Tata Communications surges on potential takeover of unit Neotel

Shares in Tata Communications gain 4.3 percent after South Africa's Vodacom Group said on Monday it was in exclusive talks to buy the company's unlisted local unit, Neotel, in a potential $590 million deal.

Acquiring Neotel would be a major boost to Vodacom's ambitions to grow its data business in Africa's largest economy.

"Every US$100 mn of deal equity value adds Rs 15/share to fair value. However, we add a conservative Rs 30/share and raise our target price to Rs 250 and reiterate BUY," Kotak said in a report on Tuesday.