Overweight Tata Communications, target Rs 570: Morgan Stanley

Morgan Stanley maintains an overweight rating on Tata Communications with a 12-month target price of Rs 570. In FY16, Neotel's business performance disappointed, but the global investment bank expects the deal to be marginally EV/EBITDA accretive.

The deal aligns well with Tata Communication's objective to focus on core business. Cash coming in would help deleveraging EV/EBITDA to 3x in FY2017. Morgan Stanley believes that the net gain to Tata Communication from the deal is Rs 16/share.