also if I look at the production capability, the Media Edge platform, which we call as a media ecosystem, those have excellent potential to grow. This quarter has seen a slowdown largely because of the World Athletics which that event concluded and that was a fairly large contributor of revenue.
But over overall in the long run. We think. That would grow. And end of the month we also will launch threatspan, a product that spans the LAN Wan cloud and security to bring a much more simplified management for enterprise customers. So all of these products will have a lot of leg to grow on the move in IoT. Our focus is going to be largely to get this business back to profitability. So we will bet on that more to turn to profitability than to emphasize the growth on that. So largely that is how I would see in the mix of digital portfolio.
Vibhor Singhal
That was really helpful on the collaboration in CIS vertical now since it forms almost more than half of our digital revenue. I think we’ve seen a very good growth in all the three quarters of this financial year. Last year we know that in the CPAAS business there were a lot of pressure on the top line as the global, the global players had also kind of got their volume, they were struggling for volumes in search of profitability. Do you think that phase is behind us now? And going forward CPA’s business specifically can continue to grow?
And again on the media business, given that we’ve reached a 300 crores of kind of top line in this quarter with the completion of the World analytics event, do you believe that this is the normal run rate or do you believe in the absence of an event like World Athletics we can probably take it up from current levels? Also given the kind of initiatives that. We are taking
A.S.Lakshminarayanan
On the, on the, on the CIS business, I think the growth drivers, as I called out, you know, the SMS world over is growing in 10 12%. I think we will be careful to focus our business on enterprise segment and look at profitable deals there other than growing that at any cost. But as I said, there are other channels such as voice RCS which has got potential and that has got much headroom. Adoption has been a bit slow in the market. So in the long run we believe the other channels will start to grow well and as I said, the pull will be from the AI platform that we talked about and that will ensure that we can elevate our conversations to outcomes to our customers to be able to do their sales conversions or to be able to deliver a better service.
And with the world leading voice AI that the platform offers, all of that offers a great potential. But do remember that in CPAAS today the SMS portion is a very large chunk. The newer portions are smaller to begin with, but that’s where we will see much of the acceleration coming from. So that’s as far as the. And the second big growth driver for us in the CIS business will also. Be. On the contact center side of the business where we launched a product called tx, which essentially sits on top of some of the existing contact center products.
Whether it’s Genesis or Cisco or even aws, it can sit on top of that and essentially help a great deal in the productivity to the customers, productivity of the agents is improved. And also customers are having to do a lot of customization on these contact center platforms. And with our TX platform, with all the integrations we have done, that customization efforts will go down. And we are also combining the Commotions Voice, AI and AI capabilities into the tx. So that will be another growth driver.
So the growth drivers in the CIS business would be the entire contact center space with TX integrated, with AI expanding to other channels and the overall AI story that we are saying with the commercial. So those would be the key growth drivers. The large part of the CPAAS business is SMS and we think, you know, that the market is growing at 10% and we would see how we can grow profitably with enterprise focus. So that would be the focus that you would have on the, on the CIS side of the story coming to media.
Again, media is somewhat cyclical based on the events that happens. But having said that, we are also expanding the media story beyond the sporting federations into the broadcasters. So we announced a large deal last year in the Latin American market that is one second is we won a fairly large deal in the US again in the broadcaster segment, bringing together again the capabilities of the switch commotion as well as the media edge capabilities to transform. And third, even in India with one of the broadcasters today we are responsible for a lot of live sporting events play out and that we are doing from this very building that we are sitting in today.
All of that are new capabilities which are the accelerators of the growth for media business. Some of it will be a steady, it’s not that seasonal. But the traditional business that we’ve been doing for federations are seasonal and bit cyclical but the business has good potential to grow in the long term.
Vibhor Singhal
Got it, got it. Thanks a lot for those detailed answers. Lakshmi Kabir Just got two questions on the financials. So if I look at the overall, the consolidated margins as well, as well as, let’s say the data margins, they have expanded. Q1Q but I mean the highly demanding analysts that we are, I believe the pace of the margin expansion still appears to be a bit on the softer side, I think and specifically now that now digital is almost half of the data revenue, do you see this the pace of the margin expansion pick up in the coming quarters?
