Texas-based Q Investments, the private equity investor who incubated Xcel Telecom, could be getting a 4x return on its investment in the firm. Though the investment fund committed $500 million as equity investment in telecom tower firm Xcel, the amount invested by it stood at Rs 200 crore ($45-50 million), sources close to the deal told VCCircle.

The deal with American Tower Corporation is expected to be closed at an enterprise valuation of more than Rs 800 crore, providing the investor a cool 4x returns in just two years.

American Tower Mauritius is buying Xcel from Q Investments affiliate Horse-Shoe Capital, Mauritius, which holds a 100% stake in the firm. The fund followed a differentiated strategy of incubating a firm rather than investing in a telecom tower firm in 2006, which was then a nascent industry for independent players.

Q Investments then roped in former BPL Mobile chief executive Sandip Basu in 2007 as it first employee to run and build the firm. This strategy seems to have paid off in giving a good profitable exit even in a downturn.

Part of the reason for the approach may have been that Q Investments has experience in the telecom tower sector. "They have invested in telecom tower firms in United States like Crown Castle and American Tower successfully," added the source. Q Investments is headed by Pranav Parikh in India, who is also a director on Xcel's board.

This deal marks the first exit by a private equity player in telecom tower space, which has seen huge investments from PE funds. The sector has seen billion dollar investments in Bharti Infratel and Aditya Birla Telecom.

This deal continues the process of consolidation in the telecom tower space. Earlier this year SREI Group-promoted Quipo Telecom Infrastructure Ltd (QTIL) merged with Tata Tele's tower arm. The deal also marks the continuing trend of correction in telecom tower valuations. While the Tata-Quippo deal valued each tower at Rs 61 lakh, this deal values towers at around Rs 47 lakh. Earlier, deals involving Reliance Infratel and Bharti Infratel, which were done during the boomtime in 2007, valued each tower between Rs 1.6- 2 crore.

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