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Tata Communications Ltd
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Ladies and gentlemen, good day, and welcome to the Tata Communications Limited Q4 FY '19 Earning Conference Call. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Vipul Garg, Head of Investor Relations at Tata Communications. Thank you and over to you, sir.
Thank you, Janice, and good afternoon, everyone, and welcome to Tata Communications earning conference call. We are being joined today by Vinod Kumar, MD and Group CEO; and Pratibha Advani, Chief Financial Officer. The results for the quarter ended March 31, 2019, were announced yesterday, and the quarterly fact sheet is available on our website. I trust you would have had the opportunity to pursue the key highlights. We shall commence today's call with comments from Vinod, who will share his insights on business and our progress. He will be followed by Pratibha, who will lead the discussion on financials. At the end of the management's remarks, you will have an opportunity to get your 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 at our website, www.tatacommunications.com. The company does not undertake to update these forward-looking statements publicly. With that, I would like to turn the call over to Vinod to share his views. Over to you, Vinod.
Thank you, Vipul, and a very good afternoon to everyone. I extend a warm welcome to all of you for this Q4 and FY '19 earnings conference call of Tata Communications. I will begin this call by sharing some thoughts on the way the business of telecommunications is evolving along with the perspective on our performance. Pratibha will follow with our analysis on the financials.Over the last 2 decades has been a paradigm shift in connectivity. The first generation of mobile networks was all about voice and gradually evolved to data and its applications. Additionally, connectivity was largely within the enterprise and maybe to their supply chain partners. However, when we talk about connectivity today, it is truly multifaceted, and it's all encompassing. It is about video and mobility. It needs to be always on. And it is about including all constituents, from suppliers to partners and to end consumers. This shift is allowing Tata Communications to play a more active role in the customers' connectivitism, especially with our introduction of MOVE and our IoT offerings. The Tata Communications' bet on IoT and cross-border mobility is starting to pay off as initial proof of concepts have started translating into large commercial deployments. We expect this business to grow manyfold in the coming years. We are seeing excellent traction in the automotive, airline, shipping and consumer electronics verticals across the world. Our recent partnership with China Telecom Global is also a positive step that shows our market credibility. Through this partnership, China Telecom Global and Tata Communications are working together to launch a global IoT service in the Chinese market. This partnership will allow companies to deploy and manage IoT devices easily and cost effectively, both within China and internationally. On the operation scaling of the MOVE services, the integration of the Teleena organization plays an important role. We are actively working to standardize our services and are in the process of transitioning existing customers to the newer MOVE platform. The enterprise IoT market in India is expected to grow at a CAGR of more than 35% through 2023. Enterprises are adopting more use cases of IoT. They're moving away from just control systems for manufacturing or fleet management. We are seeing a clear path to mass introduction in areas like smart street lighting, smart metering from FY '20 onwards in India. Worker productivity and worker safety solutions is also another area of keen interest. The key differentiator for us in India is that we are offering a packaged solution that is ready for deployment. Tata Communications provides the underlying network and the devices, the applications and the platform. This ecosystem gives us a unique advantage against competition and makes Tata Communications a preferred partner for IoT deployment. We also recently launched our marketplace for IoT solutions to capitalize the IoT industry and to build a large ecosystem for easier solution creation. More and more businesses are looking to transform how they operate and serve their customers by reimagining their networks. The business rationale for embracing a digital future is quite compelling. The Harvard Business School research study suggests that leading digital companies generate better gross margins, better earnings and better net income than organizations in the bottom quartile of digital adoption. Our customer conversations have become much more meaningful and have gradually moved away from network-centric and connectivity and are moving towards how we can make businesses more digitally enabled. This is leading to a better understanding of the customer ecosystem. It's making our services stickier and less price sensitive. Our efforts have started to yield results. During FY '19, total contract value sold, or simply put, our order book was at USD 1.4 billion, witnessing a growth of 41% over the previous year. Within these potential services, TCV sold was USD 590 million, and for growth and innovation portfolio, we sold a collective TCV of USD 790 million. These are multiyear contracts and are in various stages of execution. Please bear in mind that we also witnessed normal business churn during the year. As I reflect on FY '19, I feel that it was a year that showed the resilience of the company and one of building core strength for our future. In FY '19, we faced a lot of challenges, and despite these industry headwinds, we've been able to deliver a steady performance. Operator consolidation in India impacted us both on the revenue and the cost front. We lost some of our customers on the wholesale side, and our access cost went up significantly. We had to invest additional CapEx in India for a last-mile expansion. This operator consolidation affected our traditional services and the transformation services business. Both the affected portfolios have since stabilized and will return to the normal growth trajectory in FY '20. Our voice business continues