And how could digital, how would, how far do you think are the digital margins, let’s say from breaking even either individually or any other color that you can provide on the breakeven point for the digital subdivision.
Kabir Ahmed Shakir
Thanks. Thanks. Don’t ever apologize for being the pushy and demanding, you know, analyst that you are. You make us better. So really love the conversation that we always have. So I think it’s a good question. Great question. But I would also say on a serious note, we are walking and chewing gum at the same time. We are doing repairs with the main zone as far as the digital portfolio is concerned. I mean Lakshmi talked about CIS and you’ve seen CIS growth, CIS also become bigger. But this is also a business when we actually bought from Calera had a lot of elements in the business where we wanted to move away from traditionally, you know, acquiring volume for the sake of acquiring volume but to going into more profitable.
So we wanted to change the mix of the business, you know, and, and it’s taking, you know, time. This I would say in the last two, three quarters really kudos, you know, to the team and the business they have are changing the color of, of both the NR profile that we’re getting from cis, also the cost profile that we have some very hard calls being taken on that to improve the profitability. So I would say I’m quite pleased with the progress that CIS is making and since we are hungo about it, is why Commotion also has happened not just for cis And I think Commotion has the AI capability that it can infect positively the rest of the organization as well.
But we do believe that would be. A. A very good, I would say niche that we can have where the conversation with our customers can shift away from price to value. I mean that’s what the capability Commotion can actually bring in. We have this good engine of sms, but the moment you add the intelligence layer and composable layers on top of that and the unique capabilities of voice to voice that we have then suddenly the kind of opportunities it can give us as a healthy margin kind of opportunities will give us is immense and we are excited about it.
So that’s on cis. Likewise I can go into each and every business. We are taking both surgical actions in terms of removing the cost structure and making them fit to compete today while also having the eye on the ball to invest, you know, for the future. So horses for courses for different businesses. That was one example. The five strategic bets that we called out on the investor day. Lakshmi alluded to a couple of them just now. We are excited about the launches that they will bring. These are all SaaS based margins, the margin profile, the NR profile of this are going to be like a typical SaaS company profiles not the kind of NR profiles that you have seen traditionally in Tatacom.
So we are quite excited about this. So mix operating leverage, cost reduction is I would say a combination of all of those things. Internally we have a first tracker of each of these digital businesses when they will get the lov margin before the general cost gets allocated to them. When do they get breakeven and positive and destination on that and when do they get to ebitda and that is a varying timeline depending on each of the portfolio segments and consolidated of that is what we gave in the investor day that we are in that trajectory.
I must admit we are a little slower than what we wanted because in this particular quarter for example we did take. I mean we don’t call that out because as I said we are walking chewing gum. We got out of an onerous contract in. In CIS for example the cost of it are already absorbed even though the contract expires next quarter. That costs are already been taken in this quarter itself. So the multitude of actions that are being taken I am quite confident that we should get to digital breakeven in the near to medium term and by our ambition time frame we should have the digital portfolio at its destination margin.
Vibhor Singhal
Right, right. Just for a second I thought you will not say near to medium and you’ll probably give me a quantified timeline of months or quarters but I get that if I can push my luck which of the sub verticals in digital do you think will break even first?
Kabir Ahmed Shakir
I mean you’re really pushing my luck and yeah, I mean CIS definitely yes, I think we have a tab for that to happen. And as Lakshmi said media is cyclical. There are event based, we have very good logos and then we need to utilize those logos and get the cost structure fit for purpose as well. So very clearly these two are businesses where clearly our focus is to get them into the black.
Vibhor Singhal
Got it, Got it. Just one last bookkeeping question from my side. The TCR margins have been all over the place. 72%, 44, 51%. As a modeling exercise, where do you think the equilibrium will be for the TCR and what should we take for the margins going forward?
Kabir Ahmed Shakir
I had mentioned before it’s mid-50s is what ideally it should settle down at. There are some business model things that we are working on and this is all wiped factors we have and once those get fructified, you know, is when we will have a complete clarity on, you know, on what it is. We had already indicated that those margin levels were, you know, very high and we will, you know, come down, you know, at a reasonable level. In the last quarter itself I had mentioned to one of the questions that was raised that it should be in the mid-50s.
