Tata Communications Ltd

NSE:TATACOMM

Earnings Call Transcript 2023-Q1

[Chirag Jain, executive]

Good evening, everyone, and welcome to Tata Communications Earnings Conference Call for Q1 FY '23. We are joined today by our MD and CEO, Mr. Amur S Lakshminarayanan; and our CFO, Mr. Kabir Ahmed Shakir. The results for the quarter ended 30 June 2022 have been announced yesterday, and the quarterly fact sheet is available on our website.

We also conducted our investor meet Empowering Tomorrow on 14th June 2022 in Mumbai. A recording of the entire event and the transcript is also available online under the Presentations section on our Investor Relations page. I trust you would have had the chance to look at the key highlights.

We will commence today's call with comments from Lakshmi, who will share his thoughts on the business and the long-term outlook; followed by Kabir, who will share his views on the financial progress achieved. At the end of the management's remarks, we will have opportunity to get the queries addressed.

Before we get started, I would like to remind everyone that some of the statements made or discussed on the conference call today may be forward-looking in nature and must be viewed in conjunction with the risks and uncertainties we face. A detailed statement and explanation of these risks are included in our annual filings, which you can locate on our website, www.tatacommunications.com. The company does not undertake to update these forward-looking statements publicly.

With that, I would like to invite Lakshmi to share his views. Over to you, Lakshmi.

[Amur Lakshminarayanan, executive]

Thank you, Chirag. Good afternoon, everyone. A disciplined execution of our reimagined strategy through the products to platform shift and deepening our customer engagement has been yielding positive results. We saw a profitable data revenue growth despite ongoing supply chain and OEM lead time issues, which has worsened in this quarter, seeing a stretch of almost 4x from the initial 12 to 16 weeks delays.

We've delivered a good year-on-year data growth of 7.6% with very strong profits. Our data business remains instrumental to our overall revenue. It improved sequentially by 1.2% coming in at INR 3,340 crores. Fixed part of the data portfolio increased by 9% year-on-year with India growing at double digits. And after several quarters, international markets are showing growth for us again.

Our Q1 consolidated revenue was INR 4,311 crores, improving by 5.1% year-on-year and 1.1% Q-on-Q. EBITDA for the quarter stood at INR 1,077 crores, increasing by 9.2% year-on-year and 3% Q-on-Q while the EBITDA margin stood at 25%. The profit for the quarter was at INR 544 crores, improving by 83.6% year-on-year and 49% quarter-on-quarter. Voice business continues to degrow in line with the industry trends. The business declined by 4.7% year-on-year and improved 4.6% Q-on-Q.

Our order book for the quarter was strong and improved year-on-year in good double digits. Our funnel additions also have been healthy across the portfolio with a strong buildup in our digital platforms and services and incubation offerings. This results from our regional investments in sales and marketing as well as our products and platforms.

Let me now give you some more details about our data portfolio. Our core connectivity services grew by 3.6% year-on-year and 1% quarter-on-quarter, powered by consistent performance, high reliability, resilience, predictable routing and faster restoration. Our digital platforms and services portfolio has grown at 12.3% year-on-year. Our DPS segment is intended to consistently deliver more holistic solutions, stitching multiple products together for our customers' ecosystems. We're enabling our customers to collaborate and connect seamlessly over our secure digital solutions. Our entire portfolio, except for collaboration, witnessed double-digit growth. In fact, some products and platforms are showing greater than 20% year-on-year growth.

We have called out in our previous discussions about the fundamental shift being witnessed in our SIP usage business as the traffic is moving towards channels like IP and app-based calling. Our collaboration and managed CPaaS portfolio reduced by 3.1% year-on-year and 3.3% Q-o-Q, primarily driven by a dip in usage-based volume. However, we are seeing an increased customer interest in our newer offerings, namely GlobalRapide, InstaCC and the newly launched DIGO. A leading Asia-based global airline is accelerating their digital transformation through our GlobalRapide platform, enabling it to be more agile in the new world's hybrid working environment.

We brought onboard an end-to-end managed solution to boost the productivity by providing a holistic collaboration experience as well as ensuring cross-border regulatory compliance. Last quarter, we launched DIGO. It aims to be the preferred choice of platform for enterprise customers to deliver customized, converged and contextual conversations for their end consumers on the go. Some of our early wins includes Asia's leading taxi-hailing service and a food delivery service in Japan. We continue to onboard new customers and engage in deeper richer engagements with key enterprises.

