Macquarie Capital has bought a controlling more than 51% stake in Mumbai-based network-as-a-service provider CloudExtel for about $100 million (about ₹821 crore), making it the first such deal in the active telecom infrastructure space for the advisory, capital markets and principal investment arm of Macquarie Group.
In an interview, Kunal Bajaj, chief executive and co-founder of CloudExtel said Macquarie has picked a substantial majority stake in the company and will have a seat on the board, while the shareholding of previous owner, Bombay Gas Company Ltd will be reduced to a minority.
EY was the exclusive sell side M&A banker for the transaction. CloudExtel was a unit of Bombay Gas Company.
“The transaction size is $100 million, and because it is a change in ownership, the existing promoter’s share of ownership of Bombay Gas is going to drop down to a minority,” Bajaj said. He added that CloudExtel’s management will remain unchanged post the deal though the workforce count is expected to rise from 350 to about 1000 over the next five years.
Confirming the deal, Ivan Varughese, senior managing director and head of infrastructure and energy capital, Asia Pacific at Macquarie Capital said in a statement, “We are excited to leverage our global experience to support CloudExtel in expanding their telecommunications portfolio as well as enhancing the quality and effectiveness of connectivity for local communities across India.”
He said demand for data requires large scale expansion of infrastructure to decongest networks and enhance connectivity, in which tower fiberization is needed to rise to 70% from 33% presently.
CloudExtel plans substantial scale up of its infrastructure services over the next five years. The investments will be channelled towards small cell site hosting business and equally into expanding the fiber network, both underground and overhead, fiber-to-the-home, and into active infrastructure sharing.
“We’re talking about volume increases at the order of magnitude of 10. So, from 4,500 small cell sites today to 45,000 sites in the next five years. We plan on growing to over 35,000 route kilometers of last mile access fiber, across the country,” Bajaj said.
CloudExtel clocked revenue of ₹125 crore in FY23, clocking a compound annual growth rate (CAGR) of more than 84% for over five years with a positive Ebitda.
“To continue to grow at an aggressive rate, achieve the next level of scale and provide its latest offering in infrastructure sharing, a significant amount of capital would be required,” said Ashish Jalan, founder, CloudExtel and director, Bombay Gas Company.
Mint reported previously on CloudExtel setting up its first such sharable network at the Mumbai Central railway station, which was being expanded to other stations. The company aimed to build 40,000 small cell sites across the country that carriers like Bharti Airtel and Vodafone Idea can share.