Vibhor Singhal
Mid-50s. Got it, got it. Great. Thank you so much for taking my questions and wish you all the best.
Kabir Ahmed Shakir
Thanks.
Operator
Thank you. That question was from Mr. Vibor Singhal of Nuama Equities. We will now move to our next question. That’s from Aditya Suresh of Macquarie. Please go ahead.
Aditya Suresh
Yeah, thank you, Lakshmi. First is congratulations and wishing you the very best. Just for this quarter I had two questions. So first is any large customer dealings. You’D like to call out this quarter. You’Ll typically give us that million dollar customer journey. Any kind of update on those metrics? That’s the first one. Second is on the data center opportunity. We’ve seen quite a few large hyperscale announcements in the past several months. Could you maybe just talk through how you’re seeing the data center opportunity and.
What this could mean for your core. Connectivity segment in India? Thank you.
A.S.Lakshminarayanan
I didn’t get the second question properly, Aditya.
Aditya Suresh
Just on the data center opportunity, Lakshmi, there have been quite a few hyperscaler kind of announcements. Is that translating into kind of or how are you seeing the data center opportunity in India for your connectivity segment?
A.S.Lakshminarayanan
No, I think the to take the second question first. The data center data center opportunity is great in India. We are continuing to be the leader in that space and keeping the market share there. And even in my commentary I called out it’s not a data center data center connectivity but it’s a core connectivity deal that we announced. It’s a fairly large deal to help an OTT content provider to land and connect. So that’s the space in the core connectivity and in the core connectivity also we have seen an uptick in our because of the Internet traffic going up, our Internet related core connectivity products have seen an uptick this quarter.
So the core connectivity will see it had fallen in the last quarter because of the cable cuts. We do still suffer from the cable cuts in the Red Sea area and it’s not fully out of the woods or out of the sea yet. But despite that, we’ve seen a good growth in the core connectivity this quarter. Coming to the color of some of the other deals, I did mention that in UK and Europe we have one large network transformation deals in France and one of the wine player and one large international airlines again in that region.
There are deals in the US in that space. We are also having good amount of deals in the wi fi space. We called out the deal on the security space on cloud which was somewhat muted for the last year and a half. We have seen an uptick on the order booking this quarter. So I think from an order booking perspective, it’s been fairly well rounded across all the fabrics is what I would say. Thank you.
Operator
Thank you. Our next question is from Sanjay Jain of ICICI Securities. Please go ahead.
Sanjesh Jain
Yeah. Hi, Good evening all and thanks for taking my questions first. Lakshmi, now that you’re stepping back, just one question. You inherited a company with multiple challenges. Probably you are leaving a company with multiple opportunities. Some of the things you think you would have done better or different that you want to share, that’s number one. Number two, how do you see this company evolving or where do you see this company has a potential to reach in next three to five years?
A.S.Lakshminarayanan
I think the first one is a harder question. I need to reflect. I’m sure there are things that you could have done better and so on, but it’s. There is nothing specifically that accursed my mind because the capability shifts requires a number of things to fall in place in terms of building that capability. The significant amount of culture change, all of that are big ticket items. So all of those. I think the teams have done tremendous work in getting to where we are today and it’s kudos to the team to get us where we are very pleased with the platform that we have for future growth in terms of the product profiles.
Kabir called out that some of the strategic bets that we are calling out, some of the new products are SaaS, like products. You know, all of it are leveraging the native capability of infrastructure, be it network or compute or all these capabilities. So I think with this I’m very passionate about, at the risk of repetition, I would say about relevance to the customer and that was one of the major missions that we had to say if you stayed where we are, we are increasingly becoming irrelevant and commoditized.
So today it’s not just the million dollar customers and my commentary has said there is an uptick in that. There is uptick in $10 million customers. But that comes because we are able to have a conversation with a CIO or CDO or today even with the CEO about how we can participate and help them in their transformation. That’s a very big shift for us in terms of the relevance. And with the relevance comes our ability to participate in opportunities and then with participation comes the winning and execution that comes down the line.
I do believe that we are only scratching the surface. We have a solid platform on which the company can grow and build.
