Tata Communications surges on potential takeover of unit Neotel

Reuters Market Eye - 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 '15/share to fair value. However, we add a conservative '30/share and raise our target price to '250 and reiterate BUY," Kotak said in a report on Tuesday.

(Reporting by Abhishek Vishnoi)