The unit of Singapore's Temasek will pick up a 74% stake in the Tata company in a deal valued at $600-650 mn
Mumbai: Singapore Technologies Telemedia (ST Telemedia), a unit of state investment company Temasek Holdings Pte Ltd, is set to buy 74% in Tata Communications Data Centre Pvt. Ltd, according to two people close to the development.
The deal, which will be announced in a week’s time, will be valued at $600-650 million ( ₹ 4,000-4,500 crore), said one of the two people on condition of anonymity.
Jefferies LLC is advising Tata Communications Ltd, the parent of Tata Communications Data Centre, on the sale.
The deal is expected to reduce the debt of Tata Communications. As of 30 September, the company had a total consolidated debt of ₹ 9,595 crore.
In 2014-15, the company had a 20% share of the Indian enterprise data market and a 28.5% share of the Indian data centre market, according to the company’s 2014-15 annual report.
In June, Mint reported that Tata Communications plans to sell a 74% stake in its subsidiary Tata Communications Data Centre, citing people familiar with the matter.
Tata Communications provides data centre services in India and countries such as the US, the UK and Singapore. The government of India owns 26% stake in Tata Communications, formerly known as Videsh Sanchar Nigam Ltd.
Tata Communications Data Centre has facilities in New Delhi, Mumbai, Bengaluru, Chennai, Kolkata and Pune and some tier-II and tier-III towns. It has 44 data centres and co-location centres with over 1 million sq. ft of space.
It has eight partner sites across Australia, Malaysia, Germany and the Netherlands.
Emails sent to Tata Communications on Tuesday did not elicit any response. The spokespersons for ST Telemedia and Jefferies declined to comment.
According to Tata Communications’ annual report, the data centre unit’s profit fell 65% to ₹ 8 crore in the year ended 31 March 2015 from ₹ 23 crore in the previous year. Revenue rose 16% to ₹ 436 crore from ₹ 375 crore.
Tata Communications had separated the data centre business into a subsidiary effective 1 March 2014.
ST Telemedia is a strategic investor in communications, media and technology businesses around the world.
“With the growth in online and e-commerce business, data centres is a high-growth business. We expect that with technology capability and rising scale, India could also become the hub for data centre businesses globally," said Ajay Garg, managing director of Equirus Capital, a boutique investment bank.
The Indian data centre infrastructure market is expected to grow 5.2% to $2 billion in 2016, according to a report published by researcher Gartner Inc. in November. Of this, spending on cloud infrastructure as a service will total $100 million, Gartner said, predicting that the cloud services market will touch $1.9 billion by 2019.
A number of companies including Amazon Web Services Inc. and Microsoft Corp. have plans to set up large data centres dedicated to the Indian market. Amazon, which has clients such as Tata Motors, redBus, Paytm and the Future Group, said in July last year that its data centre will be operational by 2016.
In November, telecom operator Vodafone Group had announced its plan to invest ₹ 1,000 crore to set up a tier-IV data centre in India to cater to domestic businesses and enterprises.