Tata Communications to invest Rs1,580 crore in Singapore ops

As part of strengthening the headquarters of its international operations in Singapore, Tata Communications, which sells network services to cellular service providers and enterprises, will invest S$440 million, or about Rs1,580 crore, in that country over the next four years.

The company, part of the $67 billion Tata group, owns one of the world’s largest under-sea optical fibre cable network, connecting different continents.

Vinod Kumar, the new chief executive of the New York Stock Exchange (NYSE)-listed firm, on Wednesday announced the investment plan when Singapore government officially conferred the international headquarters status to the firm’s operations in that country. The new investment outlay forms about 20% of Tata Communications’ planned capex over the next four years, said Kumar.

The investment will go into building new network infrastructure, adding data centre capacity and
local hiring.

Last year, the company spent around Rs 800 crore in Singapore for setting up a 66,000 sq ft state-of-the art data centre facility.

The firm currently has about 127 middle and senior level executives in Singapore and plans to raise that number to at least 200 as more of its international business is handled out of Singapore, chairman Subodh Bhargava said.
Eleven Tata group firms, including Tata Consultancy Services, together employ about 2,000 people in Singapore.

Tata Communications has had to take on significant amount of debt over the years to fund its infrastructure expansion, especially building the undersea cable network and data centres across the world. As of December last year, it had debt in excess of Rs7,000 crore.

Analysts are concerned that company’s books may be overleveraged.

“Net debt/ Ebitda (earnings before interest, tax, depreciation and amortisation) is high at 6.3x and the heavy reliance on debt given the government’s stake (which we believe the government does not want diluted) implies limited de-leveraging potential,” JP Morgan analysts Malvika Gupta and James R Sullivan wrote in a recent research note on the company.

“We expect Tata Communications to have to raise funds to meet its capex needs.”