Sanjesh Jain
Thanks. Thanks Lakshmi for that. Just one question to Kabir Kabir. The digital portfolio net revenue still appears. To be quite soft. Whether I look at sequentially or yoy, it’s a decline though revenue numbers do give a a slightly better feeling of a 15% YoY growth and 4 odd percent sequential growth. But the story on net revenue is quite different which is still not encouraging or which still doesn’t put us to a path where we can go to a break even at the EBIT level. Because if net revenue is declining, which means our losses would have only expanded.
How do we correlate this and what is not getting translated from say a gross revenue to a net revenue and then to a profitability?
Kabir Ahmed Shakir
Yeah, I mean I need to probably then getting into specifics here which I cannot suggest but I’ll still, you know, try and you know, give you some comfort as to what is going on, you know, underneath this, in this you know, specific quarter, as I alluded to vipo’s question earlier, there was an owner’s contract which we have chosen to exit because I mean in that particular market in CIS the WhatsApp cost is even lower than the SMS cost and therefore we’ve said look, it just doesn’t make sense for us to continue anymore.
And so that alone was like 100 basis points impact in the quarter. Likewise there are to other deals which we did and depending on the kind of a delivery schedule, those deals when they recognized both revenue and cost in this particular quarter came at a dilutive margin profile. So that explains the one off of NR in the quarter. In the digital portfolio we examined it quite surgically. You know, on each of them none of them are structural in nature, you know, so that should give you some comfort.
Not necessary to say that we are happy with what it is, but at least they are not structural and hopefully we should learn from this and not repeat this and we get to a profitable profile. So I would only enhance the same question, same answer that I gave to Vippore that we are seeing at least CIS to start with and then media, then these two business to get to break even soon and to destination EBITDA as well. So forget the oddities of this quarter which are one offs.
Sanjesh Jain
But Kabir, just a larger question here. Did we really get aggressive, pushy to buy Calera? Because it’s been now what more than one and a half year? Close to two year and we are still cleaning up the book, onerous contracts and all those things. So what’s the learning for us from the two acquisition we have did and which should implement for the future? At least we should, we don’t repeat these things.
Kabir Ahmed Shakir
I wouldn’t say we were aggressive or anything of that sort suggestion. And this particular contract that I said is not. It was a contract that we signed after the acquisition. Right. So let’s also, you know, call performance out where, you know, where it really, you know, belongs and it’s very easy to brush under carpet and you know, blame the past. That’s. That’s not the case. I think we have a good capability in Calera. It’s a great asset that came at a great value globally. Given the ambitions that we have with commotion with AI that we will bolt on top of that.
This can really be a good asset for us. We fundamentally believe that had we done stayed the course in this particular place with Dego, we would have burned a lot more cash and we would have taken a lot longer to get to this level of revenue. So if you see from that perspective, I think it is indeed you know, a good space that we would be in. We had estimated when we took that there will be certain channels. I mean like 92% of the business was A2B and 8% was the other profitable channels. Even Lakshmi mentioned voice RCS for example, has not picked up, you know, and not been adopted as much as we thought it would with, you know, giants like Google behind it.
It’s a matter of when and not if. So we are, are we poised for all of those things. So if I look at from those opportunities point of view and our business structure point of view, the cost synergies, we got it kind of almost on target. The revenue synergies is what we knew that it’s got delayed by a year for multiple factors. I would say more than 3 4th of the factors were external rather than internal per se. So I would still on hindsight if I go back, yes, we do have got Kalera and let’s not forget we are again, for the sake of transparency and governance, we have carved out TCR and showing TCR separately.
It’s a business which is profitable. It has grown significantly from what we actually bought before. So if I add the two together, we are getting value from that business and we have to be. We have to be truthful and see the numbers the way they are.
Sanjesh Jain
No, no, that, that I clearly appreciate. Kabi Lakshmi One on the order book it’s been probably now 4 quarters or 5 quarters. We have been speaking of a very strong order book. When should we really see this hitting into a revenue growth and translating into a double digit EBITDA growth for us? Because we’re still I think lagging significantly behind both on revenue and ebit.
A.S.Lakshminarayanan
Sanjesh I don’t know whether we’re flagging strong or we flagged a strong order booking in Q4 and Q1 of FY25 and at that time of order booking I did say that one of the large orders we will see the revenues starting to come in in the later part of FY26 which is what you are seeing this quarter, a part of the revenue. And I called out in my commentary, which is one of the reasons why the core connectivity has seen an uptick in growth and after that in subsequent quarters in FY25 I did say that the order booking was more in the stable region and not gone back to the same levels of increased order booking that we called out in Q1 of FY25 and Q4 of FY24.
