New Delhi: Tata Communications will next week showcase some of its first artificial intelligence (AI) services based on the latest Nvidia chipsets, following which they will be made available to enterprises, said its managing director and chief executive officer A.S. Lakshminarayanan.
“We’re bringing a lot of AI use cases to make interactions more intelligent. We will be showcasing some of these at the (next week’s) Nvidia AI Summit… we’re fast changing into becoming a SaaS platform in areas of networks, cloud, security, IoT and interactions,” he said in an exclusive interaction with Mint.
The US-based chipmaker and Tata Communications are developing an AI cloud in India aimed at providing critical infrastructure. The partnership includes delivering AI computing infrastructure and platforms for developing AI solutions, which will be used by enterprises, such as Tata Consultancy Services Ltd (TCS). The AI cloud service is expected to be launched early next year.
“We’ll launch AI cloud by early next year. We have capacity for some internal use and we’re bringing a lot of AI use cases for our key customers,” he added. Tata Communications is aiming at local as well as international clients for this service where deals are likely to be front-loaded.
The Tata group-owned digital infrastructure provider had started the deployment of the first set of AI chips from Nvidia within the company in the June quarter with its customers expected to get the chips by the end of the year.
Tata Communications Q2 performance
Tata Communications reported a ₹227 crore profit for the quarter ended 30 September, up 3% from a year ago, but 32% lower sequentially. Its quarterly revenue rose 18% year-on-year to ₹5,781.47 crore. Expenses rose by nearly 20% to ₹5,503.47 crore.
Lakshminarayanan attributed the sequential drop in profits to disruptions or cuts in undersea cable installations in the Red Sea, which led to higher maintenance costs and larger expenses. “The traffic was routed through other routes. This would not lead to higher capex,” he clarified.
Earnings before interest, tax, depreciation and amortization (Ebitda) grew 10% y-o-y to ₹1,117 crore, but fell 0.6% sequentially. The ebitda margin, however, declined 60 basis points (bps) to 19.4% from 20% in Q1 of FY25. A basis point is one-hundredth of a percentage point.
Lakshminarayanan said that ebitda levels are expected to improve on the back of a strong order book. In the earnings call on Thursday, the company said it has got contracts across segments which includes a few large deal wins, pushing up the order book by 25% y-o-y, with order booking in international business being the highest in five years.
“We lower FY25-26 ebitda by 3-4% as we lower our margin assumptions by 90 bps on account of a slower ramp-up in profitability in the digital portfolio. With a rising share of inherently lower margin businesses in the mix, we believe that margin expansion to 23-25% by FY27 would be difficult,” brokerage Motilal Oswal said in a note following the investors call on Friday.
The acquisitions of The Switch (a US-based video production company) and Kaleyra (a messaging and communication platform) were on track to attain single-digit ebitda margin by the second year of integration, in line with the company’s ongoing plans and strategy of investing for future growth. The acquisitions merged with the business in the US last year are expected to turn profitable in two years.
Tata Communications is also looking to sell land parcel to STT Datacenter for ₹750-800 crore and has filed for shareholders’ approval as the transaction is with a related party. Tata Communications has a 26% stake in STT Datacenter.
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