to decline faster than expected, creating working capital pressure for us. We're working with our vendors and focusing on customer collections, which led to net debt reduction this quarter. We've been able to fight off the decline in voice and traditional services with growth in our innovation and growth services portfolio. Our growth service portfolio witnessed a year-on-year growth of 15.1% and ended the year with USD 398 million in revenues and turned EBITDA-positive. But the scale-up of growth in innovation services was a little slower than we had expected as these services are customized and take longer time to deliver. Our innovation services, we are still in the market-making stage and time taken to convert the PoC into commercial contract is much longer than anticipated and some -- and this is partly due to the absence of competition, and we're breaking new ground. Looking ahead, our funnel for FY 20 makes us confident that we're on the right strategy and right path for growth. As on 31st March, we have a funnel of close to USD 2.3 billion. The funnel win rate last year improved to 31% from 27% the previous year. Our internal digital transformation initiatives continue to reap its dividends. The NPS score for our top 700 customers has now dramatically improved to 59, and our manpower cost productivity has also gone up considerably during the course of the last financial year. We're working very closely with our customers. We've identified 672 customers as those with whom we will deeply engage. These customers constitute 80% of our revenues. And for better customer experience and diverse product offering, we believe we will be able to upsell more of our services in the next 2 years to this customer segment. We believe out of this list, every Indian customer has the potential of about USD 5 million per year in revenues and every international customer has the potential of USD 10 million annual digital infrastructure spend. Our aim is [ to focus ] to increase our wallet share considerably with these customers over the next 2 years. The telecom and technology sector has faced a lot of changes and challenges in the last few years. Just to call out a few, we've seen significant technology shift; pricing pressure; cutthroat competition; market consolidation; and market and macroeconomic challenges like economic nationalism, trade wars and economic slowdown. As an organization, we need to be agile to manage these shifts and -- to manage these challenges and to set out a clear road map for future growth. We at Tata Communications have grappled with these shifts and have managed to [ console ] the company in the last 15 years. So the government-owned India-focused entity, we have transformed into a global digital infrastructure provider. We've successfully transitioned from a wholesale voice business to an enterprise data provider. Our data business now contributes to around 77% of our overall revenues. We've also diversified into a global business, making us resilient and immune to country-specific issues and volatility. We at Tata Communications are in tune with the current needs of our customers, and we successfully navigate technology shifts. For example, we envisage the traditional connectivity will be commoditized, and we were proactive to launch our SDWAN services well before our competitors did. We now aim to be technology leader rather than follower, and our innovation services offering is one such step in that direction. We're progressing well on our strategy and are confident of significant ramp-up in the future.Now coming to our financial performance. Full year consolidated revenue came in at INR 16,525 crores, witnessing a decline of 1.5% year-on-year due to decline in voice. However, strong performance in data business has helped mitigate this decline in voice to a large extent. Full year EBITDA was at INR 2,745 crores and grew at 13.8% year-on-year, driven by strong profitability in the data business. Margins came in at 16.6%, an increase of 220 basis points year-on-year. Our data business witnessed strong growth. Revenue grew by 10.4% year-on-year on the back of strong performance in our growth services and the revenue uptick in innovation services. Traditional services remained stable despite industry headwinds with operator consolidation. Revenue declined there by 2.2% year-on-year. This portfolio has now started to stabilize and is expected to return to growth -- normal growth trajectory of 4% to 5% in FY '20. Growth services portfolio witnessed strong momentum. Our revenue grew by 15.1% year-on-year to $398 million on the back of large deal events in this portfolio. We witnessed a revenue uptick in the innovation portfolio, and we started commercial deployment in our MOVE and IoT India business. We have strong order book and a funnel for growth in innovation portfolio. And we expect significant revenue ramp-up in FY '20. Our transformation services business faced challenges this year due to operator consolidation in India and some shift in revenue in favor of the domestic customers. In the latter part of the year, we picked up some business at lower margins to showcase our wireless capabilities. We have strong pipeline of international business, and we're confident of strong growth both in revenue and profitability for transformation services in FY '20. CapEx for the full year was at USD 267 million, which was in line with the guidance -- slightly below the guidance we had given at the start of the year. For FY '20, the CapEx will remain in the range -- will remain approximately about USD 250 million. This year, we faced pressure on working capital, which led to increase in net debt. As stated earlier, we're working actively with our vendors and customers and hope to keep net debt at the same level as FY '20. As the world is moving towards digital enablement, our focus remains on offering best-in-class digital infrastructure solution, ensuring seamless global connectivity and effortless digital transformation. Digital enablement and transformation are key themes that business leaders are pursuing globally and technologies at the heart of these changes. And we believe that our offerings really address the sweet spot. With that, I'd like to invite Pratibha to discuss the financial highlights of the last financial year and the quarter we just finished. Thank you.