Those are the two quarters we called out exceptionally good order booking. So that’s the data. That is what we’ve been calling out. And after that it’s been a fairly stable order booking. Nothing to write home about. It wasn’t declining, but it wasn’t back at that levels of order booking that we had called out. I’m calling out this quarter that we had a very good quarter of order booking. There was one order again in the core connectivity space that I have elaborated. But even if I remove that large order in the rest of the business also there has been a good uptick in terms of the order booking on a Q on Q and on a year on year basis.
So that’s the data point as far as the order booking is concerned,
Sanjesh Jain
I. Appreciate I’m telling that we thought we were any which way doing 14, 15% if I go by the historical red rate and we had a couple of quarter of very strong and then a very stable order book I thought that could have helped us to and significantly we called out that a lot of 70% plus are coming in the digital portfolio. I thought we would have crossed 20% I think for quite a few quarter it appears that even on a low base or a favorable base last year X of acquisition and the growth was quite muted on a favorable base and a stable to a better order book, I thought we would have done better.
So just wanted to understand how should we reconcile this or is there a real potential for us to grow beyond 20% because that is really what the company need to achieve the 28,000 crores of revenue.
A.S.Lakshminarayanan
Yeah, no, I think if you ask me if we have the potential to grow. Yes, I think the previous question I did elaborate in each of the areas NextGen connectivity there are some new products and NextGen connectivity by itself has been doing very well in cloud and security. I did call out the cloud was a bit muted. We have been doing very well on security side but we have seen an uptick on the cloud order booking and we think that has got a great potential to grow. So each one of them. The only platform I called out was the move in IoT where we are sort of looking at that business to pivot to profitability.
We are looking at how the product lines within that can be consolidated and rationalized a bit more and that we want to get that to a state of fitness before we focus terribly on growth on that side. But other portfolios that the next gen connectivity, the cloud and security, the CIS platform, the media, all of them have potential to grow 20% or more.
Sanjesh Jain
Got it, got it. Thanks Lakshmi. Thanks Kabir for all those questions and best of luck for the coming quarter. Lakshmi, all the best for your next journey.
A.S.Lakshminarayanan
Thank you.
Operator
Thank you. Our next question is from Vineet Manik of Karma Capital. Please go ahead.
Vineet Manik
Firstly wishing you Lakshmi very all the best for your future endeavor. Most of my questions have been answered. Just two clarification needed. So one to Kabir on the TCTS part of the revenue. So where should we look at this bottoming out and from there how should we look at growth? So as we said that most of our baggage has now been been cleared. So how should we look at this segment from a topline perspective going forward? And the second thing also can you help us understand on the sudden increase in the depreciation during this quarter what was the reason to it and how should we look at the sustainable number going forward?
Kabir Ahmed Shakir
Yeah, thanks Vinit. Let me answer the TCTS question first. We did have two large businesses that TCTS did domestically in India. We got out of that one of the contract which is the largest one last year we spoke about it as well and that was a big top line drop that we did but it came at a huge accretive margin percentage perspective because we were losing money in that particular contract. The second one was this, this also was a, was a loss making contract for how we have, you know, got out of.
So I would look at tcts now in the last seven, eight quarters and I mean absolute kudos to the management team. They have done a phenomenal job in taking these hard calls and, and managing, you know, our way out without any issues to our customer and did the transition management very well even though they were loss making contracts. This business is now largely international and the margin profiles as you see from this particular this quarter is in the 20s. We are hoping that this business going forward also are going to take business.
It’s all very pure services of course in the telecom and the network space but is going to come with that kind of a margin for profile if not better and focus towards export and towards international operations. That is how you should look at tcts. And now with the baggage gone we are looking to task them with high growth targets which is what the team is capable of and it comes with very less upfront investment or anything that we need to, you know, put in. So, so we will, we will encourage the management team to, to really go and realize the potential which, which the quite a few deals are in the pipeline we have visibility to and which we are encouraging management to do that on depreciation, your technical accounting point, you know we need.