Moving on to our cloud hosting and security portfolio. They registered a growth of 24% year-on-year and a healthy 9.3% quarter-on-quarter. As part of this, we are happy to be associated with the country's digital India initiative with the National Health Authority. They entrusted us again to deliver the largest health cloud for the government of India as they roll out the world's largest insurance and national health ID schemes with the vision of extending universal health coverage for all its citizens. Our cloud and security offering will enable the government to roll out their national health card and register all the citizens for their unique health ID digitally.

Now about our next-gen connectivity offerings. It improved by 15% -- 15.5% year-on-year but it declined sequentially by 13.4% quarter-on-quarter. The decline was due to onetime revenues in Q4 FY '22 and also the supply chain issues, which are prolonging the project deliveries, thus delaying the revenue recognition. We are witnessing year-on-year growth and are winning on the back of our newly launched enhanced IZO Internet WAN and SD-WAN variance. Our funnel and order book continues to be healthy in this segment.

To give you an example, a leading global automotive manufacturer implemented an advanced cloud connectivity solution, which reduces network complexity and improves user experience. IZO Network Edge, multi-cloud connect offering simplifies the company's access to public cloud and the adoption of hybrid WAN across multiple regions in the world. This IZO network edge multi-cloud connectivity service platform will enable the automotive manufacturers' multicloud journey by giving them agility and flexibility to add services and bandwidth.

Going further, our Media business is making strong strides as we deliver an enhanced viewing experience for millions of fans globally for Formula 1 to MotoGP, to foraying into regional sporting events we are leading the media ecosystem with best-in-class solutions and delivering an exciting user experience.

Our Media Services revenue grew by 40.5% year-on-year and 16.8% quarter-on-quarter. And our offerings and the incubation portfolio progressed multifold as the revenue for this quarter more than doubled compared to Q1 FY '22, growing by 140.7% year-on-year and 9.9% Q-on-Q.

This is an evolving space where intelligent technology meets smart networks to drive the next wave of digital adoption. We are witnessing encouraging results across all our offerings as we innovate in this expanding mobility and IoT services ecosystem. With our suite of offerings, we remain committed to building an innovative and scalable platform to empower enterprises for their tomorrow today. We will continue to explore opportunities across growth areas, deliver exceptional customer experiences and at the same time drive sustained and profitable growth momentum.

With that, I would like to invite Kabir to give you an overview of our financial performance. Over to you, Kabir.

[Kabir Shakir, executive]

Thank you, Lakshmi. Good afternoon, everyone, and thank you once again for joining our Q1 FY '23 earnings call. Let me take this opportunity to go through the financial performance of the company for this quarter in a little bit more detail.

The Q1 of FY '23 was another healthy quarter for Tata Communications with strong operating performance. Our consolidated revenue for the quarter stood at INR 4,311 crores, improving by 5.1% year-on-year and 1.1% on a Q-o-Q basis. For Q1, our EBITDA was INR 1,077 crores, reporting a margin of 25%. Our absolute EBITDA grew by 9.2% year-on-year and 3% sequentially. As we augment our staffing capabilities, internal and external engage in pick up pace, we would see some costs coming back in a phased manner as we progress into FY '23.

Our data revenue growth continued to witness a positive growth momentum despite the challenges around the OEMs and the delayed deliveries which Lakshmi pointed out. Our lead indicators in terms of funnel, order book and win rates are progressing in the right direction, giving us the confidence to step up growth once the supply chain issues are sorted.

Voice business declined 4.7% year-on-year, though it improved by 4.6% sequentially. Data revenue for the quarter stood at INR 3,340 crores, improving by 7.6% year-on-year and 1.2% on a quarterly basis. We witnessed a strong year-on-year growth across all segments of our data portfolio, except for collaboration, which has declined on the back of usage-based revenues dipping further this quarter.

Moving to subsidiaries. TCTS was affected by lower project-based revenues this quarter. The revenue for TCTS declined by 4% year-on-year and 5% quarter-on-quarter, coming in at INR 317 crores. However, with the strengthening of our internal processes and improving the quality of our revenues, TCTS reported a positive EBITDA of INR 16 crores this quarter.