Thank you, Vinod, for sharing your thoughts, and a very good afternoon to all of you. I will provide you with the perspective of progress that we made both during this quarter and for the financial year ended March 31. Let me start with the consolidated numbers. Our consolidated revenue for FY '19 stood at INR 16,525 crores, as Vinod mentioned earlier, a decline of 1.5% year-on-year. This was primarily due to decline in voice business by 27.1% year-on-year, which was approximately about INR 1,400 crores. Strong performance in data business has mitigated this decline to a large extent. Our data business grew by 10.4% year-on-year. FY '19 has been a challenging year in many ways. We faced industry headwinds. However, despite these challenges, we have achieved revenue and EBITDA growth. Consolidated EBITDA for the year stood at INR 2,745 crore, an increase of 13.8% year-on-year. Margins came in at 16.6% and have expanded by 220 basis points year-on-year, largely due to growth services turning profitable and shift of revenue towards more profitable data services. Our strategy to focus on data services has started to show results, and we expect this strength to continue in FY '20 onwards. We have been talking about cost focus with all of you and how we are reimagining our processes to make them more future-ready as well as drive cost productivity. We have been able to achieve higher manpower cost productivity by reducing our manpower expense this year by INR 140 crore as compared to last year. Unfortunately, we were hit by exceptional cost to the tune of INR 206 crores. These were, for example, the backhaul costs that we incurred earlier on in the year. Adjusted for these costs, our operating expenses have been largely flat year-on-year. Through cost productivity initiatives, our recurring offtake is coming down, and we expect to see more benefits in the coming years. Consolidated loss for the year stood at INR 82.4 crore as compared to INR 329 crore loss in FY '18. The loss gap has narrowed considerably due to stronger business performance and onetime AFA-related gains in Q3 FY '19. For the quarter, revenue witnessed a growth of 5% year-on-year but a decline of 0.6% Q-on-Q. As you would remember, we had a onetime gain in Q3 related to access facilitation charges. Adjusted for that, the gain in revenue grew by 1.2% Q-on-Q. EBITDA for the quarter came in at INR 685.3 crores with a margin of 16.1%. EBITDA witnessed a growth of 16.7% year-on-year. On a reported basis, EBITDA declined by 23.2% Q-on-Q. However, again, adjusted for AFA gain that we witnessed, a strong EBITDA growth of 8.3% Q-on-Q is what has come in after the AFA adjustment. This quarter, we had a PAT loss of INR 198.8 crore. This was largely due to equity loss pickup in Singapore data center business to the tune of INR 173 crores. Moving on to our segmental performance. Data business witnessed strong growth this year despite industry headwinds. Globally, operators are witnessing a decline in the B2B data business. However, we have been able to buck the trend and reported strong growth in revenue. Our data revenue for the year came in at INR 12,655 crores and witnessed a double-digit growth of 10.4% year-on-year. This growth was led by strong growth in growth services, which grew by 15.1% year-on-year and revenue uptick in innovation services, which has crossed the revenue of $9.4 million in FY '19. Data services now contribute to 76.6% of overall revenue, up from 68.3% in FY '18. Data EBITDA for the year came in at INR 2,409 crores and grew by 16.6% year-on-year primarily due to growth services turning EBITDA-positive. Data contributed to 87.7% of overall EBITDA in FY '19. For the quarter, data revenues came in at INR 3,342.7 crore, witnessing a growth of 14.2% year-on-year and 0.5% Q-on-Q. Again, adjusted for AFA, Q-on-Q growth was 2.8%. The above numbers clearly reflect that our strategy to invest in growth and innovation services has clearly started to pay off. Moving to traditional services. This portfolio has been affected in FY '19 due to operator consolidation and pricing pressure. We lost some of the revenue, and our access cost went up significantly, leading to pressure on margins. By the end of the financial year, this portfolio, however, started to stabilize and reported full year revenue of $1.17 billion, witnessing a decline of 2.2% year-on-year. We focused on efficiencies and driving productivity in this business and managed to maintain profitability. EBITDA