So I wouldn’t really worry about too much. It was and one specific deal where you know it is the nature of an iru. If it is the nature of an IRU it doesn’t sit in opex. It goes as depreciation. It was effective first of April but the contract was signed in October. So that’s the reason why the sudden increase that you see is the reclassification done from 1st April onwards because only when the documentation was in place and the contract was signed with the customer could I affect such changes. I wouldn’t worry too much because you know we do, we don’t structure the deals driven by accounting reasons, we structure the deals driven by customer needs and what the customer wants.
In this particular case, you know, once that deal was inked and the documentation was available, this was the right accounting entry. So the team, you know, went ahead and restated it. It’s such things like this have existed in the base as well, you know, because it was. And that normally concludes within the quarter or maximum 1/4. I mean this time the it just went through three quarters and that’s the reason why you’re seeing the impact.
Vineet Manik
Got it. So it will be one time in nature and from next quarter onwards we should see a normalized
Kabir Ahmed Shakir
Depreciation. Absolutely, you’re right.
Vineet Manik
Got it. And. And so we can say that in tcts the large part of cleanup has happened and there is not much left. Or do you still see there is some more cleanup that is yet to happen?
Kabir Ahmed Shakir
Well, there is no domestic business left. It’s all international business. Right. So I don’t see, you know, none of those deals are loss making deals as we have. But I will say never to any of those things because you never know in, you know, in these geopolitical situation, tariffs and you know, and various things that are, that are in play and you know, global M and a place, you know, that really happens. So we have to be watchful of changing things. But I think the clear coaching, not just I would say TCs, but I would say even to the digital portfolio, business teams and leadership is managing with resilience the entire business as we navigate through these ups and downs.
So that’s where I will leave it at.
Vineet Manik
Got it. Got it. Got it. Thank you very much for your flag.
Operator
Thank you. Our next question is from Balaji Subramanian of iifl. Please go ahead.
Balaji Subramanian
Thanks for taking my call. Good evening and all the best Lakshmi on your future endeavors. I just had a quick couple of questions for Kabir. These are housekeeping in nature. You did say that this IRU charges I know, have to be expensed below the EBITDA line item. Would there be any change in the QoQ and YOY EBITDA numbers that you reported which is 4% YOY and 4.6% QoQ. If you make adjustments for this, that. Is number one,
Kabir Ahmed Shakir
Go back and adjust, you know, Balaji, even the prior quarters also. Right.
Balaji Subramanian
So it
Kabir Ahmed Shakir
Doesn’t work only in one quarter.
Balaji Subramanian
Yeah. So is there any, you know, bunched up impact this quarter? That is what I was trying to understand. So will the underlying numbers be any different if the accounting treatment, you know, were to be Removed. The impact of the effect of the accounting treatment were to be removed.
Kabir Ahmed Shakir
If you take short term, yes. If you take, you know, over, you know, a year, no, because it gets evened up.
Balaji Subramanian
So any sense on, you know, how much that delta would be in on a quarter. On quarter basis?
Kabir Ahmed Shakir
I. I mean, I don’t want to call out the specifics. I don’t have it. Why don’t you connect with Rajiv and I’m sure he can explain the maths to you. Balaji.
Balaji Subramanian
Yeah, sure. And the second one is on the improvement in NR to GR ratio in core connectivity. So anything to call out there? I think this time it was around 83%. Usually it’s around 80, 81%. So anything to call out there.
Kabir Ahmed Shakir
It’s. It’s. I would say operating leverage growth and the mix of growth versus international versus is India. So nothing specific to column.
Balaji Subramanian
Got it. Got it. That’s it. From my side. Thank you. And all the best.
Operator
Thank you. Our next question is from Avnish Tavari from Viaria Change llp. Please go ahead.
Avnish Tavari
Hi. Actually, congratulations. And to bring the company where it is the transformation and wish you very best in future. I have two questions. One is your successor, Ganesh, can you help us? What were the change capabilities the board and you looked in where the company’s trajectory has been in last few years, which we have transferred in terms of capabilities and everything. So what you are looking in the new leader. So if you can just help us understand how we should think this transition will work out.
That’s my first question.
