Swiss PE firm Partners Group in fray to acquire ACT Broadband

Partners Group, a Swiss private equity fund, is negotiating with the private equity owners of Atria Convergence Technologies Ltd. (ACT), to acquire India’s largest non-telco internet service provider, people aware of the development said.

Partners Group will likely buy out True North and TA Associates, which together own a 95% stake in the company and have been evaluating ways to monetise their investment of $500 million in the company in 2015.

The existing investors are now eyeing a valuation of Rs 10,300 crore to Rs 12,000 crore ($1.4 billion to $1.6 billion), depending on which they could retain a minority stake or exit entirely, the people said.

Partners Group is carrying out due diligence before the final bids are submitted in a few weeks. The second wave of Covid-19 has slowed the process, the people said.

Spokespersons with Partners Group, True North declined to comment while mails sent to ACT and TA Associates did not elicit any responses till the press time.

Investment bank UBS is advising the PE funds.

With 1.7 million subscribers, ACT Broadband is the fourth-largest wired broadband service provider after Bharat Sanchar Nigam Ltd. (BSNL), Bharti Airtel Ltd. and Reliance Jio Infocomm Ltd., and operates under the brand ACT Fibernet.

True North and TA Associates have tried to monetise their investments through a sale or listing earlier. In 2017-18, they filed to raise Rs 800 crore through an initial public offering. But competition from its deep-pocketed rivals affected valuations and muted investor enthusiasm, analysts said.

With a presence in 11 cities in India, predominantly in the south, ACT plans to enter new markets with its high-speed broadband and fibre services on the back of increased internet and data usage due to work from home.

ACT is strong in markets such as Karnataka, Andhra Pradesh, Telangana and Tamil Nadu. In 2009, ACT acquired Hyderabad-based Beam Telecom, which had 30,000 customers.

The company has improved its financial risk profile at the standalone level in a sustained manner, with total outside liabilities to net worth below 0.25 times, and has improved market share significantly, CARE Rating said in March.

ACT’s net profit climbed to Rs 234.63 crore in FY20 from Rs 219.46 crore a year earlier, while revenue rose to Rs 1,520.27 crore from Rs 1,403.19 crore in FY19.

However, aggressive price wars in the broadband segment may adversely impact the company’s market share and average revenue per user.

Promoted by CS Sundar Raju in 2000, ACT also operates in the cable television segment mainly in Bengaluru, Hyderabad, Chennai, Nellore and Vijayawada. It is gradually expanding its presence in other cities including New Delhi, Ahmedabad, Lucknow and Jaipur.

It has established a strong foothold in key markets including National Capital Region centred on Delhi and is able to offer high browsing speeds for broadband internet users due to fibre to home technology, its website showed.

BSNL is the largest wired broadband service provider with 7.7 million subscribers in 2020, followed by Bharti Airtel (2.7 million), Reliance Jio (1.9 million), ACT (1.7 million) and Hathway Cable & Datacom (1 million). The top wireless broadband service provider is Reliance Jio, with 408 million users, equivalent to a 35% market share.

Partners Group, which has $109 billion in assets under management worldwide, does not have a large presence in India. Its two major investments in India were the acquisition of AU Housing Finance in 2016 and Vishal Mega Mart in 2018—both deals with Kedaara Capital.