Why Tata Teleservices Share Price is Rising

On Tuesday, 26 November 2024, telecom stocks got a boost and rallied up to 20%.

Heavy volumes took Vodafone Idea shares up by almost 19% to Rs 8.3.

Meanwhile, Indus Towers and Bharti Hexacom shares increased by 4-5%.

Apart from these, one other little-known company that saw a spike in its share price was Tata Teleservices.

Shares of the company ended 20% higher.

So, what suddenly sparked a steep rally in these shares?

Let's find out.

Why Tata Tele Share is Rising

#1 Waiver on Bank Guarantees

The surge in these telecom and telecom related stocks comes following the Union Cabinet's decision to grant relief to telecom companies by waiving the bank guarantees owed for spectrum purchases up to 2022.

The Department of Telecommunications (DoT) has favoured waiving the bank guarantees telecom operators owed for buying spectrum.

The 2021 reforms eliminated the bank guarantee requirement starting with the 2022 auctions.

The moratorium for spectrum auction dues ends in October 2025.

Vodafone has emerged as the biggest beneficiary of this approval as it owes the highest amount. It recently failed to pay its second bank guarantee of around Rs 3.5 bn in November 2024, which covered spectrum purchased at an auction in 2012.

#2 Value Added Tax Credits

Apart from the above reason, the sentiment for telecom companies has improved following the Supreme Court decision last week which allows telecom companies to claim central value-added tax credits on duties paid for essential infrastructure items like tower components, shelters, and other related materials.

The ruling overturned a previous judgment by the Bombay High Court, which had classified these items as non-capital goods, denying telecom companies the right to claim the credit.

This decision has come as a significant relief for Tata Teleservices as it grants them the ability to claim tax credits that were previously considered ineligible.

What Next?

Despite being a loss making company, Tata Teleservices has strong growth plans in place and it's looking 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.

Additionally, it is also enhancing its offerings in internet leased line and SD-WAN to maintain competitive margins.

Tata Teleservices (Maharashtra) is also aiming to drive future growth by focusing on digital transformation for SMEs. It has one of the widest reaches in the enterprise segment through 1,500+ partners.

Nevertheless, as we mentioned above, the company is facing heavy losses and high debt. This poses a significant challenge to its future growth and financial stability.

Financial Snapshot

Rs m, standalone	FY20	FY21	FY22	FY23	FY24
Net Sales	10,777	10,437	10,938	11,062	11,917
Growth (%)	-16%	-3%	5%	1%	8%
Operating Profit	4,562	5,130	4,846	5,093	5,436
OPM (%)	42%	49%	44%	46%	46%
Net Profit	-37,141	-19,967	-12,150	-11,447	-12,284
Net Margin (%)	-345%	-191%	-111%	-103%	-103%
ROE (%)	0.0	0.0	0.0	0.0	0.0
ROCE (%)	-457.8	-542.6	35.8	43.5	53.4
Dividend (Rs)	0.0	0.0	0.0	0.0	0.0
Debt to Equity (x)	-1.0	-1.1	-1.1	-1.0	-1.0

Source: Equitymaster

For a detailed view, check out the company's factsheet and its latest quarterly results.

How Tata Teleservices Share Price has Performed Recently

In the past 5 days, Tata Teleservices share price is up 23%.

In 2024 so far, the stock price has fallen 9%.

Tata Teleservices has a 52-week high of Rs 111 touched on 19 July 2024 and a 52-week low of Rs 65 touched on 4 June 2024.

In the past 1 year, shares of the company have fallen by 6%.

Here's a table comparing Tata Teleservices with its peers -

Comparative Analysis

Company	Tata Tele	Bharti Hexacom	Hathway Cable	MTNL	Railtel
ROE (%)	0.0	11.4	1.9	0.0	14.2
ROCE (%)	53.4	15.7	2.6	-8.9	19.7
Latest EPS (Rs)	-6.5	10.1	0.5	-52.7	8.1
TTM PE (x)	0.0	129.5	37.4	0.0	48.3
TTM Price to book (x)	-0.8	12.6	0.7	-0.1	6.7
Dividend yield (%)	0.0	0.3	0.0	0.0	0.7
Industry PE	69.1
Industry PB	7.9

Source: Equitymaster

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