Tata Comm: Upsides in stock limited given execution challenges, valuations

Sharp rally and integration/execution challenges may cap upsides for the stock

After a strong rally since mid-May, the Tata Communications stock has shed over 3 per cent in the last few sessions. While the recent acquisition of US-based and NYSE-listed Kaleyra comes at a reasonable price and is expected to strengthen its portfolio, brokerages believe the upsides in the stock are limited given execution challenges and high valuations.

The cash consideration of the deal to buy the Communications Platform as a Service or CPaaS player is $100 million or Rs 820 crore and is payable to shareholders of Kaleyra at $7.25 a share, a 59 per cent premium to the prices