Our payments business continues to make steady progress as we expand our portfolio under the franchisee model we launched last year. We're witnessing a mixed benefit as the ATMs under the franchisee umbrella contribute roughly 1/4 of our total revenues today. Our focus is on further accelerating the deployment of such ATMs as we move ahead in the fiscal year and achieve scale in operations.

Revenue for the quarter came in at INR 44 crores, improving by 3.4% quarter-on-quarter and 17.1% year-on-year. EBITDA for the quarter was only INR 1 crore, mainly impacted by the -- due to increase in CRA expenses as they increase rates owing to inflation and higher fuel costs.

Having achieved financial fitness much ahead of our committed time, we have laid strong foundations for the company's future. With strong profits and free cash flows, we have a compelling posture globally to drive to the next phase. I'm pleased to see significant and consistent improvement in all the financial KPIs as we see the finance strategy positively impacting various parts of the business.

PAT for the quarter is at INR 544 crores as compared to INR 296 crores in Q1 of FY '22. Our PAT margin came in at 12.6% for Q1 and improved sequentially by 410 basis points and by 540 basis points year-on-year.

Our journey of balance sheet hygiene continues and we received yet another tax refund this quarter. Despite adjusting for the interest cost benefit from that, PAT is significantly higher both in Q-over-Q and year-on-year terms. CapEx for the quarter stood at INR 329 crores, though our approved CapEx is greater than INR 500 crores. Much of the variance can be explained due to the supply chain issues and the delayed deliveries, which we have already called out.

Our CapEx spend should accelerate as we deliver on some of these opportunities in the near to medium term. ROCE for the quarter is at 29.1%. Net debt as of the end of the quarter stands at INR 6,134 crores. Net debt-to-EBITDA is now at 1.4x compared to 1.9x a year earlier.

Our cash flow for the quarter came in at INR 955 crores. We changed the definition of our free cash flow from just EBITDA less CapEx to a traditional definition of FCF. More details around the same are available in our fact sheet. All historical numbers have been restated accordingly for a fair comparison.

While the underlying metrics are already healthy and improving versus prior period, improving our balance sheet even further, they are optically even better this quarter due to the timing differences, the supply chain issues impacting CapEx and therefore, cash flow net debt, the dividend payout, which happened in July, impacting the net debt reported for the quarter.

Delivering on value addition, innovation and financial fitness will continue to be at the core of our organizational strategy. We have built a good foundation and continue to strengthen it every quarter as we commit to driving exceptional customer experiences and develop innovative solutions to accelerate growth.

This brings us to the end of the management commentary. I'll now ask Chirag to open the forum for Q&A. Thank you for your attention.

[Chirag Jain, executive]

Thank you, Kabir. We'll wait for a minute for the queue to assemble. The first question is from the line of Sanjesh Jain of ICICI Securities.

[Sanjesh Jain, analyst]

Yes. And thanks for providing opportunity. A few questions from my side. First to Lakshmi, the revenue growth and net revenue growth, right, there is quite a large divergence in this quarter, well, favorable for the company. But I want to understand what is driving net revenue faster than the gross revenue. It is better renegotiation, more on net sales. So what is contributing to the net revenue growth over and above the gross revenue growth? And how should we think about this going forward? That's one.

Second, on the order book, you did mention that order book has grown at a healthy double digit, led by the DPS and the incubation and you also mentioned about the National Health card. Can you give us some more color on the order book? When you say double-digit, how much it really goes into replenishing the existing contract? How much will it contribute to the growth as well?

Number two, how much really this national health card kind of a large government project really help us in pushing the growth? That's on the second.

Third, on collaboration side, that piece looks like has been struggling. We are down from INR 6 billion revenue per quarter now to INR 3.7 billion. And we have been quite optimistic on the CPaaS. When should we start seeing collaboration also contributing to the growth? So that's on the business side for Lakshmi.

[Amur Lakshminarayanan, executive]

Thanks for the questions. I'll take -- Sanjesh, I'll take the -- in the reverse, talk about the order book first and then come to the net revenue part, which Kabir will add more color to. On the order booking, as I said, we are -- we have seen a good double-digit growth. I think it's coming across all the portfolios of our offering, both in India as well as in the international markets.

I think I called out the investments in terms of sales and marketing that we had begun to do in Q3, Q4 of last year, and that's beginning to show results as well as the enhanced products that we have launched on the IZO Internet as well as on other areas.