for the year came in at USD 386 million, witnessing a growth of 6.7% year-on-year with the margins coming in at 32.9%, translating into an expansion of 280 basis points over last year. Growth services continued to witness strong growth. In FY '19, revenue reached USD 398 million, a growth of 15.1% year-on-year in dollar terms. This portfolio has become significant in size now. We continue to witness a strong uptick in business as visible from TCV sold number shared by Vinod earlier. These services are platform-based and highly customized for each customer. This leads to a longer delivery period, which in turn leads to delay in revenue recognition. With scale, we have been able to achieve profitability in this business. EBITDA loss for the year for both services stood at $7.4 million as compared to $40 million loss in FY '18. As we grow scale, we will continue to witness steadfast improvement in EBITDA margins. We are witnessing strong traction in IZO, media and mobility services. On a full year basis, IZO services grew by 111%, media services grew by 392%, and mobility grew by 15% -- 59% year-on-year. For the quarter, growth services revenue came in at USD 110.8 million, growth of 9.2% Q-on-Q and 14.2% year-on-year. In Q4, we received a onetime revenue of USD 4 million on account of early termination penalty on one of our hosted contact center deal. Growth services has turned EBITDA-positive this quarter. EBITDA for the quarter came in at USD 6 million as compared to a loss of $4.5 million in Q3. Moving to innovation services. This is the portfolio where we are still investing, and we believe these services will drive our future growth. At the start of FY '19, we were still at market-making stage, and we engaged with our customers and started PoCs. These PoCs have started to convert into commercial deployment, and we have recorded full year revenue of $9.4 million as compared to $0.4 million in FY '18. We expect revenues to scale up in FY '20. In Q4, EBITDA loss was higher as transformation cost of $6.5 million was recorded in this portfolio. Moving to our transformation services business. The revenue stood at INR 1,254 crores for the year, witnessing a growth of 11.3% year-on-year. This business was affected by operator consolidation, as Vinod mentioned earlier. Despite challenges, we have been able to grow this business on the back of new deal wins. This year, we faced profitability challenges in this business, leading to a decline in EBITDA. This is due to customer exit, timing mismatch between loss of revenue and cost realignment and shift in revenue in favor of domestic business. For the quarter, we saw decline in transportation services profitability. EBITDA for the quarter came in at INR 10.1 crore and witnessed a decline of 70.3% Q-on-Q and 8.6% year-on-year. As part of our long-term strategy, in the latter part of the year, we took up a few deals at lower margins to showcase our capabilities in wireless space. We are working with leading operators on next-generation advanced radio planning and optimization. We are helping operators design networks using predictive tools and by incorporating social media feed, which will lead to over 20% [ CapEx ] efficiency. We're also working on self-organizing networks in partnership with Cisco. With the strong international business pipeline in these services, we expect improvement in revenue growth and profitability in FY '20. Moving to payment solutions business. We continue to rationalize our ATM portfolio and focus on profitability. In FY '19, we closed 3,395 ATMs. This business has turned EBITDA-positive by focusing on profitability and productivity. EBITDA for the year came in at INR 5.2 crores as compared to a loss of INR 19.8 crore in FY '18. Average transaction per day per ATM has also moved up from 70 in FY '18 to 90 in FY '19. EBITDA for the quarter was at INR 2.1 crore and was down 66.9% Q-on-Q as we witnessed lower average transactions per day from 92 in Q3 to 88 in Q4. We are witnessing a study uptick in transaction numbers, and our focus is to keep on looking at efficiencies and enhanced profitability.Moving to the voice business. We continued to witness a decline in line with industry trends and technology outlook. Revenues for the year stood at INR 3,870 crore, a decline of 27.1% year-on-year. This decline has been higher than expected and created working capital pressure on our overall business as voice is a negative working capital business. We have been able