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PE firm TA Associates to hold 40% stake in Atria for $200 mn

MUMBAI: Private equity giant TA Associates is acquiring 40 per cent stake in Bengaluru-based Atria Convergence Technologies (ACT), valuing the broadband and cable TV company at $526 million.

TA Associates is investing $200 million to make the stake acquisition, its first purchase in an Indian broadband and cable TV company.

“TA Associates will hold 40 per cent stake in ACT. It is paying $200 million for it,” a source familiar with the development said.

India Value Fund III will exit from its investment of seven years in ACT. However, India Value Fund Advisors (IVFA) will reinvest through its new fund Indium V (Mauritius).

“IVFA’s new fund will put in $300 million, reinforcing its confidence in the growth story of ACT. It will hold 55 per cent stake in ACT,” the source said.

In 2008, IVF III had acquired a controlling stake for around Rs 200 crore (Rs 2 billion). It subsequently upped its stake and made additional investments of around Rs 400 crore (Rs 4 billion).

In the new shareholding arrangement, the founder-promoters CS Sunder Raju and K Nagaraju will hold the remaining 5 per cent stake.

“This is basically a shareholding deal. No money will come into the company. The size of the deal is $500 million,” the source said.

Earlier, IVFA was holding around 70 per cent stake in ACT. But following the FIPB approval, this had increased to 78 per cent, the source added. The balance was with the promoters.

There will be no change in management, the source said. Bala Malladi will continue to be the CEO of ACT. Dhiraj Poddar, co-head of India at TA Associates Advisory, will join ACT’s board of directors at the close of the investment.

Earlier, had reported that ACT was in the advanced stage of negotiations with TA Associates to unload stake.

ACT will be the first broadband and cable TV company to have the backing of two private equity firms. As IVFA and TA Associates will together hold 95 per cent of ACT, funding will no longer be an issue. Bullish on the company’s growth story, ACT is expected to expand its broadband presence initially to the bigger cities across the country.

TA Associates is mainly interested in ACT’s broadband play and the focus will be to scale up this line of the business.

ACT, which provides broadband through fibre-to-the-home technology, is already the second-largest private wired broadband service provider in India, after Bharti Airtel. Public sector telecom majors BSNL and MTNL occupy the first and third positions respectively.

Operating in the states of Karnataka, Andhra Pradesh, Telangana and Tamil Nadu, ACT is eyeing a total broadband subscriber base of one million in FY16. As on 30 April 2015, it had 0.68 million broadband subscribers.

ACT acquired Hyderabad-based ISP Beam Telecom and went in for rebranding early this year. Beam Fiber, the broadband service brand of Beam Telecom, is now called ACT Fibernet.

While the broadband business is wholly owned by ACT, the cable TV operations are run through three downstream subsidiaries.

In Bengaluru, the cable TV operations are run through Kable First India where ACT has 74 per cent stake and the balance 26 per cent rests with the local promoters. A similar structure prevails in ACT Digital, which operates in Andhra Pradesh. In ACT Cable TV, which operates in Nellore, the majority is with local promoters while ACT has 49 per cent stake.

ACT has 850,000 cable TV subscribers and is targeting one million by the end of FY16. The cable TV operations are concentrated in the states of Karnataka and Andhra Pradesh.

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