Tata Communications share price fell more than 4% in the early trade as the company plans to acquire US-based Kaleyra Inc.

At 9:26 am, Tata Communications was trading at Rs 1,557.35, down Rs 24.75, or 1.56% on the BSE.
Tata Communications has decided to acquire Kaleyra, Inc. in a cash-only transaction at a price per share of $7.25 for an entire consideration to Kaleyra shareholders of about $100 million and the assumption of all outstanding debt.

The boards of directors of both Tata Communications and Kaleyra have universally accepted this transaction.
Consummation of the deal is subject to Kaleyra’s stockholders’ approval, certain regulatory approvals and other customary closing conditions.

Upon the transaction’s end in six to nine months, Kaleyra Inc. will become a subsidiary of Tata Communications Limited.
Kaleyra Inc. has subsidiaries in the USA, Italy, India, UAE, Germany, the UK, Dominican Republic, Mexico, Africa, and Canada.

Kaleyra is a global group providing mobile communication services to financial institutes, e-commerce players, OTTs, software firms, logistic enablers, healthcare providers, retailers, and other large administrations worldwide.
The ambitious growth targets specified in the analyst meeting may need near-term high capex and opex; the acquisition could upsurge net debt by 22% to Rs 68 billion, along with margin dilution.

The company’s robust FCF of Rs 12-14 billion, despite a rise in capex, could allow it to scout for growth opportunities with a healthy ROCE target of over 20%.

The broking house maintains its Neutral rating with a studied Target Price of Rs 1,450 per share (earlier Rs 1,350) amid enhanced growth visibility, led by the Kaleyra acquisition (assigned 8x/3x EBITDA to the Data/Voice business).