Tata Communications' margin slips as tax rise cuts Q1 profit
Revenue grew 10.45% YoY, but expenses grew faster and the 40.69% tax rate drove a 31.78% profit decline.
Filed 22 Jul 2026, 13:20 IST · Tata Communications Ltd (TATACOMM)
Key takeaways
- Consolidated net profit fell 31.78% year on year as profit before tax declined 27.55%.
- Operating margin narrowed 0.90 percentage points sequentially because expenses grew 1.56% against revenue growth of 0.44%.
- Negative other income equal to -41.29% of pre-tax profit and a 39.87% tax rate weakened profit quality.
Price around the results
Revenue momentum held, but profit conversion weakened
Consolidated revenue grew 10.45% year on year, while operating profit rose only 8.21% because expenses increased faster at 10.98%. Sequentially, revenue was nearly flat at +0.44%, but operating profit declined 4.19%. The result was a 31.78% year-on-year fall in net profit to Rs 129.72 cr.
Costs and below-operating-line items drove the margin and profit pressure
Operating margin narrowed 0.38 percentage points year on year and 0.90 percentage points sequentially, as expense growth outpaced revenue growth in both comparisons. Interest expense rose 5.31% year on year and 2.32% sequentially, while depreciation increased 11.08% year on year. Negative other income equal to -41.29% of pre-tax profit was a major drag, and the tax rate rose 17.90 percentage points year on year to 39.87%.
Margin has declined for two straight quarters and trails peers
Operating margin rose through Q3FY26 to 19.84% before easing to 19.59% in Q4FY26 and 18.69% in Q1FY27. The latest margin was 0.73 percentage points below the 19.42% median for 10 reported telecom peers. This places the quarter's margin below the sector midpoint despite the year-on-year revenue growth.
The initial stock reaction was weaker than its usual results-day move
The stock fell 3.16% on the results day, despite opening 0.62% higher, and underperformed the market by 2.36%. The move was slightly smaller than the stock's 3.65% median absolute reaction across its last eight results, during which it rose four times and fell four times.
Q1FY27 at a glance
Consolidated figures as filed with NSE — cross-checked against an independent source.
| Line item | Q1FY27 | Q4FY26 | QoQ | YoY |
|---|---|---|---|---|
| Revenue | ₹6,583 cr | ₹6,554 cr | +0.44% | +10.45% |
| Other income | ₹-89 cr | ₹71 cr | — | — |
| Expenses | ₹5,353 cr | ₹5,270 cr | +1.56% | +10.98% |
| Operating profit | ₹1,230 cr | ₹1,284 cr | -4.19% | +8.21% |
| Operating margin (%) | 18.69% | 19.59% | — | — |
| Interest | ₹186 cr | ₹182 cr | +2.32% | +5.31% |
| Depreciation | ₹739 cr | ₹731 cr | +1.16% | +11.08% |
| Profit before tax | ₹216 cr | ₹443 cr | -51.25% | -27.55% |
| Tax | ₹86 cr | ₹183 cr | -53.07% | +31.45% |
| Net profit | ₹130 cr | ₹259 cr | -49.97% | -31.78% |
| EPS (₹) | ₹4.71 | ₹9.24 | -49.03% | -29.39% |
Operating margin of 18.69% compares with a Telecommunication sector median of 19.42% across 10 peers that have reported Q1FY27.
How the stock reacted
| Window | Stock | vs NIFTY |
|---|---|---|
| Results day | -3.16% | -2.36% |
| Next session | -1.00% | — |
| 5 sessions | -2.09% | -2.35% |
Volume on the results session was 4.05× its 20-day average.
What to watch
- Whether operating margin recovers from 18.69% after two consecutive quarterly declines.
- Whether expense growth stays below revenue growth after the latest 10.98% versus 10.45% year-on-year comparison.
- Whether the tax rate moves down from 39.87% and other income avoids another negative contribution to pre-tax profit.