Carlyle taps ADIA, GIC, KKR, others for sale of stake in Airtel data centres business

Carlyle taps ADIA, GIC, KKR, others for Airtel data centres business stake sale

Private equity firm Carlyle has begun formal discussions with sovereign wealth funds including the Abu Dhabi Investment Authority, Singapore’s GIC and global private equity majors like KKR for the sale of its 24 percent stake in Nxtra Data, the data centres business of telecom company Bharti Airtel, sources aware of the development told Moneycontrol.

Carlyle had picked up the stake in the company in 2020 for approximately Rs 1,780 crore ($235 million).

Moneycontrol first reported on February 14 that Carlyle was getting ready to sell its stake in Airtel’s data centre business.

“The deal was formally launched a couple of weeks ago and is seeing very strong initial interest from investors. More than a dozen prospective buyers have been sent the information memorandum, including names such as ADIA, GIC, KKR,” said one of the sources cited above.

“The strong interest in the asset is being driven by the scale of the platform and the strong partner (Bharti Airtel), which has strong relationships with enterprise customers through its telco business,” the source added.

The stake sale is likely to fetch a value of around $800 million -900 million, sources added.

Carlyle, KKR, ADIA declined to comment. An email sent to GIC remained unanswered.

As on March 31, 2023, Nxtra Data operated two hyper scale data centres and 10 enterprise grade data centres in cities such as Mumbai, Pune, Bengaluru, Chennai, the NCR, and Bhubaneshwar and has over 120 Edge data centres across India.

Revenue growth; Strong linkage with Airtel

Nxtra’s revenue has registered a compounded annual growth rate (CAGR) of around 13 percent over the last five years (from Rs 852 crore in FY19 to Rs 1,601 crore in FY23), according to a credit rating report by Care Ratings. The revenue growth has been aided by the higher demand over supply.

The rating agency noted that Nxtra has strong linkages with parent Airtel, making it an important subsidiary for the parent telco.

“The majority of the data centre requirement of Bharti Airtel is met by Nxtra in India. Airtel uses the Edge data centre 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 plans to exit the Airtel data centres business comes when investors are keen to tap the digital revolution in India by investing in backbone infrastructure such as data centres.

As per a May 2023 report by financial services firm Avendus, India's data centres market is expected to lead the next wave of infrastructure and real estate investments by growing at a compounded annual growth rate of 40 percent 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.

The report added that developers have a pipeline of over 3,000 MW to be delivered over the next 10 years, which will require a capex of approximately $23 billion.

This growth potential has attracted several investors to the Indian data centre market including Blackstone, Brookfield and Yonder.