to maintain our margins through tight cost control, productivity measures and one-off benefits that we got this quarter. Despite the revenue decline of 27.1%, full year EBITDA has declined by only 3.1%. For the quarter, EBITDA came in at INR 96.6 crores, growth of 27.2% Q-on-Q and 29.3% Y-on-Y. This is primarily due to a shift in traffic to more profitable locations and onetime settlement benefit.Moving to CapEx. CapEx for the full year was at USD 267 million, which was well within the guidance given at the start of the year. Year-on-year CapEx was higher by $32 million due to investment towards India backbone expansion of $25 million. For FY '20, CapEx will remain in the range of $225 million to $250 million. Net debt for the quarter came in at $1.2 billion, a reduction of $55 million as compared to Q3 FY '19 due to stronger working capital management. As the business is shifting towards data, we are working actively with both our vendors and customers to effectively manage our working capital intensity. Our aim is to keep our net debt constant for FY '20. Our average cost of borrowing for Q4 was 3.86%, an increase of 10 basis points over Q3. This is due to the average LIBOR movement from 2.35% in Q3 to 2.5% in Q4. To conclude, I would like to reiterate that our strategy to focus on data services have started to show results, with growth services portfolio turning EBITDA-positive on the back of strong top line growth. And we are starting to see significant traction in our innovation services portfolio. We are confident that we are moving in the right direction. And we are focused on not only strengthening our capabilities but also strengthening our cash flow and return ratios as we continue to pursue profitable growth opportunities in future. This brings up end to management commentary, and I would now request our moderator to open the forum for Q&A.
[Operator Instructions] We take the first question from the line of Aliasgar Shakir from Motilal Oswal Securities.
I just had a question on margin -- EBITDA margin guidance for the data business. I mean about a couple of years back, we had a guidance of reaching 30% in about 3 years' time. From there onwards, our margin have right now come down. I understand this is largely because of the losses that we've done in the innovation business. So first of all, just wanted to understand, does that guidance stand? Or how are we, I mean, positioned on that? And related question on the innovation business, while you gave a bit remarks in the innovation segment, I just want to understand what is the gestation period of investment in this segment? And basically, I mean, what is the kind of trend in terms of EBITDA losses we should see this before we see profitability in this segment?
Okay. Thanks for your question, Aliasgar. Firstly, I think when you're referring to 30% EBITDA, that was when we also had the data center business in our portfolio. So what in our Destination 21 objective, which we have shared as our aspirational target, it was more like 25%. So we continue to strive and work towards that. It may not be in '21 that we get there because we said right from the beginning, there is a stretched number that we are aspiring for. We are seeing expansion in our data EBITDA, and we expect the expansion to continue going into the coming year. As far as innovation itself is concerned, I think gestation period, these are services which we are market-making in many cases. [ Look at the ] IoT in India, we are the only player actually offering turnkey solutions that include everything, and we're creating a market. There's efforts to build the marketplace is an example of that. Cross-border mobility, we are really a disruptor in this space with only known MNO operator that's offering globally seamless services. With NetFoundry, again, we're providing application-aware embedded networking. Again, it's market-making. Therefore, the -- as I said in my comments and Pratibha also alluded to it, we're having -- now we're seeing our proof-of-concepts that we worked on last year turning into revenues, and we would see increasing momentum as this year progresses. In terms of EBITDA profitability, I would say that the innovation part of our portfolio is probably FY '22.
Okay. So this INR 450 crore of EBITDA loss that we're seeing in innovation services in this year should further go up from here before it starts coming down?
I mean, I think this would stay at the same level. It shouldn't really go up.
