Carlyle Group is to spend $235 million on buying a quarter of Nxtra, the data center subsidiary of India's Bharti Airtel.
Under a complicated deal announced this week, the 25% stake in Nxtra will be acquired by Comfort Investments II, an affiliate of CAP V Mauritius Limited, an investment fund managed and advised by entities of the Carlyle Group. Subject to regulatory approval, the deal is valued at $1.2 billion.
Nxtra has ten large data centers and 120 edge data centers in India. It hopes to use the investment to expand its presence and offerings in the country.
Last year it commissioned a new data center in Pune and it is building more in the major cities of Chennai, Mumbai, and Kolkata.
Parent company Airtel remains one of the largest players in India's enterprise connectivity sector, with more than 2,500 large businesses and 1 million small and midsized enterprises as customers.
The growing emphasis on digitalization, coupled with India's local data-storage requirements, is fueling the growth of the data center market. Several Internet giants, including Google and Amazon, have set up data centers in India.
Cloud adoption by small and midsized enterprises will increase the need for Indian data centers. The coronavirus pandemic has provided an additional boost, as companies invest in tools to maintain social distancing.
In the meantime, Airtel needs to cut its debt of $19.6 billion, especially now that arch-rival Reliance Jio is debt-free after raising more than $15 billion from numerous international investors in the last few months.
"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," says Gopal Vittal, the CEO of Bharti Airtel's India and South Asia business, in the company's statement.
Carlyle has invested more than $2.5 billion in several Indian firms, including SBI Life, SBI Card, HDFC, Delhivery, Piramal Pharma and PNB Housing Finance. In the data center segment, it has bought stakes in Coresite in the US and Itconic in Spain.
— Gagandeep Kaur, contributing editor, special to Light Reading