BackPEs look to exit ACT as WFH boosts valuations
True North, TA Associates are eyeing an enterprise value of $1.4 billionThe plan is primarily aimed at providing a profitable exit to the two private equity investors by capitalizing on the internet boom spurred by the work-from-home economy
PremiumThe owners of Atria Convergence Technologies Ltd (ACT) are in talks to sell a controlling stake in India’s largest non-telco internet service provider amid a surge in demand for home internet services, two people aware of the development said.
Private equity firms True North and TA Associates, which own more than 90% in the company, are eyeing an enterprise value of around $1.4 billion, the people said on condition of anonymity. ACT had last raised $500 million from True North and TA Associates in 2015.
The plan is primarily aimed at providing a profitable exit to the two private equity investors by capitalizing on the internet boom spurred by the work-from-home economy, one of the two people said.
“The discussions are at an early stage. They are in the process of appointing an investment bank to manage the sale and are in talks with a few foreign investment banks for this. They will be looking at telcos that want to add to their wired broadband services and foreign PE funds for the stake sale," the person added.
Global investors have shown increased interest in India’s fast-growing internet services business, as customers consume more data at home as they work remotely. The move by many households to switch from basic cable TV services to internet-based services such as Netflix, Amazon Prime Video and Disney Hotstar is also fuelling demand for broadband internet.
On 29 July, Mint reported that sovereign fund Qatar Investment Authority is in advanced talks with Reliance Industries Ltd to invest around $1.5 billion in an infrastructure investment trust that holds the unit Reliance Jio Infocomm Ltd’s fibre-optic assets.
“This is the right opportunity to provide an exit to the private equity players that backed ACT Fibernet for long," said the first person.
Emails sent to ACT Fibernet, True North and TA Associates remained unanswered.
Despite the imminent threat from Jio, ACT Fibernet has become the fastest-growing wired broadband company, according to Telecom Regulatory Authority of India data.
ACT Fibernet added 70,000 subscribers in the four months to 30 April for a total of 1.59 million subscribers, according to the latest data on broadband subscribers.
Jio, which had 860,000 fibre broadband customers at the end of December, managed to increase its subscribers to 900,000 by April-end, while Bharti Airtel saw its wired broadband subscriber base increase to 2.44 million from 2.42 million. Hathway, owned by Reliance Jio, managed to grow its subscriber base to 970,000 from 900,000.
At 7.97 million, BSNL continues to lead the wired broadband services in India in terms of users.
Unlike its rivals, ACT Fibernet is a pure wired broadband services company with a presence in 18 cities.
Jio has a pan-India presence and has plans to offer fibre broadband services in around 1,500 cities within the next 12-18 months.
ACT Fibernet was looking to raise nearly ₹800 crore through an initial public offering a couple of years ago, but the plan was abandoned because of poor IPO market conditions and launch of Jio’s wired broadband services.
“ACT Fibernet may be able to get a decent valuation, especially because the demand for fast-speed internet for gaming, work and entertainment has increased radically," said the second person cited above.
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