Yes, we expect that we will – with obviously revenues are going to increase in the innovation portfolio. However, we have to spend -- continue to make some spending in order to build out the features and also in sales and marketing. But we will contain it and ensure that the losses don't go up further.
Got it. And when you mentioned...
The only other point that I do want to make is when you look at cost, you can contain them up to a certain level, and then they step up as the revenues ramp up. And this would happen both for the growth services portfolio as well as for the innovation services portfolio. So if there's a sudden ramp-up that we start to see in revenues, then costs will go up.
Got it. But then it will be offset by the revenues that you make. So it will not extend your EBITDA losses, [ will be... ]
Yes, which is why I said we expect them to be at the same levels.
Okay. And when you say this 25% margin, can you help us understand the levers of reaching there, given that your traditional segment is already at this optimum level of 30%? Growth segment, what kind of margin profile, or what kind of upside do you see from here in the next 2 years? And then [ since ] innovation will remain constant over here, then what sort of other margin levers do you have to reach there?
Ali, so if you asked me to look at a traditional, I would expect that to remain in the range of 29%, 30%. We're not expecting significant expansion in margin. Having said that, our focus is to continue to drive productivity, and our efforts will be to see how we can in any way try to improve these margins. We then come to growth services where you've now seen that we've turned EBITDA-positive. And from here on, we should start to see our margins expand. Again, innovation, as I mentioned earlier, we would try to contain our losses. So there's not going to be a further impact on margins negatively. Having said that, you look at our transformation services portfolio. There, the margins have really come down, and that gives us a very good opportunity. As we now start to win contracts in some of the new services that I mentioned earlier on, we will see significant margin expansion. Having said that, I'd also want to add that most of these opportunities that we are fighting today in our transformation services business is outside of India. That will further provide an uptick in margins. Then our payment solutions business, that has turned EBITDA-positive, and again, we should start to see margin expansion in that business. So overall, across our portfolio, barring traditional services, we should start to see margins go up.
Got it. It's helpful. And just lastly on the transformation services, since we have come down very drastically in terms of the margin profile, you did mention about it, what is the kind of order pipeline, and what pricing of those order pipeline? What kind of confidence do you have over there to display the kind of margin improvement that we can see from there?
Without getting into specifics at a deal level, which I can't, but we have about 3 or 4 significant international deals we're working on that we expect to close within the next 1 to 2 quarters. And this gives us some confidence that we will see about 18% to 20% revenue growth in transformation services in the coming year. And further, given the fact that it's largely international contracts that I'm referring to, we will see an improvement in the EBITDA for transformation services.
So in FY '20, it should really go back to the same margin profile that we did in the years prior to '19, or it should take longer?
Ali, actually, we would still want to continue to invest in some of these new services, carry out more PoCs. So it'll take at least another year or more for us to go back to margins -- to the earlier margins.
You're referring to the transformation services, right?
Absolutely. Absolutely.
Got it. And your working capital has gone up, and you have mentioned this primarily because of voice going down, whereas data requires high working capital cycle. Should it stabilize at the current level, or you should further see increase in your receivable days?
We will try to hold on to our receivable days. Having said that, there could be some quarterly movement, both in net debt as well as receivables. But for the year, we intend to keep our net debt at same level.
Okay. Any update on the TC -- the Tata Teleservices deal now that, [ that ] deal has already received conditional DoT approval?
No further updates from us. That transaction has to be concluded, and then we'll begin working. Right now, no further update, status quo.
[Operator Instructions] We take the next question from the line of Sanjesh Jain from ICICI Securities.
I have a couple of question on the order book, which you have mentioned, of $1.4 billion, which has [ grown ] by 41% Y-o-Y. Can you share what was the growth in traditional, that $590 million, which you mentioned and in the growth services, the $790 million [ which ] you have shared?
Give me a second. We need to pull that up. I don't recall the year-on-year growth -- okay. [ I got it ]. Okay. Traditional, we had it relatively flat for order book year-on-year. In growth services, we had a 40% improvement year-on-year.
You said traditional is flat, right?
Yes.
But you said the overall has gone up by 41%. Mathematically, it doesn't add up.
Yes. But he's not adding the innovation services to it.