A.S.Lakshminarayanan
Amnesh, thank you for your wishes. I would only talk about the process. It’s been a while. The NRC and some committees by the. Board. Looked at extensive set of candidates and went through a process to arrive at the answers. We had clearly created a set of requirements in the job profile in agreement with the board, which clearly is to see how to take this company forward in terms of leveraging on all the changes that we made, bring more AI and capabilities in the platform side and grow the business.
And that’s how the selection came about. So I don’t want to talk about anything specific. You will get to meet and hear from him soon. But be assured that it went through a process to make sure that the company can move forward at an accelerated pace.
Avnish Tavari
Great. Now this is super helpful. The second question I have that you have built great capabilities and I think the growth is also. You said in order book. At least we are seeing some science emerging. What do you think this whole we see the AI a big apex. Maybe it’s right now hardware side that piece. You have been trying to grow this company. Very, very hard efforts you put in. So in terms of headwind and tailwinds and as you, as you leave this footprint, how are you seeing the overall outside the company’s control kind of headwinds and tailwinds you’re experiencing in your platform?
A.S.Lakshminarayanan
We’ve been calling that out even in IR day. If you see there are two things. One is the macro environment is not very helpful and that’s continuously changing. And the uncertainties there means that the businesses are cautious. But on the positive side or the tailwinds are the huge changes that are brought about by AI and the potential that AI offers to enterprises to transform themselves. And we are only scratching the surface as far as the enterprise adoption of AI goes. And they have to now build new class of applications that are intelligent.
And that would mean that the entire digital infrastructure has to be significantly looked into and transformed. They have to look at. When I say AI adoption at scale, many enterprises are still taking a very use case approach. Every use case is a project and each of the project takes a long time. And that is where a platform like commotion that we are bringing in brings a more platform centric approach to AI. In a sense we are trying to say that is a. It’s like an AI operating system. So today, as you pointed out, it’s more the beneficiaries of AI are, you know, the chip manufacturers, the hardware and that’s where the bulk of the spend is going to.
And then the attention has come to the models. Models also there are not going to be too many models. Large models are going to be consolidating and they’re going to be few. And then the enterprises have to look at doing their own small models, fine tuning and building applications at scale for which they need to bring a lot of data integration together, put in a lot of guardrails so that the AI can be trusted. So all of that is what I’m calling as an AI operating system that needs to sit on top of the current system of records.
And that’s where our full stack capability with Yuai cloud. The strengths that we have in connecting all of these clouds, the AI studio and the platform that sits in above will have help customers to navigate these transformations. So largely that’s the sort of the headwind and the tailwind and how we are positioning ourselves to prepare ourselves and prepare the customers for the future.
Avnish Tavari
Just maybe one last piece. This AI infrastructure capex you were doing that Nvidia kind of partnership, is there some traction you think there also you have a role to play as the in India AI infrastructure comes up.
A.S.Lakshminarayanan
We do play. So we have a partnership with Nvidia because of which we have launched our AI cloud and the AI cloud we are targeting more of enterprises and as I called out in my commentary, we are beginning to see uptake in the adoption of our AI cloud both for training as well as for inferencing. We are also launching our AI studio that sits on top of the cloud for customers to build their own AI applications. So ours will be a fully integrated stack right from GPU to AI Studio to building agentic AI with the Commotion platform and that is our play in the market.
Avnish Tavari
Great. Thank you Lakshmi and wish you very best.
A.S.Lakshminarayanan
Thank you.
Operator
Thank you. That was the last question for today. I now hand the floor back to Mr. Lakshmi Narayanan for closing comments. Over to you sir.
A.S.Lakshminarayanan
Thank you all again. I know many of you called out to wish me luck for my stint after, but thank you for all your support and as I read out in my commentary, we’ll keep our heads down in executing this quarter and we think we have a great platform on which the company can go forward. I want to call out that the momentum that we’ve seen on the growth is something that we would want to build on and the strength of the company is being very close to the customers. The NPS scores are great and our relevance to the customers are increasing.
So with that know we think we’ll execute with all the focus that we need to execute. Thank you so much for all your support.
Operator
Thank you on behalf of Tata Communications. That concludes today’s conference. Thank you for joining us and you may now click on the leave icon to exit the meeting. Thank you all for your participation. Goodbye.