Unprecedented M&A Deal in India’s Tech Landscape
In a surprising move, the Shapoorji Pallonji Group has decided to divest its stake in the data centre construction business, marking its exit from a sector it once pioneered in India. The business has been sold for a hefty sum of Rs 700 crore to a consortium of investors, including a notable group of individuals and institutional investors.
Unique M&A Deal in Tech Sector
The sale of SP Group’s data centre construction business for Rs 700 crore stands out as a unique transaction in the Indian tech industry’s mergers and acquisitions landscape. Unlike traditional buyout deals, this transaction involves a consortium of investors, comprising as many as 30 individuals, along with prominent domestic institutional investors.
Details of the Deal
Under the terms of the deal, the SP Group has sold its data centre construction business to a group of investors, including well-known names like Ashish Kacholia, Mukul Mahavir Agrawal, Yash Kela, and Nikhil Vora. This move comes as a strategic decision by the SP Group to streamline its business operations and focus on core areas.
Restructuring and Spin-off
The data centre construction business, which generates a revenue of Rs 400-500 crore and is profitable, will be spun off from Sterling and Wilson, a subsidiary of SP Group, into a separate entity. This restructuring is subject to approval from lenders. The proceeds from the sale will be utilized by Sterling and Wilson to reduce its debt burden.
Investor Confidence and Infusion of Funds
Apart from the 30 individual investors, 12 domestic institutional investors, including Alchemy Capital and Capri Global Holdings, have also invested in the data centre construction business. The investors have infused funds into the business through convertible debentures, which will be converted into equity upon approval of the restructuring plan.
Future Plans and Stakeholding
While SP Group is divesting its stake in the data centre construction business, chairman Khurshed Daruvala expresses interest in remaining in the industry. He plans to inject Rs 200 crore into the business, securing a 22% stake in the new entity. This move underscores his commitment to the sector despite the divestment.
Potential Implications
The sale of SP Group’s data centre construction business signifies a strategic shift in the company’s focus and priorities. It also reflects investor confidence in the potential of the data centre industry in India. The transaction’s success will depend on regulatory approvals and the willingness of stakeholders to embrace the restructuring plan.
The divestment of SP Group’s data centre construction business marks a significant development in India’s tech industry. It underscores the evolving dynamics of the sector and the strategic decisions undertaken by key players to adapt to changing market conditions. As the transaction progresses, stakeholders will closely monitor its impact on SP Group’s future trajectory and the broader tech landscape.
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