I'm not adding innovation [ to it ].
And he's not adding TCPSL and all the others, right?
Okay. Okay. Okay. Got that point. How to see this order book, as in we have a very strong order book, which is growing like at 40%? Can you give some sense, I mean, how much of this is project-led, and how much is recurring? That's number one. Number two, what is the average age of this order book? And number three, what kind of slippages that we can expect out of this, given your learning in the past on this order book?
So I think the only question I can answer is -- the 3 that you asked, is the last one. So our win rate is at 31%, right? So that's a figure we need to use. Further granularity we don't provide. And I think it will also confuse your models. I think the more comfort -- the comfort -- we started sharing this from last quarter to give visibility into the mix and show -- to demonstrate that we are getting traction in our growth services and to also show that year-on-year, these services that we are offering are relevant for the customers, and we're able to expand the order book. So I think you should use it more for directional than try to use it to build more sophistication into your model. Because there are quite a few factors, duration of contract. There are fixed NRC. There's committed traffic. There's usage traffic. All those vary by service, and it really becomes quite complex to give a general answer.
And some of it also gets impacted -- by the way, we have to account for it, given that IndAS 115 is coming.
Got it. But some directionally, as in [ if I see ] the order book growth has been very strong, like 41%. Our data revenue has grown 10%. We need to see some convergence in terms of the growth for the order book and revenue. Or there will always be a certain gap because of the pricing deflation and...
I think as we report it for a few more quarters, you'll be able to do some correlations between the order book number and the -- between the funnel -- the order book number and the revenue number.
My follow-up question is on the funnel. What's the exact difference between the funnel and the order book? Is that what we are in discussion also in terms of the funnel?
Yes. Funnel includes everything. So it'll be from low probability -- everything does not fall within the funnel, from low probability to 99%. And then when it get -- closes, it goes into order book.
And order book is something which we have signed in terms of contract? That deal is...
Order book is signed, and it's only a question of how long it takes to implement, which varies by service. And the -- it will be -- it'll have a upfront fee for some services, monthly charge for some services and then usage component. And this can -- the spread between these 3 will depend on the service and the customer order.
And the customer himself. The customer himself has to be ready to accept the service.
Yes.
Okay. Okay. But this is a contracted deal, and it's just a matter of time.
That's right.
Just on the growth services of $790 million we have shared, where are we seeing more traction in terms of what service, media, SIP trunking, where are we seeing this traction in terms of growth?
It's -- unfortunately, I'll have to say it's across the portfolio. But the ones that stand out are MOVE, SDWAN and IUC portfolio.
Okay. Just one on the digital potential that we see, where we said that in India, we may have a potential of around $5 million per corporate year and around $10 million for the international customer, what do we mean by this? I did not get the comment.
Oh, what we mean by that -- that's a good question. And I'm sorry I wasn't very clear. [ By that, we ] mean that every customer that we have today -- we have 672 customers with whom we're trying to deepen our engagement. And these are a combination of India customers and customers outside India. The Indian customers for the services that Tata Communications has in its portfolio can spend up to $5 million a year with us. And international customers can spend up to $10 million a year with us, right on average. Now some will be more, [ will be ] less, but both are average figures.
But those are incremental we are talking over and above what the business...
No, no. Including what they spend with us. The numbers today are much lower. So it would be double of what we currently serve today if I have to just give an estimate across India and international.
Next question is from the line of Bharat Sheth from Quest Investment.
Sir, I mean, taking forward to previous question, say -- you said we are engaged with 617 (sic) [ 672 ] customers. So can you give some color how many are of domestic, and how many are international? And this TCV, what we say for the growth, how many are -- pertain to domestic, and how much is for international clients?
The 672 customers are roughly about 45% in India and 55% outside. But TCV, we don't split it further into in India and international.
Okay. Okay. And sir, on the full year, any kind of color on EBITDA for the growth that would you like to say, I mean, FY '20 or '21, if not '20 possible then? Where do we like to see the size of the business as in EBITDA margin?
Growth services are actually tracking well. And we expect this portfolio to continue growing at 18% to 20%. On the margins -- ideally, the margins show that if it grows at 20%, 20-odd percent, should hit 9% to 10%. But I would call out more as 5% to 7% for the year.
