Tata Communications and Mastek Q4FY23 Results Analysis

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The results season began last week, and we have been tracking and analysing the results of key companies from the Nifty 200 universe. On March 19th, from the companies that declared their results, we analysed the results of two companies that are significant in their respective sectors. These are Tata Communications and Mastek.

Tata Communications

Key Highlights

• Consolidated revenue from operations grew by 7.2% to Rs 4,568.7 crore in Q4 FY23 from Rs 4,263 crore in Q4 FY22.
• Consolidated net profit declined by 10.7% on a YoY basis to Rs 326 crore in Q4 FY23.
• For the entire FY23, however, the net profit increased to Rs 1,801 crore from Rs 1,485 crore in the previous year.
• The company’s board has recommended a final dividend of ₹21 per share of the face value of ₹10 each for the financial year ended March 31, 2023.
• Among business verticals, Data business grew 2.2% QoQ and 10.3% YoY, while Digital platforms and services grew 2.3% QoQ and 15.5% YoY. 
• Core connectivity revenue grew 1.7% QoQ and 5.7% YoY, and the Incubation portfolio grew 9.4% QoQ and 116.6% YoY.

Management Speak

A S Lakshminarayanan, Managing Director and CEO at Tata Communications, said in a statement accompanying the quarterly results. “Our expanding digital portfolio, coupled with an improving relevance quotient across India and international markets, is helping us reposition the firm as a ‘CommTech’ leader. We remain committed to our ‘Reimagine’ strategy to deliver profitable growth by creating sustainable value for our customers.”

Our Take

Post announcement of results, the stock of Tata Communications rose by 3.27% on the next trading day. Though the company’s profits have declined on a quarterly basis, considering the annual data for FY23, it recorded its highest annual revenues and net profits. The company has a healthy order book and is expected to continue its growth trajectory in the coming quarters. For long term investors, the stock holds good potential.

Mastek

Key Highlights

• Consolidated revenue stood at Rs 709 crore in Q4 FY23, up by 22.0% YoY.
• Operating revenue up by 7.7% QoQ in rupee terms.
• PAT at Rs 72.6 crore, up 8.2% QoQ but down by 9.1% on a YoY basis.
• 12 months order backlog grew by 22.1% YoY.
• The company has proposed a final dividend of 240%.

Management Speak

Commenting on the FY23 results, Hiral Chandrana, global CEO of Mastek, said, “We are pleased to report a sequential revenue growth of 7.8% QoQ in USD and 5.3% QoQ in constant currency in Q4, fueled by strong in-quarter execution and demand for digital engineering, experience, and cloud transformation services. Despite macro uncertainty, our pipeline and order backlog across markets continue to grow, account mining is yielding results, and we added 28 new clients in the quarter. We were able to further reduce our attrition to 21.0% on an LTM basis, a 700 bps reduction from a year ago. We are thankful to our customers and employees for their continued trust and commitment to Mastek.”

Arun Agarwal, global CFO, said: “We are glad to conclude FY23 with revenue growth of 18.5% YoY in constant currency and continued positive deal momentum. For the full year FY23, we were able to maintain an operating EBITDA margin of 17.8%, driven by our cost-optimisation focus while funding for growth. Our 12-month order backlog stood at Rs 1,794 crore, an increase of 17.2% on YoY in constant currency. We are confident that efforts to strengthen our leadership team, disciplined execution, and strategic priorities position us well to navigate successfully through the current macroeconomic environment.”

Our Take

On the next trading day post the results, the stock of Mastek surged 12.5%. This has come as a pleasant surprise, especially after the negative sentiment on the IT sector after the Infosys results last week. Our view has been that the tier-2 IT companies are poised to perform better than the top five IT companies, and Mastek’s results confirm our hypothesis. Mastek said it added 28 new clients in Q4 FY23, and the total number of active clients during Q4 FY23 was 464 as compared to 444 in Q3 FY23. We continue to hold the view that while the IT sector may not be strong at the moment, a few mid-cap IT stocks like Mastek will continue to be good bets in this sector.

ABOUT THE AUTHOR

Ketan Sonalkar (SEBI Rgn No INA000011255 )

Ketan Sonalkar is a certified SEBI registered investment advisor and head of research at Univest. He is one of the finest financial trainers, with a track record of having trained more than 2000 people in offline and online models. He serves as a consultant advisor to leading fintech and financial data firms. He has over 15 years of working experience in the finance field. He runs Advisory Services for Direct Equities and Personal Finance Transformation.

Note – This channel is for educational and training purpose only & any stock mentioned here should not be taken as a tip/recommendation/advice

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