So all of these are helping us to grow the order book. And even though we delivered a strong order booking, the funnel has been filled back. And therefore, the funnel is also quite strong, and we are confident of building the funnel going forward. So that's on the order booking.

I think you asked a specific question on contracts like NHA, how does it help to sharpen our products. This has been an excellent relationships. In the NHA 1.0, we provided our IZO cloud solution, which was a government community cloud created specifically for the government of India to ensure that it complies with all the requirements of the government in terms of the compliances that are required.

We won the NHA 2.0. This is a massive undertaking by the government and the demands on the solution was even greater. And it includes all the cloud security offerings as well embedded into this and we'll have several new features. So this will overall strengthen our cloud portfolio quite significantly. And we will bring similar capabilities to bear in IZO Cloud to other industries as well as the recently launched financial cloud that we launched a couple of quarters ago.

So -- and it's a testament to both our execution as well as the strength of the product. We believe the IZO Cloud has a niche space. We don't directly compete with the public cloud. We have a multi-cloud offering. But it does have a niche positioning and a niche benefit that we are offering to the market, and this growth has been very, very good to see.

The question on collaboration. We launched the -- yes, you said that the new CPaaS had mentioned some quarters ago about the possible launch. We were building out the product, the platform. This platform has been launched now. And as I said, we are seeing very, very good conversations with the customers and the funnel is building up. This is fairly unique in our opinion in terms of this platform, offers very simple ways for an architect to deliver a very converged communication experience for their consumers.

It's scalable, and it offers a programmable workflow, intelligent AI-driven chatbots and other capabilities. So as we further develop a product, further enhance the capabilities and we take it to the market. We are quite confident that this will get good traction, not just in India, but also in the international markets.

[Kabir Shakir, executive]

Let me answer the question on the NR growth that you asked, Sanjesh. Primarily, at a very uber level, it is just product mix. And even if I lift the hood between core connectivity and DPS, also much of the growth is product mix. There are details around, yes, more on-net and less off-net, which is therefore help the profitability.

So again, that is a product mix thing. And also, a few of the contracts where we had fixed costs and waiting for the usages and now the usage has started coming in. So therefore, the profitability of each of those individual things have looked better as well. So again, product mix related. So at a micro, mid- and macro level, all 3 point towards improving product mix, which has helped in NR growth being better than GR growth.

[Sanjesh Jain, analyst]

And the trend should continue?

[Kabir Shakir, executive]

Well, it again depends on the kind of customer orders that we have. And I -- hopefully, it should have that same trend.

[Sanjesh Jain, analyst]

And my whole question was, was it by design that we are changing this or just coincidental to what is happening?

[Kabir Shakir, executive]

No, it's not design. It's on mix, it's not that these are products that can be alternated by the customer. So if someone wants core connectivity, they'll buy core connectivity. If someone wants CPaaS, they're going to buy CPaaS. It's not -- you can't switch them. So it's just a mix effect of how our order book pans out.

[Sanjesh Jain, analyst]

Got it. Got it. Next set of question. One on the EBITDA margin guidance of 23% to 25% range, which you mentioned in the previous quarter more on the lower end. It looks like you have been performing much better. You're on the upper end. Are you relooking the guidance or...

[Kabir Shakir, executive]

Well, Sanjesh, I've never given a guidance for a quarter or I've always mentioned long-term range that we would like to operate in. Earlier, if you remember, we had a much more wider range of 22% to 25%. And we heard the market feedback. We made it tighter at 23% to 25%. And there will be times when we will operate at the lower end. There will be times when we operate at the higher end. And in last quarter, I also pointed out that it will be more back-ended as things open up, offices open up, travel happens, we start funding marketing programs to accelerate growth.

All of that will happen in the way in which the programs intend to happen and costs intend to come. So we did not call out and say for this quarter or -- on that part. I've just given that range and we have spoken many times and to many other analysts on the call also, I'm a fan of a range. It gives the right elbow room for the management to take the right calls and not be pinned down by any target. So my request is to take it in that spirit only, that -- and 22% to 25%, I think it's quite a tight enough range for us to operate under.

So it's, of course, good news that we are operating at the higher end of the range. We continue to operate for the last 1.5 years, 2 years on the higher end of the range. But I don't want to get fixated there because if I am getting right proposals from the business to fund marketing, to aid customer success, we are not going to say no because we are just pinning ourselves to some guidance. We should do what is right for the business, Sanjesh.

