The Carlyle Group has agreed to acquire a 25% stake in the data centre business of Bharti Airtel Ltd, as the private equity firm struck its third India deal in less than two months.
Carlyle will pay $235 million (Rs 1,775 crore) for the stake in Nxtra Data Ltd, Bharti Airtel said in a statement on Wednesday. The Indian telecom operator will retain the remaining 75% stake.
The post-money enterprise valuation of Nxtra is about $1.2 billion, it added.
The transaction is subject to regulatory approvals, including from the Competition Commission of India.
Carlyle’s investment in Nxtra is yet another indication of foreign investors’ growing interest in digital services companies in India. Over the past couple of months, Reliance Industries Ltd—Airtel’s bigger rival in the telecom sector—has raised $15.2 billion from 10 global investors for its digital unit Jio Platforms Ltd. These investors include Facebook Inc, Middle Eastern sovereign wealth funds and a bunch of American private equity firms.
Nxtra, based in Delhi, provides data centre services to Indian and global enterprises, startups, small and medium organisations and governments. It operates 10 large data centres and over 120 edge data centres, which provide services including co-location services, cloud infrastructure, managed hosting and data backup.
“Airtel, with its proven track record of solid execution and customer focus, is well positioned to leverage the potential growth of data centres in India,” Carlyle Asia Partners managing director Neeraj Bharadwaj said.
Gopal Vittal, Bharti Airtel’s managing director and CEO for India and South Asia, said the company was focussed on the security of data privacy requirements of its customers.
“Rapid digitization has opened up a massive growth opportunity for data centres in India and we plan to accelerate our investments to become a major player in this segment,” he said.
The investment in the telecommunications major’s data centre arm comes even as the Indian government continues to push for the local storage of data produced by Indian companies and the public. The Personal Data Protection Bill, 2019, is currently with a joint select committee of Parliament.
The coronavirus pandemic, which has given a big push to digital consumption and work-from-home arrangements, is likely to further accelerate growth of data centres in India.
The deal also comes in the wake of increased scrutiny on Chinese investments in India’s technology and startup sectors. Following a deadly border clash between the militaries of the two countries last month, the government on Monday banned 59, mostly Chinese, mobile apps including Bytedance’s TikTok and Tencent’s WeChat.
Carlyle’s India bets
Carlyle is one of the earliest Western PE firms to begin operating in India, having started in June 2000.
The Nxtra deal is Carlyle’s largest technology investment in India. It has previously backed technology companies such as engineering services provider QuEST Global, payments processing firm Financial Software & Systems Pvt. Ltd and software product company Elitecore Technologies in the country.
Also, the investment in Nxtra is Carlyle’s third deal in India in less than two months.
Last week, the US-based buyout giant agreed to acquire a 20% stake in the pharmaceutical business of Piramal Enterprises Ltd for about $490 million (around Rs 3,700 crore).
The transaction valued Piramal Pharma Ltd at $2.775 billion, with a potential upside of $390 million depending on the company’s performance during 2020-21, the company had said.
In May, Carlyle agreed to take over animal healthcare company Sequent Scientific Ltd for about $210 million in its biggest control-oriented deal in India.
Carlyle had previously invested in two healthcare companies in India—diagnostics chain Metropolis Healthcare Ltd and hospital company Medanta. (For more on Carlyle’s India strategy, click here.)