AS Lakshminarayanan, MD and CEO of Tata Communications, discussed the factors contributing to the margin decline during an interview with CNBC-TV18. He highlighted the product mix effect as a significant driver, emphasising that different products within their digital portfolio, such as CPaaS (Communications Platform as a Service), next-gen connectivity, IoT, and connected solutions, have varying margin profiles.

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This mix effect has led to the observed decline in margins, which is expected to continue. However, Lakshminarayanan expressed confidence that once the product mix is optimised, the margins will begin to recover. He said that their focus is on the long-term goal of achieving a margin of 23 to 25 percent, and they are not overly concerned about the current situation.

During Tata Communications' Investor Day, held on June 7, the company revealed its ambition to double its data revenue by FY27. To achieve this target, Tata Communications is actively working on enhancing its product portfolio across various business verticals.

Lakshminarayanan stated that they have set a higher ambition for themselves due to the opportunities available and the investments they are making in their products and capabilities.

Despite the recent margin decline, Tata Communications has consistently demonstrated revenue growth over the past three years. Lakshminarayanan shared that the company achieved an impressive six percent compound annual growth rate (CAGR) during this period.