Tata Communications Ltd will sell a majority stake in its data centre business to Singapore Technologies Telemedia for about $635 million including debt, as it joins other Tata Group companies selling overseas assets to cut borrowings and consolidate operations.
The Indian company said in a stock-exchange filing that it has signed definitive agreements with ST Telemedia, a unit of Singapore state investment firm Temasek, to sell 74% of its data centre business in India for an enterprise value of Rs 3,130 crore (US$467 million) and an equal stake in its Singapore data centre business for S$232.4 million (US$168 million). Tata Communications will retain a 26% stake in the business, it said.
Tata Communications joins the diversified group’s steel, power and hospitality arms in selling overseas assets in recent years. Tata Steel Ltd is divesting its UK business, Tata Power is offloading its Indonesian assets while Indian Hotels Company said on Wednesday it planned to sell its Taj Boston hotel in the US.
The $110 billion salt-to-software conglomerate had expanded its overseas operations aggressively under previous chairman Ratan Tata through multiple acquisitions in sectors such as beverages, chemicals, steel, auto and hotels in the first decade of this century. But under Cyrus Mistry, who took over as chairman in December 2012, the group has been looking to consolidate its business and cut the debt taken on to finance the acquisitions.
Tata Communications is also looking for a buyer for the fixed-line assets of its South African arm Neotel Pty Ltd after a deal with a unit of Britain’s Vodafone fell through.
The company had a net debt of about $1.48 billion at the end of December 2015. For the nine months through December, it posted a net loss of Rs 6 crore on revenue of Rs 15,409 crore. This compares with a net profit of Rs 179.5 crore on revenue of Rs 15,098 crore a year earlier.
The latest deal includes Tata Communications’ 14 data centres in key cities across India, including Delhi, Mumbai, Bengaluru and Chennai, and its three Singapore facilities.
Tata Communications holds its data centres through wholly owned subsidiary Tata Communications Data Centers Private Ltd. The data centres service clients including blue chip enterprises in Asia, e-commerce platforms and multinational corporations.
Vinod Kumar, managing director and CEO, Tata Communications, said the deal will help the company focus more on advanced services within the data centre that enable digital transformation for its customers, in addition to infrastructure services. It will also enable the company to redeploy capital in other areas and broaden its portfolio of services, Kumar said.
ST Telemedia will make the acquisition through unit ST Telemedia Global Data Centres. The acquisition will help the Singapore company to strengthen its global data centre network to span four geographies, including in India and China.
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