[Sanjesh Jain, analyst]

Got it. Got it. One last question on the annual report. It says about asset held for sale, we have certain real estate asset being classified there. What is the realization and what we are looking at it and what time frame are we putting on it? It's less than 12 months, right, if you put there?

[Kabir Shakir, executive]

Yes. I mean, we don't know, normally, the accounting policy says when the probability of sales becoming higher, that's when you have to classify as asset held for sale. So there are about 10, 11 properties that we have, which we have classified under that category.

Actually, 2 of them, the sale consideration has been received already in Q2. So that will get reflected when we talk about Q2. But other things will probably take its own time. I can see one of the properties was there for -- since the time I actually joined the company. And it has its own vagaries as to when that will fructify. So they will happen in the due course. All of them have the high probability of happening in the next 12 months, and that's the reason why we have put it in there, Sanjesh.

[Sanjesh Jain, analyst]

And what will be the cumulative realized -- I know we can't tell it exactly, but what is the range are we looking at there?

[Kabir Shakir, executive]

No, the one that -- the number that you see, which is held for sale is about INR 152 crores.

[Sanjesh Jain, analyst]

But that will be on the book value, right? That won't be on the fair value, right?

[Kabir Shakir, executive]

That is the book value. It also depends on as we monetize property by property. Some of them are a couple of buildings, which are for data centers, which will be done at cost. So that may not happen. Some of them are very low cost we are carrying since inception, and they will have a higher premium market value. And 2 of them have concluded, so I know the value. The balance have not been concluded. So I don't know the value. Sanjesh, that's the honest answer.

[Chirag Jain, executive]

The next question is from the line of Gautam Rathi (sic) [ Nishit Rathi ] from Chanakya Wealth.

[Nishit Rathi, analyst]

This is Nishit. Just a question. So just wanted to understand, had the supply chain disruption not happened and if things were normal this quarter, what could have been the impact that on our revenue growth? If you could just kind of help us quantify that number? How should we think about it?

[Amur Lakshminarayanan, executive]

No, I can't put a number, Nishit, exactly on it. There are -- if you look at that, it has impacted in many ways, some of them on immediately deliverable projects that we could have realized revenues on. Some of the OEM delays are in building the core capacity itself, which is not directly attributable to this quarter's revenue, but potentially delaying the capacity enhancements for the future.

So that's probably the answer I can give. We are not calling out specifically. The delays I have called out in terms of the extent of delays have increased quite significantly with these OEMs quite significantly, which I mentioned in my opening remarks. So those are the main attributes.

But having said that, we are working to look at our orders, placing some of the orders ahead of time, building up some of the inventory. And those are the actions that we are taking and working very, very closely with all the OEMs concerned because they've been working shoulder to shoulder with us along with our customers, giving jointly the commitments and so on. So we are doing everything that we can to ensure that we can deliver as expected by our customers and to turn up the revenues on the orders.

[Nishit Rathi, analyst]

And Lakshmi, are you seeing some progress being made there? Are you starting to see that -- is there -- are you seeing that in a quarter or 2 that these things can start to -- when do you see normalization come through, is it still very murky for you to kind of call that out right now?

[Amur Lakshminarayanan, executive]

Nishit, I think this is like looking into the crystal ball, talking to many of the -- at the very senior levels with these OEMs, all of them are unable to give any firm view. And by all reckoning, this is likely to continue for several quarters is what -- so yes, there is no clear outlook on when this will get fixed.

[Kabir Shakir, executive]

In fact, let me chip in as well. The lead times are only getting worse as the time goes. That's what Lakshmi also mentioned in the commentary. Yes, so it is -- what used to be 12 weeks, it's now 4x, 5x is the kind of lead times that we are actually seeing. So and these are all linked to, of course, the global events that are happening. I don't think any of us can predict when the Russia-Ukraine crisis is going to come to an end. That has an impact on neon. That has an impact on semiconductors. That has an impact on the equipment. So it has a cascading effect initiative. So if we hazard a guess and take a guess, I don't think any of us are going to be right in that.

[Nishit Rathi, analyst]

No, no, I fully understand that. I was just trying to understand, are there -- because like some of the companies that we have, they say that they've started trying to work with or trying to modify their needs to the conductors that are available. So is there any way to come around that, but I can understand it's a fairly...

