The Carlyle Group will invest $235 million for approximately 25 percent stake in Nxtra Data Ltd, a wholly-owned subsidiary of Bharti Airtel engaged in the data centre business.

The post-money enterprise valuation of Nxtra is approximately $1.2 billion and Carlyle will hold a stake of approximately 25 percent in the business upon completion of the transaction, with Airtel continuing to hold the remaining stake of approximately 75 percent, Bharti Airtel said in a regulatory filing.

Nxtra offers secure data centre services to leading Indian and global enterprises, hyperscalers, start-ups, SMEs and governments. Nxtra has a portfolio of 10 large data centres and more than 120 edge data centres around the world which provides customers with co-location services, cloud infrastructure, managed hosting, data backup, disaster recovery, and remote infrastructure management.

“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,” said Gopal Vittal, MD & CEO (India and South Asia), Bharti Airtel.

The transaction is subject to the necessary regulatory approvals, including approval from the Competition Commission of India, the company added.

“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 centres in India. We look forward to collaborating with Airtel to unlock the full potential of Nxtra," said Neeraj Bharadwaj, Managing Director of the Carlyle Asia Partners advisory team.

Why is the deal important for Airtel?

The deal puts Airtel into the league of Google, Amazon, Microsoft, Oracle that have been expanding their data centre presence in India. Indian enterprises across sectors are rapidly adapting to digital services.

Research firm Business Wire released a survey in February that found that India's data centre market is expected to grow at a CAGR of 4 percent till 2025. With enterprises realising the importance of digital services between March and June (due to the lockdown imposed due to the COVID-19 pandemic), the number is expected to increase. With a marquee investor like Carlyle on board, the deal will give Airtel financial muscle to be able to expand its footprint.

Carlyle has bought 25% in Nxtra and 75% is still with Airtel. This could potentially give Bharti Airtel an additional lever to bring in more capital at a later date if it were to look at divesting more stake.

With Jio upping the ante and establishing itself in the digital asset space with a slew of investors, bringing in Carlyle into Nxtra will give Airtel additional ammunition to meet the competition.

First Published:Jul 1, 2020 7:06 AM IST