Tata Communication slips 4% on acquisition plan of US-based Kaleyra

Shares of Tata Communication slipped 4 per cent to Rs 1,515.50 in Friday’s intra-day trade, after the company announced it will acquire US-based Kaleyra at an equity value of $100 million (Rs 820 crore).

Tata Communications, a global digital ecosystem enabler, said it has entered into a definitive agreement to acquire Kaleyra, Inc to empower global enterprises to offer personalised experiences to their customers.

The deal is subject to approval by Kaleyra’s stockholders, certain regulatory approvals, and other customary closing conditions. Upon closing of the transaction, expected in six to nine months, Kaleyra Inc. will become a subsidiary of Tata Communications, the company said.

"With this transaction, Tata Communications will gain an industry-proven platform with strong capabilities and scale. Kaleyra brings a stronghold in the business communications market in banking and financial services, retail and digital commerce industries across global markets, in addition to a strong team with expertise in technology, engineering and research & development," the company said.

Kaleyra is a global omnichannel integrated communication services provider with a set of proprietary platforms, which offers targeted personalisation through messaging, video, push notifications, e-mail and voice-based services, and chatbots.

That apart, Tata Communications will also assume net debt of $149.9 million in its books. Kaleyra has a topline of $339 million and is loss making at EBITDA and PAT levels.

Analysts at Motilal Oswal Financial Services believe that the deal should accelerate growth for Tata Communications given Kaleyra’s complimenting portfolio in US/EU and CPaaS vertical.

"However, the near-term investments in capex and opex may dilute Ebitda margin guidance of 23-25 per cent further after Switch acquisition and capex increase to ~$600 million," the brokerage firm said, maintaining a 'neutral' rating on the counter, with a revised target price of Rs 1,450 per share.
 

Besides, according to analysts at ICICI Securities, Kaleyra's presence in the CPaaS space in US, Italy and India will gradually boost and widen Tata Communication CPaaS offering of Digo (in India and APAC).

"Nonetheless, operating losses (albeit the company is targeting an Ebitda break even in the short term and a double-digit margin in the medium term) will dilute margins in FY25 (earnings dilutive too) and FY26," the brokerage firm added.