U.S. Private Equity Giant Carlyle Group To Buy 25% Stake In Indian Data Center firm

Washington D.C.-based private equity firm Carlyle Group has agreed to purchase a 25% stake in Nxtra Data Ltd., a wholly owned subsidiary of Indian telecom company Bharti Airtel, for about $235 million. Bharti Airtel will continue to hold the remaining 75% stake in Nxtra.

The deal gives Nxtra an enterprise valuation of about $1.2 billion.

Based in New Delhi, Nxtra has 10 large data centers across India, and is constructing more data centers in the country.

Nxtra provides data center services to Indian and global enterprises, start-ups, small and medium businesses and governments. Nxtra offers customers with co-location services, cloud infrastructure, managed hosting, data backup, disaster recovery, and remote infrastructure management, Bharti Airtel said.

Last year, Nxtra commissioned a data center in Pune, and is constructing others in Chennai, Mumbai and Kolkata.

Nxtra will use the proceeds from the sale to upgrade its infrastructure.

The transaction remains subject to regulatory approval from the Competition Commission of India.

“Rapid digitization has opened up a massive growth opportunity for data centers in India and we plan to accelerate our investments to become a major player in this segment," said Gopal Vittal, managing director and CEO for India and South Asia at Bharti Airtel. "We are delighted to have Carlyle as a strategic partner in this exciting journey, particularly given their experience in this industry, and look forward to working with them.”

Vittal added: “At Airtel, we have built a robust data center portfolio that is future-ready and scalable. For us, the security and data privacy requirements of our customers are our top priorities, which we have established as a key differentiator for our data center offerings".

The Indian market is witnessing a spike in demand for data centers as more companies are choosing cloud computing, and consumers increasingly demand digital services.

For the traditional telecom firms, cloud and entertainment services offer new sources of revenue.

Neeraj Bharadwaj, managing director of the Carlyle Asia Partners advisory team, stated: “India is set to become one of the largest markets in the world for digital services. Airtel, with its proven track record of solid execution and customer focus, is well positioned to leverage the potential growth of data centers in India. We look forward to collaborating with Airtel to unlock the full potential of Nxtra.”

Carlyle has also invested in other data centers, including Coresite in the U.S. and Itconic in Spain.

"While Carlyle - being one of the most experienced global [private equity] investors in India… has made several investments in the [information technology] & [business process outsourcing] services sectors… the deal with Airtel-Nxtra is the first significant investment by the firm in the core telecom-data center business," said Arun Natarajan, founder of Venture Intelligence, a company that analyzes private companies.

Some analysts think that large Indian companies are getting better at unlocking the value of their internal assets.

“The telecom companies first started by [selling off] tower assets, now it is the data centers due to the digital push and next would be fiber assets,” said Hemant Joshi, an independent telecom expert.

Separately, Carlyle Group also said it will purchase a 20% in Piramal Enterprises' pharmaceutical unit in Mumbai for about $490 million.

Carlyle had invested more than $2.5 billion in India as of Mar. 31, 2020.