TATACOMM - Fundamental Analysis: Financial Health & Valuation
Back to ListFundamental Rating: 3.5
| Stock Code | TATACOMM | Market Cap | 45,732 Cr. | Current Price | 1,605 ₹ | High / Low | 2,004 ₹ |
| Stock P/E | 64.8 | Book Value | 355 ₹ | Dividend Yield | 1.56 % | ROCE | 6.39 % |
| ROE | 5.93 % | Face Value | 10.0 ₹ | DMA 50 | 1,730 ₹ | DMA 200 | 1,733 ₹ |
| Chg in FII Hold | 0.85 % | Chg in DII Hold | -0.54 % | PAT Qtr | 306 Cr. | PAT Prev Qtr | 155 Cr. |
| RSI | 37.3 | MACD | -65.2 | Volume | 2,56,423 | Avg Vol 1Wk | 4,16,710 |
| Low price | 1,291 ₹ | High price | 2,004 ₹ | PEG Ratio | -3.32 | Debt to equity | 0.55 |
| 52w Index | 44.0 % | Qtr Profit Var | 127 % | EPS | 46.4 ₹ | Industry PE | 39.9 |
💰 Financials: Tata Communications (TATACOMM) shows moderate fundamentals with ROE at 5.93% and ROCE at 6.39%, reflecting limited efficiency in capital usage. Debt-to-equity ratio of 0.55 indicates moderate leverage, manageable but worth monitoring. Quarterly PAT improved to ₹306 Cr. from ₹155 Cr., showing strong sequential growth (+127%). Cash flows remain stable, supported by diversified telecom and digital infrastructure services.
📊 Valuation: Current P/E of 64.8 is significantly above the industry average of 39.9, suggesting stretched valuation. P/B ratio (~4.5) is high relative to book value of ₹355. PEG ratio of -3.32 signals negative growth prospects. Intrinsic value analysis suggests the stock is trading above fair value, requiring caution for new entries despite earnings momentum.
🌐 Business Model & Competitive Advantage: Tata Communications operates in global telecom, cloud, and digital infrastructure services. Its competitive advantage lies in strong brand backing, global network reach, and diversified offerings across enterprise connectivity, data centers, and digital solutions. However, profitability remains constrained by high competition and capital-intensive operations.
📈 Entry Zone: Considering DMA 50 (₹1,730) and DMA 200 (₹1,733), accumulation is attractive only if the price dips below ₹1,500–₹1,550. Long-term investors should hold cautiously, as valuations are stretched despite strong industry positioning.
Positive
- Sequential PAT growth (+127%) indicates strong earnings momentum.
- Moderate debt-to-equity ratio (0.55) ensures financial stability.
- Diversified offerings across telecom, cloud, and digital infrastructure.
- Strong brand backing under Tata Group.
Limitation
- Low ROE (5.93%) and ROCE (6.39%) reflect weak efficiency.
- High P/E (64.8) compared to industry average (39.9).
- P/B ratio (~4.5) suggests expensive valuation.
- PEG ratio of -3.32 signals negative growth prospects.
Company Negative News
- Decline in DII holdings (-0.54%).
- Stock trading below DMA levels, reflecting weak sentiment.
Company Positive News
- Increase in FII holdings (+0.85%), signaling foreign investor confidence.
- Strong quarterly profit growth supports investor sentiment.
Industry
- Telecom and digital infrastructure industry P/E at 39.9 indicates Tata Communications trades at a premium.
- Sector growth driven by rising demand for connectivity, cloud, and digital services.
- High competition and capital intensity remain key risks.
Conclusion
🔑 Tata Communications is a stable company with strong brand backing and diversified operations. However, weak return ratios and stretched valuations limit near-term attractiveness. Entry around ₹1,500–₹1,550 offers a better risk-reward balance. Long-term holding is justified only if profitability improves and growth prospects strengthen.
I can also prepare a comparative HTML snapshot against peers like Bharti Airtel and Reliance Jio to highlight Tata Communications’ relative valuation and efficiency.