[Amur Lakshminarayanan, executive]

Yes. I think that's what I said. I think we have taken all the steps to mitigate in terms of wherever we could place some advanced order, look for alternative solutions. So all of that is what we are working with in order to make sure that we can serve our customers in the best possible way.

[Nishit Rathi, analyst]

And just one last question from my side. Is there some clarity that you can give on your -- on what our role in 5G could be given that all the -- now private 5G is being allowed,, how will Tata Com participate and what will be our role and along with all the group companies? If there is some sense that you could share out there, that would be very helpful.

[Amur Lakshminarayanan, executive]

It would be the best thing in building capabilities private network. We have already got ads set up in Pune. We have done successfully pilots on private network across heterogeneous network, including LTE-M license and 5G or various use cases for 3, 4 customers. We are taking this capability internationally as well.

So we are building strongly the capabilities on private network with a strong platform and a digital fabric in the campus. You already had our strengths with LoRa IoT for use cases, and we are expanding that to other use cases that can be served through this fabric, be it LTE-M license or 5G, to give the right SD 4.0 use cases to our customers. So that is something that we are doing and investing in.

[Nishit Rathi, analyst]

So Lakshmi, is it fair for me to understand that, A, our -- are the back -- the fiber network that we have, all the assets, the digital infrastructure that we have, that becomes -- the utilization of that kind of goes up. And then on top of it, we are building solutions and services, which will also be a capital-light way to enable the companies to kind of participate with these solutions. Is that the right way to think about it?

[Amur Lakshminarayanan, executive]

So you're now asking a more general solutions about our products and platforms or specific?

[Nishit Rathi, analyst]

No, specific with respect to 5G, right? Like...

[Amur Lakshminarayanan, executive]

Yes. So the 5G private network will make use of some of our capabilities. So for example, a 5G private network beyond basic security that 5G offers is going to require a lot more device security, which we will bring through our securities that we have built into our new platform, right, in terms of device security and other securities. We also bring an orchestration capability to be able to deliver a service.

As I said, a company does not have to immediately go for a 5G because a lot of use cases, we believe, can be delivered through LTE-M license to begin with. And as they get good at using those use cases, and they see the returns on those, people can upgrade that seamlessly to a 5G network. So those are the kind of capabilities that we will deliver. And MOVE platform, for example, will enable companies to seamlessly move from within campus to outside the campus. So if your question is will 5G private network make use of our current capabilities and other platforms, the answer is yes.

[Chirag Jain, executive]

Next question is from the line of Mr. Deepak Poddar from Sapphire Capital.

[Deepak Poddar, analyst]

Am I audible?

[Chirag Jain, executive]

Sir, can you please be louder? Your volume is very low.

[Deepak Poddar, analyst]

Okay. Now it's better?

[Chirag Jain, executive]

Yes.

[Deepak Poddar, analyst]

Okay. Sir, I just wanted to check little on the -- I mean, if you have to look back over the last 10 years, I mean, our revenue has been hovering around, I mean, INR 17,000 crores, right? The profitability has improved. So can you throw some light that how we see growth basically going forward as well? And what led to flattish kind of, I mean, revenue in the last 10 years, yes?

[Amur Lakshminarayanan, executive]

Yes. So I have to go back to the very basics in this. So as a B2B player, you would see that a lot of players in their revenue side being stagnant as well as on many other parameters. Partly the reason is network has been commodity. More and more capacity build is happening and more and more capacity and volume is being sold, but there is a greater price erosion. And that's been the nature of the business for the last several years.

Second is, this industry also has been undergoing a lot of technology disruptions, I'd say, right, in terms of -- and one technology comes and cannibalizes another. So the voice gets cannibalized by data. MPLS gets cannibalized by Internet. And I can give many, many more examples in this industry.

So these are the reasons why the numbers have been stagnant across the B2B space for very many companies, including ourselves. So we have undergone a lot of transformation moving from a voice-only company to voice and data being a wholesale to enterprises. And a lot of these technology changes has been at the heart of why revenues have been stagnant. And the second is the company also had previously certain products like data centers and so on, which are sold in the past. And therefore, the overall number over the last 10 years looks the same.

[Deepak Poddar, analyst]

And how do we see next 3 to 5 years, maybe in terms of growth part?

