Tata Communications resilient amid tariff uncertainty, eyes growth with strong cash flows and strategic investments: CEO

Tata Comm MD & CEO

Tata Communications MD and CEO AS Lakshminarayanan said the company has not witnessed any significant impact from ongoing global tariff-related macroeconomic challenges, although its international customers are experiencing varying degrees of pressure and are largely taking a cautious, wait-and-watch approach in response to.

In an interview with Moneycontrol, Lakshminarayanan emphasised that Tata Communications continues to generate healthy cash flows and remains firmly committed to both organic and inorganic investments. This comes on the back of major restructuring initiatives that are now largely complete, with the company maintaining a constant focus on improving efficiencies and monetising non-core assets.

A key pillar of its forward-looking strategy is the company's AI cloud platform, Vayu, which has begun signing up customers and is already being utilised for AI model training and other computationally intensive tasks. The company will scaple the platform further once the surge the expected demand, particularly from government-led initiatives, kicks in.

Tata Communications has been empanelled for the Ministry of Electronics and Information Technology’s (Meity) AI Cloud Facility and is closely monitoring the programme’s rollout. In parallel, the company is leveraging Vayu internally to enhance its own AI capabilities, including consuming GPU resources for internal innovation and product development, he said.

Edited excerpts:

This is a question everyone is asking, and to be honest, most responses are similar. My view is that since we move data—and data is not subject to tariffs—there’s no direct impact on our business or on anything we sell outside. However, our customers are impacted to varying degrees. Most of them are adopting a wait-and-watch approach.

I don't think people are wanting to take some immediate actions such as going on a cost-cutting drive or something similar, but they are cautious. They have to balance in a situation where there are going to be some macroeconomic uncertainty, which might be short-term or which might have long-term implications.

At the same time, technology is evolving rapidly. The AI space, in particular, is experiencing rapid acceleration. Organisations are being pushed into a hyper-connected world at hurtling speed. So what should they do to prepare themselves to navigate the future?

Of these two problems, I would rather focus on the second problem and how we can help enterprises there. The first problem is related to (US President Donald) Trump, so we can't do anything there.

Yes, the transformation initiatives we've undertaken have put us in a solid financial position. Our net debt to EBITDA (earnings before interest, taxes, depreciation and amortisation) ratio has come down to 2.06, which is healthy even as we want to be below 2. We’re generating cash, and our capex will remain in line with traditional levels.

We’ve earmarked capital for new product development. For example, we launched the Vayu Cloud and invested in cloud connectivity products and will launch in coming quarters. We also introduced Kalyera AI. We are embedding AI into our offerings across all domains. We are pushing ahead with these investments so that we can help our customers really get ahead of their competitors. So we have a very positive outlook on our investments.

Some of the major restructuring efforts have been completed, but this will be a continuous process. We’re constantly evaluating areas where we can drive efficiencies or monetise assets. That includes assessing the performance of our past investments and deciding where to refocus. So, yes, the review is ongoing. But we are in a strong position to continue investing—both organically and inorganically.

Yes, we’ve started onboarding customers. Our AI cloud is already being used for training and other purposes. We’re waiting for the larger demand, particularly from government programmes, to materialise, which we hope will happen soon. We’re empanelled for the MeitY’s AI Cloud Facility and are awaiting that programme’s launch.

In the meantime, we’re also utilising the infrastructure internally to enhance our own AI capabilities and managing our own GPU consumption.

It’s a mix of all. We're very optimistic about the Vayu AI Cloud. We have a unified, integrated story because we can offer the cloud and connect the network. We have installed liquid cooling (for data servers) //added, please check//, probably the only player in India to have done so, ensuring we are environmentally safe and secure. Additionally, the AI studio we have will enable people to develop applications faster, better and more cost-effectively. Overall, our proposition is very compelling, and we are very positive about it.

Absolutely. We offer several differentiators. Our integrated and unified offering, spanning network to cloud infrastructure, GPU capability and platform services, sets us apart.

While hyperscalers have their place in the cloud journey, when it comes to AI, enterprises have critical questions: How do I maintain control over my data and intelligence? How do I gain a competitive advantage from my AI development?

Most open models like OpenAI today are trained on publicly available data, which accounts for approximately 99 percent of the content. However, less than 2 percent of enterprise-specific data has been transformed into intelligence. Companies must decide whether to use AI to create competitive advantages or risk sharing their intelligence with the broader market.

To me, the answer is very obvious and, therefore, the need for more private sovereign clouds that can provide them the best price performance and secure their future.

Overall, it's been a very strong and robust performance. Our digital revenues grew by approximately 29.5 percent, and our data revenues for the full year increased by 13.5 percent. Specifically, in this quarter, the revenue jump is particularly commendable given the macroeconomic conditions.

The highlight, or the icing on the cake, is the board's approval of a Rs 25 dividend to be paid to shareholders, which is great news. All in all, I would summarise it as a very credible and extremely positive performance.

Yes, that’s very much our goal. When we launched our "Reimagine" strategy in 2020, we set a target to bring digital revenues up to 50 percent. I’m pleased to say that in FY25, we’ve nearly reached that milestone. Back in FY23, digital revenues were Rs 4,500 crore. This year, we’ve nearly doubled that to Rs 9,100 crore. It's a significant achievement and a strong foundation for continued growth.

We do expect customers to remain cautious. However, we’re quite optimistic. Our order bookings at the start of last year were strong, and we believe that the technology challenges and demands of a hyper-connected world will continue to drive investment. We are well-positioned to support our customers through this evolution.