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NTT to buy 74% stake in Netmagic
[January 26, 2012]

NTT to buy 74% stake in Netmagic

Jan 26, 2012 (Mint - McClatchy-Tribune Information Services via COMTEX) -- NTT Communications Corp., a unit of Japan's Nippon Telegraph and Telephone Corp, will buy a 74% stake in Indian data centre services provider Netmagic Solutions Pvt. Ltd.

While financial details of the transaction were not disclosed, Telecompaper, an independent research and publishing firm focused on the telecom industry, pegged the transaction to be around 10 billion Japanese yen ('642 crore). A person directly involved with the deal confirmed the transaction value. He spoke on condition of anonymity.

Netmagic operates seven data centres in cities, including Mumbai, Chennai, Noida and Bangalore, and provides services such as cloud computing, infrastructure management, disaster recovery solutions and hosting computer software applications to about 1,000 customers.

Acquisitions in the data centre space may increase as Internet application businesses is one of the fastest-growing segment in India, be it for electronic commerce or infrastructure for cloud computing, said Deepak Srinath, director of Bangalore-based investment bank Viedea Capital Advisors Pvt. Ltd.

The acquisition by NTT will allow Netmagic to expand in India and outside, said Sharad Sanghi, founder and chief executive of Netmagic Solutions.

"This alliance will help Netmagic to leverage NTT Com's global network and data centre footprint for customers," said Sanghi. "The partnership will also help us strengthen our growth plans in the Indian sub-continent and globally." Founded in 1998, Netmagic had raised '80 crore from Nexus Venture partners and Fidelity International Ltd in 2008. In 2010, Netmagic raised '70 crore in a round led by Nokia Growth Partners and Cisco Systems.

Nexus Venture Partners sold its minority stake in Netmagic, the fifth such exit by Nexus in the past 18 months, at a time when the Indian venture capital industry has been struggling to sell their investments.

"We are very happy with the returns we have made; these are satisfying return multiples. We got the kind of returns that VCs aspire for," said Anup Gupta, managing director at Nexus Venture Partners, without giving details of the transaction.

Early stage investors typically seek an internal rate of return of as much as 30% on their investments.

In 2010, Nexus sold its stake in online classifieds firm OLX to Naspers. The VC firm also exited web collaboration firm Dimdim Inc. when Salesforce acquired it. Nexus's portfolio firm was acquired by Citrix Systems and Gluster was bought for $136 million by Red Hat Inc.

"For Nexus, the credit lies in being able to find global buyers for their companies. Initial public offerings (IPO) are still a challenge for venture capital firms," said Srinath. Right now, it is easier to exit companies that have offerings catering to the global markets than those focused on India alone as global buyers are more interested in such firms. Also, there are more global buyers available, compared with Indian purchasers, he said.

The exits by Nexus come at a time when it is looking at raising its next fund. Nexus Venture Partners plans to raise a $250 million fund, its third, this year, according to a 19 August Mint report. Gupta, however, said exits are a function of a portfolio company's performance and scale. "India is becoming a global market with fantastic innovation," he said. "The exits have nothing to do with our fund raising plans. There is no pressure (on portfolio companies) from us to offer exits." ___ (c)2012 the Mint (New Delhi) Visit the Mint (New Delhi) at Distributed by MCT Information Services

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