A telecommunications stock has come into focus after ICICI Securities upgraded its stance to BUY, citing a resilient digital services franchise, steady order-book growth, and stronger positioning through acquisitions. The brokerage note highlights key progress across digital layers, signs of customer stickiness, and long-term growth potential.
Company Snapshot
Tata Communications. Market cap: Rs. 48,683.70 crore. Opening price on 17th September 2025: Rs. 1,714.65. ICICI Securities has set a target of Rs. 2,000 and upgraded the rating from ADD to BUY, implying a potential upside of 16.64 percent from today’s open.
Digital Services: Driving Relevance and Scale
According to the report, Tata Communications’ internal review indicates steady progress in its digital services business. Product penetration per customer has strengthened over the past three years, supported by multiple fabric deal wins, while the number of clients in the million-dollar revenue bracket has also risen, enhancing customer mining opportunities.
Its Net Promoter Score stands at 84, among the highest in the industry across geographies and services. This has translated into robust double-digit expansion in the digital services order book, with the company now winning contracts even from clients without prior core connectivity ties.
On the technology front, Tata Communications has completed the first phase of large-scale GPU deployment (primarily H100s), with further expansion to follow based on demand. Meanwhile, it is developing AI use cases to drive internal operational efficiencies.
Also Read: 4 Stocks in which promoters increased their stake in the company to keep an eye on
Kaleyra: Path to Profitability
According to the report, Tata Communications faced two key challenges with Kaleyra: some contracts were secured through aggressive bidding and turned out to be economically unviable, prompting the company to renegotiate or exit them; and SMS buying inefficiencies weighed on margins, which are now being addressed to improve profitability.
At the same time, enterprise clients are increasingly seeking omnichannel partners, an area where Kaleyra has strong capabilities. Since non-SMS channels such as voice, WhatsApp, and other digital platforms carry higher profitability, the company expects rising contributions from these services to support a meaningful improvement in overall margins.
Kaleyra is a global Communications Platform as a Service (CPaaS) provider, enabling enterprises to engage with customers through SMS, voice, push notifications, email, and instant messaging channels.
Founded in 1999 and headquartered in Milan and New York, it serves key sectors such as banking, e-commerce, healthcare, and retail. In June 2023, Tata Communications completed the acquisition of Kaleyra, Inc. and its subsidiaries for about $100 million, making it a wholly owned subsidiary.
Core Connectivity: Challenges Easing
According to the report, Revenue growth in core connectivity was impacted in the past 18 months by cable cuts in the Red Sea and weaker SAARC region revenues. With cables restored in Q3FY25, Tata Communications is now focused on regaining market share. Rising demand for DC-to-DC connectivity and AI-driven capacity expansion in global data centres are seen as future growth drivers. ICICI believes the bulk of the headwinds are now behind the company.
Guidance and Long-Term Outlook
According to the report, the company has reaffirmed its outlook, projecting data revenue to rise to Rs. 280 billion by FY28 from Rs. 195 billion in FY25, with digital services accounting for 60 percent compared to 47 percent earlier.
Tata Communications expects this growth to be driven by greater customer relevance, higher product penetration, multiple-fabric deal wins, and sustained order book expansion.
EBITDA margins are guided to improve to 23–25 percent by FY28 from about 20 percent in FY25. The company continues to invest USD 50–60 million annually in new product development and sales capacity while absorbing near-term losses from Kaleyra.
Management notes that past margin dilution was a deliberate choice to support long-term capability building and profitability at Kaleyra, combined with operating leverage, should aid future margin expansion. Tata Communications also aims to maintain a RoCE of over 25 percent, balancing disciplined capital allocation with its commitment to growth investments.
The Switch: Expanding Media Capabilities
According to the report, the Switch acquisition has bolstered Tata Communications’ media portfolio. With consoles installed in 72 US stadiums, a Los Angeles production centre, and Netflix studio hosting, the deal has provided a strong foothold in live sports and content production. Since its acquisition in May 2023, The Switch has maintained an EBITDA margin of about 13 percent.
AI and GPU Investments
According to the report, Tata Communications has completed the first phase of GPU deployment (mostly H100s) and secured a tie-up with Nvidia, marking it as one of the first Indian corporations with such an initiative. The IndiaAI Mission’s plan to subsidise GPU access by up to 40 percent is expected to support adoption.
While enterprise AI adoption in India has been slower than expected, TCom has invested in GPUs and developed internal AI applications. It has integrated AI into core and digital services as well as operations, such as automating RFPs. The company remains cautious on further investments, preferring to align GPU expansion with revenue opportunities.
Written By Manan Gangwar
Disclaimer
The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Trade Brains Technologies Private Limited or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
