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Carlyle eyes exit from Airtel’s data center business

Private equity firm Carlyle plans to sell its entire 24 percent stake in Nxtra Data Ltd, the data centre unit of telecom operator Bharti Airtel Ltd, people aware of the development said.

A formal sale process is still some time away, the people added, requesting anonymity. Carlyle acquired the stake in Nxtra in 2020 for approximately Rs1,780 crore.

“There is a strong interest in the data centres space, and they have been receiving some inbound requests for their stake in Nxtra. The sale could easily fetch Carlyle at least 3x (triple) the amount it invested as the asset has grown tremendously well in the last few years, and the relation with Airtel and the enterprise customers that Airtel can draw through its telco relationships are a competitive advantage for the platform,” one of the people cited above said.

A spokesperson for Carlyle declined to comment. An email sent to a spokesperson for Bharti Airtel remained unanswered.

As of March 31, 2023, Nxtra Data operated two hyper-scale data centres, 10 enterprise-grade data centres in Mumbai, Pune, Bengaluru, Chennai, the National Capital Region, and Bhubaneshwar and has more than 120 Edge data centres across India.

Revenue growth; Strong linkage with Airtel
Nxtra’s revenue has grown at an average annual pace of around 13% over the past five years (from Rs852 crore in FY19 to Rs1,601 crore in FY23), driven by robust demand for its services, according to Care Ratings. The rating agency noted that Nxtra has strong links with parent Airtel, making it an important subsidiary for the parent.

“A substantial part of the data centre requirements of Bharti Airtel are met by Nxtra in India. Airtel uses the Edge data centres of Nxtra as switching centres for its telecommunication business and provides data centre services to its enterprises through Nxtra’s infrastructure. Nxtra, thereby, has strategic importance to enable Airtel to run its various operations uninterrupted,” the report said.

Rise of Data Centres
Carlyle’s plan to exit the Airtel data centres business comes when investors are keen to tap the digital transformation in India through investments in critical infrastructure such as data centres.

The India data centre market is expected to lead the next wave of infrastructure and real estate investments by growing at a compounded annual growth rate of 40% to approximately 1,700 megawatts (MW) capacity by 2025 from 800 MW in December 2022, on the back of investments worth $5 billion during this period, according to a May 2023 report by financial services firm Avendus. The report said developers have a pipeline of over 3,000 MW to be delivered over the next 10 years, requiring a capex of approximately $23 billion. This growth potential has attracted several investors, including Blackstone, Brookfield and Yonder.

Blackstone Group, the world’s largest manager of alternative assets, has plans to develop 600 MW capacity across two large hyperscale data centres in India.

In July 2023, Reliance Industries Ltd said it would invest as much as Rs 1,000 crore to build data centres along with Canadian investment firm Brookfield. The JV is currently building data centres in Chennai and Mumbai. Yondr Group, a developer of hyperscale data centres, has formed a strategic joint venture partnership with private equity firm Everstone Group. The joint venture plans to deploy $1 billion to develop data centres in India, with its first facility being developed in the Mumbai Metropolitan Region. Moneycontrol

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