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MOSL: Morning India (23/May/17)-1.Tata Comm.-2. Media-3. GAIL; 4. Bank of India; 5. Pidilite Inds.; 6. Tata Power; 7. SRF; 8. Allcargo; 9. Just Dial; 10. Aviation Monthly

​MOrning India (23/May/17): 1.Tata Comm.; 2. Media; 3. GAIL; 4. Bank of India; 5. Pidilite Inds.; 6. Tata Power; 7. SRF; 8. Allcargo; 9. Just Dial; 10. Aviation Monthly

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Today’s top research idea

Tata Communication: Story remains intact; Growth segment to drive profitability

We spoke with the TCOM management to understand the business outlook post the sale of a couple of businesses.

TCOM’s deep connectivity, which allows it to provide healthy SLA and have low access costs, should lead to EBITDA CAGR (FY17-19) of 10% to INR27.9b in the traditional business. The growth segment, supported by the bouquet of value-added connectivity services, should turn profitable over next four quarters as it has reached a sizeable scale to drive operating leverage. We expect the segment to garner EBITDA of INR1.8b in FY19 v/s EBITDA loss of INR1.7b in FY17.

We expect overall data EBITDA margin to expand 500bp over FY17-19 to reach 24.6%, driving 22% EBITDA CAGR. The core business should see 17% EBITDA CAGR to INR36.2b in FY19, as new products add more value for enterprise clients. We remain positive on the stock, led by its steady EBITDA growth, improving free cash and return ratios.

Piping hot news

RBI outlines action plan to implement NPA ordinance

RBI on Monday released an action plan to implement the Banking Regulation (Amendment) Ordinance 2017, which includes the option of rating assignments being determined by the RBI and increasing the size and scope of the oversight committee (OC).