[Amur Lakshminarayanan, executive]

Yes. So that's why I think we talked about our strategy to say to go beyond network to be digital platforms and solutions, which is over and above the network what can be done. And DIGO is a good example. DIGO makes use of our strong voice, messaging, global network and on top of that capability, as a foundation. We are building a platform that enables enterprises to deliver a very simple, flexible, secure customer engagement platform capability.

So we'll deliver everything programmable workflows, everything programmable, truly omnichannel experiences and so on and so forth, which will put the enterprises at a good step in delivering very good customer experience for their consumers. So those are the kind of things that we are building, which will sit on top of the network. So our cloud offering is exactly that. It's IZO Private Cloud that sits on our network. And that's what we are able to offer an integrated network and a cloud solution to our customers. Same with network security, combined with our cloud and other security offerings. So we are building our products and platforms sitting on top of that core capability of network and which are what we call as digital platforms and solutions. And that's part of the strategy that we articulated.

[Deepak Poddar, analyst]

Yes, fair enough. And my second question is regarding your cost part. I think in your opening remarks, you did mention that we expect some of the costs to come back in the phased manner in FY '23. So any kind of margins impact that can have on it? Yes, any comments will be helpful.

[Kabir Shakir, executive]

Despite all these costs coming back, we will stay within our guidance of 23% to 25%. So that's where I can't comment any further than that.

[Chirag Jain, executive]

The next question is from the line of Mr. Abhishek Singhal from Naredi Investments.

[Unknown Analyst]

Good afternoon, sir.

[Chirag Jain, executive]

Abhishek, can you be please a little louder?

[Unknown Analyst]

Hello? Am I audible?

[Chirag Jain, executive]

Yes, please.

[Unknown Analyst]

Congrats on a good set of numbers. I have few questions. First, in the consolidated statement, the other income is INR 234 crore. So we want its full detail from where it has come?

And second question, as per our view, revenue growth in data core connectivity is stable, and in data, digital performance of this growth in double digit. In quarter 1st, EBITDA margin in data, core connectivity is 5%, and data digital performance has been 7.1%. So what EBITDA margin we expected from data digital platform performance services in next 2 to 3 years?

[Kabir Shakir, executive]

Abhishek, let me take both the questions. Firstly, the other income includes, as I mentioned in my commentary, an IT income tax refund of the past years. So there is an interest component within that refund, which we are -- we classify into other income. So that's the majority of the INR 234 crore that you talked about.

On your next question, in terms of EBITDA for each of our portfolios, I have again encouraged all of you to look at our total portfolio as a company as a whole. There are multiple moving parts that we have. We have a voice business that declined. We have a data business, which is where our focus is, which grow. We have a core connectivity business, which has a very different growth profile, and we have a digital platform and solutions business, which has a different growth profile and in incubation services separately, which have a very different focus and attention. So it is constantly a game of resource allocation that the management does in order to activate the right outcome for each of the businesses, not just for the short term but also for the long term.

So I would say the businesses that are today small need that support, need that air cover in order for them to grow into large businesses, the potential that they actually belong. So my encouragement to all of you again is to go back to the 23% to 25% as a consolidated weighted average margin that you should look at and leave that to the management to be able to do the resource allocations dynamically depending on where we get the right returns for that individual business and for Tata Com as a whole.

[Chirag Jain, executive]

Next question is from the line of Mr. Pratap Maliwal from Mount Intra Finance.

[Pratap Maliwal, analyst]

Can you hear me, please?

[Chirag Jain, executive]

Yes, please.

[Pratap Maliwal, analyst]

Yes. So just looking at the fact sheet. So when we come to the digital platform and services revenue, when we look at the breakup, you see that collaboration and CPaaS as a percentage of revenue is declining now for the past 4 to 5 quarters. And even the next-gen connectivity, kind of hovering around the 15% to 16% range mostly. Now when we look at our growth trigger in terms of revenues, SIP Trunking was an important part, and our next-gen connectivity has the IZO and the SD-WAN. So with these maybe segments not filing as we hope, where does the revenue trigger come from? That's my first question, if you could answer, please.

[Amur Lakshminarayanan, executive]

So that's on the digital platforms and solutions, as we called out, collaboration has primarily been declining because of the larger usage component of the GSIP. And that is something that we called out. We are still calling that out. And that is -- and you're right, and that was a large part of our digital platforms and solutions before.