For FY '20?
For FY '20, that's right.
And '21, any kind of, I mean, color would you like to say?
Let's wait for the next earnings call.
Let's wait for 2 more quarters, I would say, before talking FY '21.
And on this innovation service, we have 3, I mean, service. We have IoT, then on Teleena platform, MOVE and NetFoundry. So in which segment we are seeing the traction? And you say that by '22, we expect it to EBITDA-positive or breakeven. So at what level we expect it to be EBITDA-positive, or what kind of number that you have in mind?
In terms of -- on a blended basis, it will be in low single digits. The -- in terms of the services that will have the most contribution for revenues from the innovation portfolio in FY '22, it will be MOVE, and then IoT India and NetFoundry will be roughly equal is our current projection. But some of these are our destinations. MOVE, we're already seeing very good traction, as I said, in multiple sectors across the geographies around the world. So that we're quite confident of. NetFoundry and IoT India, they are still discovering the best use cases for them. So I'll bet equally on them for FY '22. In terms of quantum generation portfolio, we're saying we'll be between -- around $150 million.
Okay. And any color you would like to say on the pricing pressure on this traditional in FY '20? What pressure was there? I mean, how much erosion we saw in '19 and where do we see -- I mean, [ flat ] or again, we would like to have some, I mean, growth in that?
I think it will be -- we will see some growth. We're expecting around 2% growth in our traditional services for revenues. Pricing pressure, I'm not forecasting any unusual price pressure in FY '20 for our traditional services. It'll continue at the past levels that we've seen, which will adapt to volume growth.
Any update on, I mean, this HPIL and land transfer thing?
The next MCA hearing is on May 17. Right now, it's really procedural steps that have to be completed. We're tracking it very closely, but it's with MCA now.
Where are we stuck? I mean I think we were expecting somewhere, I mean, by end of year [ itself ]?
No. The transfer of the matter from one Ministry of Communications to Ministry of Urban Development caused some slowdown. But besides that, there's no red flag as such.
Next question is from the line of Riddhesh Gandhi from Discovery Capital.
Just a quick question on the traditional data. You were shifting 2% growth in the digital revenue. How about on the EBITDA front? Should we expect any kind of margin expansion on traditional data?
We'd like to maintain that it's going to be stable at about 29% to 30% for the coming year.
Correct. Perfect. So effectively, the revenue growth is going to be in line with EBITDA growth on the traditional data?
That's right.
Got it. And with regard to this MCA thing which you have mentioned, is this effectively the last step, which is there? Or is there anything additional and...
That will be the last step.
Next question is from the line of Neerav Dalal from Maybank.
Most of my questions have been answered. Just on the write-off of goodwill in the associated companies, if you could just elaborate on that. And how are replaced now after the write-off and so some color on that would be useful.
This write-off has happened in STT data center business in Singapore where we have 26% stake. There, they have taken impairment of goodwill. And because we have a minority stake, it got accounted for as part of our minority accounting. The valuation of that business has now come down to $110 million.
Okay. So you do not expect any further impairment? Or is there still any goodwill left on their books which needs to be impaired, something like that?
No, we don't expect any further impairment.
Okay. Okay. So this is for the Singapore deal -- you also had another data center -- you had taken another business there, so...
Yes. We also have a 26% stake in their data center business. That is doing very well. In Singapore, actually, the competitors environment led to decline in price erosion. And that is why we had -- STT had to take impairment, given that we had reached full capacity in this data center.
Well, ladies and gentlemen, that was the last question for today. I would now like to hand the floor back to the management for their closing comments.
Okay. Ladies and gentlemen, thank you for joining the call. As I said, the FY '19 was a year that really tested our core strength. We believe that we passed it successfully and the resilience of the business shown through. We have been doing some fundamental transformation work in our internal digital processes and strengthening our go-to-market. It's on the basis of this we're confident that we will show the growth in both revenue and profitability that we shared with you today. We look forward to your continued support and to speaking to all of you in the next call. Thank you very much.
Thank you. Ladies and gentlemen, on behalf of Tata Communications, that concludes this conference. Thank you all for joining us. You may disconnect your lines now.