Three contenders have emerged to acquire Carlyle Group’s stake in Nxtra Data Ltd, the data center arm of telecom giant Bharti Airtel. The interested parties include private equity giant KKR, Singapore’s sovereign wealth fund GIC Holdings Pte. Ltd, and DigitalBridge Group Inc., a digital infrastructure-oriented alternative asset manager. This secondary minority sale deal, being handled by Bank of America, is expected to value Nxtra at approximately $700 million. Carlyle, through its affiliate CA Cloud Investments, acquired a 24% stake in Nxtra for $235 million (roughly 1,800 crore) back in 2020. While Carlyle is selling its entire stake, Bharti Airtel will retain the remaining ownership. The deal underscores the significant investor interest in India’s digital and physical infrastructure space. Previously, on February 22nd, reports suggested that ADIA, Stonepeak, Permira, GIC, KKR, and DigitalBridge were being considered for the acquisition. Another example of this growing interest is the potential acquisition of Vodafone Group’s 21.5% stake in Indus Towers by New York-based private equity firm I Squared Capital and alternative investment firm Stonepeak, valued at approximately $2.3 billion. Based in Gurugram, Nxtra Data Ltd, a subsidiary of India’s second-largest telecom carrier, commenced operations in 2013. It provides a vast network of secure and sustainable data centers across India, catering to leading enterprises, hyperscalers, start-ups, SMEs, and government entities. Nxtra competes in the high-demand digital infrastructure sector against companies like Yotta and NTT, and it has outlined plans to significantly expand its capacity. The company boasts the largest network of data centers in India, with 12 large and 120 edge data centers nationwide. Nxtra is investing 5,000 crore in seven new facilities located in Mumbai, Pune, Kolkata, Bengaluru, Hyderabad, and Delhi. This investment aims to double its current capacity from 200 MW to 400 MW by 2025. NTT executives had stated last year that they intend to add eight new data centers currently under construction, further expanding their existing 14 centers across 15 cities. Yotta Data Services is also expanding its data center in Greater Noida and initiating work on an ‘edge’ data center in Guwahati. The rising deployment of artificial intelligence (AI) and generative AI (GenAI) within enterprises is driving an exponential increase in compute capacity requirements. This demand is fueling significant growth in data center needs, particularly in markets like India and the US, leading to substantial revenue potential in the coming years. According to a report by real estate consulting firm CBRE South Asia, India’s data center capacity is projected to exceed 1,300 MW by the end of 2024, up from 880 MW as of June 2023. Currently, nearly 500 MW of capacity is under construction. The report highlights that Mumbai, Chennai, and Bangalore will dominate the data center market, collectively accounting for 80% of the capacity by the end of 2024. The continuous uptrend in the local data center industry is attributed to rapid digitalization, enhancements in tech infrastructure, and the adoption of advanced technologies like 5G, AI, blockchain, and cloud computing. Financial services advisory firm Avendus Capital, in a June 2023 report, projected $23 billion in investments towards data center capital expenditure over the next decade. This significant investment is driven by the exponential increase in data consumption and storage, government initiatives promoting data localization, and the demand for high bandwidth following the launch of 5G services. Beyond commercial needs, the Indian government is actively pushing for data localization under the provisions of the Digital Personal Data Protection (DPDP) Act. This necessitates the establishment of data centers within the country. Additionally, the government has outlined plans to implement a policy encouraging the development of data center parks. This policy includes providing infrastructure status, which grants access to benefits such as long-term credit at favorable terms.
