Tata Communications’ data centre exposure and long‑term value have to be seen in the context of (a) its minority stake in STT GDC India and (b) its broader “digital fabric” (network, cloud, security, media, CPaaS, AI infra), not as a pure data‑centre landlord.

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1. Where Tata Communications stands today on data centres

1. Asset ownership structure

- In 2016–17 Tata Communications sold 74% of its India and Singapore data centre business to ST Telemedia Global Data Centres (STT GDC), retaining a 26% minority stake. (telecom.economictimes.indiatimes.com)

- In 2019, it sold the remaining 26% in the Singapore data centres, making that business fully owned by STT GDC; the 26% stake is now only in STT GDC India. (sttelemedia.com)

- Conclusion: Tata Communications is no longer a majority data centre operator; it is a strategic minority partner in STT GDC India plus a connectivity/cloud/security provider into the wider DC ecosystem.

2. Scale and growth of the JV (STT GDC India)

- STT GDC plans to invest US$3.2 billion (~₹26,000 crore) to add 550 MW of data centre capacity in India, almost tripling its IT load over 5–6 years; STT GDC already commands ~28% market share by revenue in Indian colocation. (sttelemediagdc.com)

- Tata Communications, per its latest disclosures, continues to hold 26% in STT GDC India, giving it indirect exposure to this expansion. (livemint.com)

3. Strategic direction

- Management has clearly articulated an “asset‑light” model, focusing on:

- Global network and connectivity

- Cloud and security

- Unified communications, CPaaS (Kaleyra acquisition), media (The Switch), and now AI/agentic AI and GPU‑as‑a‑service. (tatacommunications.com)

- Recent news indicates Tata Communications is eyeing collaboration with TCS on a US$6.5 bn, 1 GW data centre build‑out in India, where its main role is likely to be network + cloud/AI infra rather than owning all the buildings/power shells. (outlookbusiness.com)

Net: the “future of Tata Communications’ data centres” is primarily via (a) its 26% stake in STT GDC India and (b) the ecosystem revenues (connectivity, cloud, security, AI infra) riding on the massive DC capacity build‑out in India, rather than via owning/operating the DC real estate itself.

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2. Sector outlook: India data centres over the next decade

Structurally, India’s DC story is strong and directly relevant to Tata Communications:

- STT GDC India alone is tripling capacity (550 MW addition), reflecting confidence in AI, cloud, data‑localisation‑driven demand. (sttelemediagdc.com)

- Tata group (TCS + Tata Communications + others) is lining up US$6.5 bn for 1 GW of new capacity; global hyperscalers (Google and others) are also announcing large AI‑focused DC investments in India. (outlookbusiness.com)

- As workloads shift to cloud/AI, network, edge connectivity, security, managed services and AI infra (GPUs‑as‑a‑service) become critical – exactly where Tata Communications is positioning its “Digital Fabric”. (tatacommunications.com)

For a long‑term investor, this suggests:

- Direct DC rental income is captured mostly at the JV level (STT GDC India).

- Tata Communications’ P&L exposure is through:

- Dividends/earnings from its 26% stake (not very transparent, as STT GDC India is unlisted), and

- High‑growth data and digital revenues driven by the traffic and workloads hosted in those DCs.

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3. Earnings profile and long‑term drivers

Latest available consolidated numbers (FY25, year ended 31 March 2025): (tatacommunications.com)

- Gross revenue: ₹23,109 crore (up 11.2% YoY)

- Data revenue: ₹19,513 crore (up 13.7% YoY)

- EBITDA margin: 19.8%

- PAT: ₹1,625 crore (up 44.7% YoY)

Key structural drivers for the next decade:

1. Data & digital revenue mix

- Data already contributes >80% of total revenue and is growing in double digits. (tatacommunications.com)

- Within data, digital portfolio (cloud, security, CPaaS, media, IoT) is growing much faster than legacy connectivity but is margin‑dilutive for now; over time, as scale builds and integration of acquisitions completes, margins can normalise upwards. (tatacommunications.com)

