Why Tata Teleservices is drawing institutional bets despite mounting losses
Summary
Tata Teleservices’ pivot to enterprise services and Tata Sons’ support are fuelling investor optimism. But with a staggering ₹20,000 crore debt load and a decade of losses, the turnaround won’t be easy.
Shares of Tata Teleservices (Maharashtra) Ltd (TTML) have dropped nearly 25% over the past year as mounting debt and persistent losses continue to batter the stock. The telecom firm’s debt burden, at ₹20,416 crore, now nearly doubles its market capitalization of ₹11,233 crore, a stark indicator of the financial strain caused by accumulated adjusted gross revenue (AGR) dues.
Despite the grim financials, institutional investors are quietly increasing their stakes in TTML. Foreign institutional investors (FIIs) have raised their holding to 2.53% in the March 2025 quarter from 2.03% two years ago, while Domestic institutional investors (DIIs) have nudged up their stake to 0.12%.
The interest is modest but consistent, raising the question: Why are institutional players quietly accumulating a loss-making stock weighed down by debt? Is a turnaround in sight, or is it a speculative bet?
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Strategic pivot and parent support
Despite a decade of losses, Tata Teleservices is pressing ahead with a pivot to enterprise services.
In 2021, it pivoted from traditional telecom services to enterprise solutions under the Tata Tele Business Services (TTBS) brand, targeting small and medium enterprises. The shift has yielded some operational gains — revenue has grown at a 6% CAGR over four years, and operating margins have expanded from 39% in FY20 to 44% in FY25.
But profits remain elusive, largely due to hefty interest payments linked to its ₹20,416 crore AGR dues. The Supreme Court has refused to reconsider the interest and penalties but waived bank guarantees for spectrum purchases up to 2022.
Meanwhile, Tata Sons has stepped in with a letter of support, pledging to cover any liquidity shortfalls over the next 12 months. While this lifeline may provide temporary relief, it doesn’t address the core challenge - TTML’s mounting debt and persistent losses.
Betting on digital solutions
Tata Teleservices is banking on its Smart Digital solutions portfolio to drive growth, targeting the SME segment with a broader suite of services.
The company plans to expand offerings in converged communication, cloud infrastructure, cybersecurity, and digital connectivity, along with internet leased lines and SD-WAN to sustain margins.
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TTML is also ramping up its network infrastructure, aiming to extend its existing 130,000 km fibre network to provide more reliable, high-quality connectivity. The expansion is critical to positioning the company as a more formidable player in the telecom landscape while serving a wider business base.
Sectoral tailwinds could bolster growth
In addition to the company’s growth plans, the strong sectoral outlook also bodes well for the company.
The broader telecom and digital infrastructure space is poised for a lift, driven by government initiatives aimed at fostering innovation and reducing import dependence.
At the centre of this push is the Atmanirbhar Bharat initiative, which seeks to position India as a global hub for telecom equipment manufacturing, including core transmission gear, 4G/5G infrastructure, and IoT devices.
For Tata Teleservices, the evolving ICT landscape in the SME sector also presents a promising growth avenue, with rising demand for digital solutions likely to translate into sustained revenue momentum.
Path to profitability remains steep
Despite sectoral tailwinds, Tata Teleservices faces a daunting climb to profitability. Mounting losses, eroding net worth, and liabilities that exceed current assets underscore the company’s financial strain.
While revenue growth briefly hit double digits in the first three quarters of FY25, it slipped again in the March quarter. Worse, losses have continued to widen despite the revenue bump.
The key drag: ₹20,000 crore in adjusted gross revenue (AGR) dues. As of 31 March 2025, Tata Teleservices had just ₹42.4 crore in cash — a fraction of its debt.
Tata Sons has pledged to provide liquidity support for the next 12 months, but the debt burden remains substantial, casting doubt over long-term repayment ability. Repeated losses have also eroded reserves, resulting in negative equity and book value.
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Conclusion
Institutional investors’ gradual accumulation in Tata Teleservices, though modest, signals a calculated bet on the company’s turnaround prospects.
On one hand, it remains a heavily leveraged, loss-making entity grappling with debt and competition. On the other, its pivot to enterprise services, operational gains, and Tata Sons’ backing offer a measure of stability and a potential recovery narrative.
For more such analyses, read Profit Pulse.
But the path forward is steep. Massive debt overhang and fierce competition leave little room for error. Whether Tata Teleservices can convert its strategic bets into sustainable shareholder value remains uncertain.
For now, it’s a speculative play, one that could reward patient investors but carries significant risk.
About the author: Ayesha Shetty is a research analyst registered with the Securities and Exchange Board of India. She is a certified Financial Risk Manager (FRM) and is working toward the Chartered Financial Analyst (CFA) designation.
Disclosure: The author does not hold shares in the companies discussed here. The views expressed are for informational purposes only and should not be considered investment advice. Readers should conduct their own research and consult a financial professional before making investment decisions.
