Tata Communications secures $250 mn sustainability loan; here’s how stock reacts

Tata Communications has secured a five-year $250 million sustainability-linked loan (SLL) from three foreign lenders - Australia and New Zealand Banking Group Limited (ANZ), DBS Bank, and Export Development Canada (EDC). ANZ acted as the lead sustainability coordinator for the loan, while DBS Bank and EDC were the joint sustainability coordinators, the Tata Group said in an exchange filing last evening. The company will mobalise the fund to meet carbon emission reduction targets as it aims to become “Net Zero” across its global operations by 2035.

Reacting to the news, Tata Communications shares opened 0.5% higher at ₹1,875.55 against the previous closing price of ₹1,864.95 on the BSE. The stock, however, lost momentum and slipped into negative terrain, falling as much as 0.47% to ₹1,856.05, while the market capitalisation slipped to ₹53,070 crore. The counter fell over 1% from the opening level, with 1,274 shares changing hands over the counter in the first 30 minutes of trade.

At the current level, shares of Tata Communications trade 11% lower than its 52-week high of ₹2,085 touched on April 3, 2024. The stock has rebounded over 22% from its 52-week low of ₹1,515.50 hit on June 30, 2023. The counter has risen over 15% in the last one year and nearly 3% in a month. 

In the exchange filing, Tata Communications said this was the company's first sustainability loan under its new SLL framework. Through the framework, a first of its kind in the sector in India, Tata Communications intends to link its funding with key objectives such as carbon emission reduction targets (non[1]financial covenants) that are core and material for the company’s long-term sustainability performance.

As per the company, the interest rate margin of the loan will be adjusted up or down in accordance with the progress on its carbon emission reduction targets. “Such short-term targets, creating a link between the cost of banking facilities and progress achieved on key environmental milestones, are consistent with the company’s longer-term ambition to be Net Zero across its global operations by 2035.”

“The pioneering transaction is a landmark step towards supporting our belief in sustainability as a value creator. We intend to drive positive change not just within our own operations but also play a leading role in sustainable finance,” says Kabir Ahmed Shakir, CFO, Tata Communications.

"We are confident that this innovative financing model will pave the way for a more resilient, more responsible future for businesses of all sizes and locations,” Shakir adds.

For the financial year ended March 31, 2024, Tata Communications reported a 17.5% year-on-year rise in its consolidated revenues to ₹20,969 crore, while data revenue crossed the ₹17,000 crore mark, growing by 21.9% on a full-year basis.

For the fourth quarter of FY24, the consolidated net profit of Tata Group company dropped by 1.5% to ₹321.18 crore compared to ₹326.03 crore in the same period last year. Sequentially, the profit grew 7.2 times from ₹44.81 crore in the December quarter of FY24, led by the reversal of past Tata Communications (Bermuda) tax losses, totalling ₹186 crore.

The gross revenue of the company rose 24.6% to ₹5,692 crore in Q4 FY24, from ₹4,569 crore in the corresponding period last year. The revenue of the company stood at ₹5,633 crore in Q3 FY24.

On the operating front, EBITDA grew 2.1% YoY to ₹1,056 crore, while the margin dropped by 408 basis points to 18.6%.  The data revenue grew 26.9% to ₹4,656 crore versus ₹3,670 crore in Q4 FY23.

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