2. Core connectivity pressure

- Industry‑wide, core connectivity faces 10–15% annual price erosion, MPLS → internet, and competition from low‑cost/cloud‑based solutions; this drags revenue and requires constant efficiency gain. (livemint.com)

3. Optionality from STT GDC India

- If STT GDC India’s 3x capacity translates into strong cash flows, Tata Communications could benefit via:

- Higher share of profits/dividends from the JV

- Potential stake monetisation (partial or full exit) at a DC‑sector valuation multiple, though there is no formal announcement on such a move yet. (sttelemediagdc.com)

4. Execution risks

- Recent quarters (FY26 Q1 and FY26 Q2) show pressure on PAT despite revenue growth (PAT down 43% YoY in Q1 and 27% YoY in Q2), indicating higher costs/investments and integration drag. (economictimes.indiatimes.com)

Overall, a reasonable base‑case assumption for a 10‑year view is low‑double‑digit revenue CAGR with PAT growing slightly faster if margins recover.

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4. Ten‑year price framework (illustrative, not a recommendation)

Live real‑time stock price and market cap as of 28 December 2025 are not available in this interface. The latest reference values I can rely on are:

- Around March 2025, one research summary cited market capitalisation ~₹39,600 crore and share price about ₹1,405. (researchaim.com)

Using FY25 PAT of ₹1,625 crore as base: (tatacommunications.com)

Base‑case illustrative scenario (10‑year view to ~FY35)

> This is an example calculation, not a CNI recommendation or formal target.

- PAT CAGR: 12% over 10 years

- FY35 PAT ≈ ₹1,625 × (1.12)^10 ≈ ₹5,050 crore (computed).

- Terminal P/E: 18–20× (assuming stable, mid‑teens ROCE with maturing digital portfolio; lower than current high‑growth multiples to be conservative).

- Implied FY35 market cap range:

- Low: 18 × ₹5,050 ≈ ₹90,900 crore

- High: 20 × ₹5,050 ≈ ₹1,01,000 crore

Relative to the March‑2025 mcap reference (~₹39,600 crore), this implies a 2.3–2.6× move in market cap over 10 years.

If we simply scale the March‑2025 share price (~₹1,405) by that factor, you get an illustrative price band around:

- ~₹3,200 to ₹3,700 per share over 10 years

This corresponds roughly to a compound annual return of about 8–10% (price only, excluding dividends), under the base‑case assumptions.

Upside / downside levers

- Bull case (better than base):

- Data/digital CAGR 15%+, PAT CAGR 16–18%, margins back >22%, P/E 20–22×

- Potential 3–4× in 10 years (≈12–14% CAGR) is conceivable if execution is strong and the DC/AI cycle is very favourable.

- Bear case (worse than base):

- PAT CAGR only 6–8% due to persistent margin pressure, high competition, or unsuccessful integrations; market de‑rates to 12–15× P/E

- Returns could compress to low single digits, or even be flat in rupee terms.

Important:

- These figures are purely illustrative, based on public FY25 data and simple growth/valuation assumptions.

- They are not a formal CNI InfoXchange target price, buy/sell/hold call, or personalised investment advice.

- Actual outcomes can differ sharply due to regulation, interest rates, FX, technology shifts (AI, satellite, 5G, etc.), competition (Jio, Airtel, global clouds), and group capital‑allocation decisions.

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5. How to think about Tata Communications from here

From an analytical perspective (not a recommendation):

- It is best viewed as a global digital‑infrastructure and services play with a strategic DC JV, not as a pure data‑centre landlord.

- Long‑term upside largely depends on:

- Scaling digital services to profitability

- Maintaining strong cash generation from core connectivity despite pricing pressure

- Realising value from the 26% STT GDC India stake and any future DC partnerships (like with TCS)

- For an investor with a 10‑year horizon, the thesis is fundamentally about India+global digital infra, AI workloads, and enterprise connectivity, not just “data centres” in isolation.

For any actual investment decision, you should factor in your risk appetite, asset allocation, tax situation, and consult a SEBI‑registered investment adviser or rely on detailed research reports (including those from CNI InfoXchange, where applicable).

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