Why Tata Teleservices Share Price is Rising

Big news from the Tata group is grabbing the headlines today. The Assam government recently signed an agreement to lease over 170 acres of land to the group.

The group acquired the land for its massive Rs 270 billion (bn) semiconductor plant. This facility is expected to create over 30,000 jobs and be operational by mid-2025.

But the spotlight doesn't stop there. While the group is making waves with its ambitious semiconductor project, another subsidiary, Tata Teleservices, is experiencing its own positive development - a 5% surge in its share price.

This comes after a challenging year for Tata Teleservices in 2024. The company struggled with high debt and losses leading to a sluggish performance on the stock market.

Let's explore what might be driving this sudden rise in the company's share price.

#1 Anticipated Quarterly Results

The recent surge in Tata Teleservices shares is driven by expectations ahead of the company's upcoming Q4 earnings report. Tata Teleservices is preparing to release its Q1 FY25 results soon.

Investors typically buy stocks before earnings announcements, hoping for positive financial results. As the current earnings season unfolds, the market is responding favorably to companies with solid margins and promising outlooks for the next few quarters.

It's not uncommon for stocks to jump 15% or even 20% due to strong earnings. Geojit Financial Services experienced such a rally recently.

For Tata Teleservices, it remains to be seen whether the telecom giant can break its pattern of consecutive quarterly losses.

In its FY24 results, the company declared that the accumulated losses of the company as of 31 March 2024, have exceeded its paid-up capital and reserves.

The company incurred a net loss for the quarter and year ended 31 March 2024, and the company's current liabilities exceeded its current assets as of that date.

Will this quarter be different? We'll find out soon.

One crucial point is that Tata Sons is expected to support Tata Teleservices in managing its high debt levels, which is important for evaluating the company's long-term growth potential.

Last year, Tata Sons committed an additional Rs 20.6 bn to the struggling Tata Teleservices. So far Tata Sons has repaid over Rs 460 bn of its debt.

#2 Sectoral Optimism

The recent tariff hikes by telecom operators, ranging from 10% to 25%, and growing data consumption will boost the average revenue per user (ARPU) for Indian telecom companies. This increase in ARPU, along with reduced capital expenditure, will improve the financial health of the industry.

Lower network investments after the 5G rollout and limited spectrum renewals will help reduce capital expenditure. This will enhance the return on capital employed (RoCE) and help the industry reduce debt. As a result, the credit profiles of telecom companies will improve.

Industry ARPU is expected to reach a decadal high by the end of the next financial year. This is a significant increase from last financial year's ARPU.

Two main factors will drive this rise. First, the recent 17-19% tariff hikes by telecom companies. Second, organic growth in data usage due to increasing 5G penetration.

Customers are upgrading their plans because of rising content consumption. Video streaming, social media, and online gaming are driving this trend. As a result, ARPUs are increasing.

This sectoral optimism is indirectly benefiting Tata Teleservices' share price. The positive outlook for the telecom sector boosts investor confidence.

Despite Tata Teleservices' challenges, favorable industry trends contribute to a more optimistic view of its future performance.

What Next?

Tata Teleservices (Maharashtra) aims to drive future growth by focusing on digital transformation for SMEs.

The company plans to fortify its smart digital solutions portfolio. This includes expanding its offerings in converged communication solutions, cloud infrastructure, cybersecurity, collaboration and productivity, and digital connectivity.

It has undertaken several key initiatives. The company plans to enhance omni-channel communication through the Smartflo WhatsApp business platform.

The Smartflo UCaaS suite of solutions will offer a unified communication experience for both customer-facing roles and internal teams. Partnering with Microsoft, the company will facilitate cloud migrations, enhancing flexibility and agility.

Smart workspace solutions will leverage AI to streamline repetitive tasks, allowing SMEs to focus on business expansion.

To counter the decline in traditional voice services and the impact of 5G on enterprise data services, the company is diversifying its product portfolio.

It is focusing on expanding SIP trunking, cloud-based communication, and unified communication solutions. Additionally, it is also enhancing its offerings in internet leased line and SD-WAN to maintain competitive margins.

Despite these positive strategies and initiatives, it is important to highlight that the company is facing heavy losses and high debt. This poses a significant challenge to its future growth and financial stability.

How Tata Teleservices Share Price has Performed Recently

In the past five days, Tata Teleservices share price has rallied 7%. In the last month, it is up 3.8%.

In 2024, so far its share price has tumbled 10.9% and its up 8.9% in the last one year.

The stock touched its 52-week high of Rs 109.1 on 15 September 2024 and a 52-week low of Rs 65.3 on 04 June 2024.

About Tata Teleservices

Tata Teleservices is engaged in the business of wired and wireless telecommunication activities and holds a Unified License with Access Service Authorisation in Maharashtra and Goa and also in the internet service provider category.

The company is focused on providing various wireline voice, data, and managed telecom services.

To know more, check out Tata Teleservices financial factsheet and its latest quarterly results.

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

Happy Investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...