We are confident of sustaining our growth in coming quarters: Amur S Lakshminarayanan, Tata Communications

"We offer a digital fabric that is intelligent on top of which our customers build their applications. And this is getting great resonance, our funnel is quite good, our win rates are inching upwards. So all things being equal, we are very confident of keeping this growth," says Amur S Lakshminarayanan, MD & CEO, Tata Communications.

This is the second consecutive quarter of double digit data revenue growth for you. What were the factors would you say that aided this kind of growth?
Firstly, we are sharply focused on executing our strategy. We talked about our strategy in 2020 when we launched our new strategy of re-imagine. We talked about financial fitness. We talked about our product to platform shifts. And we are very, very focused on executing these strategies. The financial fitness goals we achieved ahead of time and the product to platform shift is still in progress. So I would attribute this growth to execution on the strategy holistically but more particularly in the investments that we made in our products and platforms. Also the sales and marketing investments that we are making, particularly in the international markets where we have to show and grow our share of the pie in those markets is a big white space for us.

So these are the things that we've been doing and we are beginning to see the results of that.

So the question is, how sustainable will this growth be going into the coming quarters?
Yes, I think what we are hearing from our customers is a good acceptance of what we are talking to them about. We find that as we talk to our customers, our relevance to them in terms of their digital transformations is ever more increasing and important.

We talk about the digital fabric, which is secure and intelligent and covers all the way from connected cars to the factories to the cloud and everything else. So we offer a digital fabric that is intelligent on top of which our customers build their applications. And this is getting great resonance, our funnel is quite good, our win rates are inching upwards. So all things being equal, we are very confident of keeping this growth.

Though margins are in line with your guidance. It has also slipped on a sequential basis. There is a sudden escalation in cost-specific on employee cost. What has led to this cost hike?
No, I would not say it is one off. As I mentioned, we are investing in talent. We are investing in our products and platform. This is very much in line with our strategy and we are executing that strategy. We have always been saying that these costs will come. We also said that some of the benefits that we had because of the Covid travels were restricted. Some of the marketing events could not take place. All of those are coming back. So I think the cost would come back is what we said and that is what is happening. And that is showing the results of both the growth as well as the margins.

So the question now is that if you are going to have this revenue growth which you are saying is going to be sustainable as well, is it also going to be backed by higher EBITDA margins, that is what the Street would want to know?
Our ambition as I said is to operate in that 23% to 25% margin range. We had seen some headwinds as I said besides our investment, there were headwinds with respect to inflationary pressures both on the wage inflation as well as the inflationary pressures on other opex related costs so those would be there. I would think that these are temporary. But as we grow, clearly the EBITDAs would also grow.

So how does the sales funnel and order book look like for this quarter? How much has the growth been and what is your order pipeline looking like?
The pipeline is quite strong, the funnel is strong. We are also improving our win rates, particularly on large deals. The number of large deals in our definition is more annual contract value of more than a million dollars. Those kind of deals are increasing the pipeline and number of deals that we have signed up has also increased over the last year. So I think the funnel is quite strong and as I said, what gives more encouragement to me is the kind of conversations we are able to have with our customers. It is resonating because our portfolio today addresses not just the cost side of the equation of our customers but it is resonating with the revenue side in terms of how can we impact their customer experience through our products like DIGO.

So, I think the resonance is increasing, our relevance is increasing to them so we are quite confident of keeping up the momentum in our funnel.


The Switch acquisition that you announced in December, this was the first inorganic growth for your company. How much will this acquisition add to your top line and EBITDA?
This acquisition is very strategic for us. We have said that with the strengthening of our balance sheet, now it opens up many optionalities for us to find ways to invest and this is one and first such instance where it is entirely funded through the cash generator within the company. We will make acquisitions when it helps us to extend our product line, extend our reach to customers so what Switch does to us is it is one of the market leaders in the US for the sporting events.

Now, Tata Communications, our media segment has been very strong with global sporting federations like the Formula 1 and Formula E and others and these global sporting federations reaching global audience is what we call as a global to global segment.