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Our view

The revenue growth remains muted for the company but overall, the SIP Trunking revenue has been recovering since Jun’21 and it continues to expand its cloud and collaboration‐based solutions, which have benefited from the growing adoption of digital solutions. It has been able to maintain consistent profitability with EBITDA margin of~25% led by cost optimization.  The recent investment by company in its next generation data solutions holds promise and should drive revenue growth going ahead.   We maintain ADD Rating on the stock with revised target price of Rs 1,650. It trades at EV/EBITDA of 10.1x on FY23E EBITDA

Result Highlights

* Reported revenue of Rs 41,028mn, below estimate, up 0.7% QoQ( down 6.8% YoY). The sequential muted growth was due to decline in “other” segment comprising rentals, payments and transformation services, which declined by 4.2% QoQ, while data segment comprising 75.7% of revenue grew just 0.5% sequentially due to 0.3% decline in core connectivity business.

* Transformation services has started stabilising ( from the impact of covid) but at slow rate. Payment solutions business continues to be affected by Covid19 2nd wave as average daily transactions for Q1FY22 were 59 as compared to 75 in Q4FY21.

* EBITDA margin declined by 90 bps QoQ due higher network cost in the cost which increased by 11.2% QoQ led by provision of Rs 330 mn for license fee on revenue from pure internet services in the quarter  

* Capex for quarter was Rs3.8 bn compared to Rs 3.7 bn for QFY21  Net debt increased by Rs 2.15 bn sequential to Rs 80 bn, led by annual employee bonus payouts and higher working capital which tends to be elevated at the start of a year.

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