A few things happened in the market, which is the COVID and the resulting change to organizations moving to the app-based communication. So the UCaaS shift happened. People shifted to using within a closed user group on a team or a Cisco as supposed to be using numbers to call these out. All these are very rapidly changing trend that we saw in the market for the last couple of years. And hence, the collaboration, which was, again, the GSIP was a very large part of it suffered from that.

What we have done very quickly is to fire that entire collaboration portfolio with offerings where today, GlobalRapide, which is enabling companies to implement and manage their UCaaS solutions, whether it is Teams or Cisco or whatever. And that has been growing and the funnel there is quite good. The second is the contact centers moving to a cloud is an important trend. And we are capturing that trend by diversifying our InstaCC offering a lot more than having just one product under InstaCC. Now we have 4 variants of InstaCC. We announced a partnership with Genesis, with Amazon, and we have our own InstaCC product which a white-label product that we offer to our customers.

And the third we have done in the collaboration is, as I mentioned, the DIGO platform that is launched. So all these products have -- are -- actually the InstaCC and the GlobalRapide is -- the line will be fired by the GSIP, but it will be consumed as a platform and not just as a GSIP as a stand-alone that we sell to enterprises. So we are also pivoting as the market changes and developing products and launching them into the market.

So I think it's only a matter of time before the overall collaboration will again start. It will take a couple of quarters because the GSIP, as we called out, has been declining, and that has been a larger part of the portfolio. That's on the collaboration side.

Next Gen connectivity, we have strengthened that product again quite significantly with our IZO Internet WAN with multiple variants for the international market, strengthen that product across all geographies, and we are seeing very, very good traction in that in terms of engagement with the customers. I also mentioned as part of the IZO, the next-gen connectivity, the multi-cloud Connect product that we are trialing with a couple of customers, and we have seen some early success and I called that out with a large U.S.-based auto OEM.

So that product is in the early stages and we'll roll that out in coming weeks and months. So the next-gen connectivity also includes all the SD-WAN. SD-WAN, we have strengthened with multiple product OEM capabilities, bolting on security capabilities to provide a holistic network transformation. So those are the strengthening that we are doing, and those will begin to contribute in quite a significant way in the overall digital platform solutions.

[Pratap Maliwal, analyst]

Okay, sir. So when it comes to SD-WAN and our network transformation deals, I believe that comes under next-gen connectivity. So could you please get some idea on what our traction is on the network transformation deals, SD-WAN in particular, and maybe in India, international, like is it 50-50, I believe, is that correct?

[Amur Lakshminarayanan, executive]

You're talking about overall or on the network side?

[Pratap Maliwal, analyst]

On the network transformation deals, sir.

[Amur Lakshminarayanan, executive]

Yes. So network transformation deals, as I mentioned, I think -- see network transformation comprises of several things. People want to transform their underlay, move from MPLS to Internet, work from anywhere, connect from anywhere. So that is part of the network transformation. Network transformation also includes the overlay of SD-WAN and also in many a times, a security component attached to it to say how are we securing the network. All of this in entirety is what we call as a network transformation or our next-gen connectivity. We are seeing good traction both in India as well as in the international markets...

[Pratap Maliwal, analyst]

Okay. So is the split for SD-WAN roughly 50-50? I believe that was called out in the last quarter. And why is it's so. If that is true then the market, mainly for network transformation is outside India. So shouldn't maybe the international proportion be greater. That was my question.

[Amur Lakshminarayanan, executive]

I don't have that data readily with me if that was -- we normally call out our overall revenues between India and international to be 50-50, not sure that called out specifically for SD-WAN as being -- I think I'll come back to you if there is any specific clarification that we need to provide.

[Chirag Jain, executive]

This brings us to the end of the call. I will now request Lakshmi to share his closing comments.

[Amur Lakshminarayanan, executive]

Thank you, Chirag, and thank you, everyone, for participating and asking questions. As I mentioned before, I think we have delivered a very good quarter results. It's come on the back of all the investments in the market to develop a robust pipeline as well as investments in strengthening our products and platforms. There is good amount of opportunity for us going forward as we develop our platforms and as we engage with our customers even more deeply. And thank you for all your questions and look forward to participating next quarter. Thank you.

[Chirag Jain, executive]

This brings us to the end of the call. The recording will be available on our website in the next 24 hours. You may please disconnect now. Thank you.