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Business News/ Companies / Tata Communications plans to sell data centre business

Mumbai: Tata group firm Tata Communications Ltd plans to sell a 74% stake in its subsidiary Tata Communications Data Centre Pvt. Ltd, according to two people familiar with the matter who asked not to be identified. Jefferies LLC has been hired by Tata Communications to advise it on the sale, one of the two said.

Talks with some private equity and strategic investors have begun, this person added. The second person said the deal size would likely be around $300 million and help Tata Communications reduce debt on its books.

The firm had a debt of 11,547 crore as on September 2014.

A Tata Communications spokesperson was non-commital about the deal.

“Tata Communications is highly tuned in to business growth opportunities. Accordingly, we continually look at new or different ways in which to use our experience, insights and customer proposition to benefit our customers and partners, as well as our company," the spokesperson said.

“As you would expect, this includes the many and varied business development opportunities that might come our way. Beyond this, it is not appropriate for us to comment on any specific matter, whether it be actual or potential. Similarly, we do not comment on speculation or rumour."

According to Tata Communications’ 2014 annual report, the data centre subsidiary is profitable, and returned a net profit of 23 crore for 2013-14 on a revenue of 375 crore. The company is yet to announce its numbers for 2014-15. “In the long run, unless the company is able to raise equity funding, its ability to raise additional debt funding may be restricted. This, in turn, could adversely affect the capital expenditure programme in the long run," the annual report said.

Perhaps in anticipation, Tata Communications hived off the data centre business into a wholly-owned subsidiary effective 1 March 2014.

“The wide presence of Tata Communication’s data centre could be attractive to buyers," said the second person.

Tata Communications Data Centre has facilities in Delhi, Mumbai, Bengaluru, Chennai, Kolkata and Pune and some tier-II, and tier-III towns. The company also provides data centre services in the US, the UK and Singapore. It owns over 1 million sq. ft of data centre and co-location space across 44 global locations and also has eight partner sites in Australia, Malaysia, Germany and the Netherlands, according to the company’s website.

In 2013-14, the Tata Communications had a 28% market share of the Indian data market and a 25% market share of the Indian data centre market, according to the company’s annual report.

Several global and Indian firms are in the process of setting up data centres in India.

In 2014, Microsoft Corp. chief executive officer Satya Nadella announced plans to build data centres in India to tap demand for cloud-based computing as it plans to offer its Azure and Office 365 services in India. Last month, Amazon Web Services (AWS), part of, said it would set up data centres in India next year for the cloud computing platform for its Indian customers including Hungama, Tata Motors Ltd, Jubilant Foodworks Ltd, Future Group, NDTV Ltd, ZEDO, Freshdesk, Hike, Paytm and Inmobi.

Last year, Mint reported that Reliance Jio Infocomm Ltd, the telecom unit of Mukesh Ambani’s Reliance Industries Ltd (RIL), would set up 14 data centres across the country to create a cloud-computing infrastructure that could complement its roll-out of 4G wireless broadband services.

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Updated: 23 Jul 2015, 12:39 AM IST
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