Detailed Rationale

Crisil Ratings has upgraded its rating on the long-term bank facilities of Nxtra Data Ltd (Nxtra) to ‘Crisil AAA/Stable’ from ‘Crisil AA+/Positive’ and reaffirmed its ‘Crisil A1+’ rating on the company’s commercial paper programme.
 

The upgrade in the long-term rating follows a similar upgrade in the long-term rating of the parent, Bharti Airtel Ltd (BAL, ‘Crisil AAA/Stabe/Crisil A1+’), driven by improvement in the business and financial risk profiles of BAL during fiscal 2025 in line with the expectation of Crisil Ratings. The improvement in the business risk profile of BAL is supported by increase in the company’s revenue share in the domestic mobile segment by ~400 basis points (bps) over fiscals 2021 to 2025, along with healthy growth in ARPU (average revenue per user), resulting in substantial growth in its operating profit and improved return metrics. The financial risk profile is expected to improve over the medium term driven by moderation in capital expenditure (capex) requirement amid strong operating profit, leading to steady deleveraging.
 

The ratings continue to reflect the strong business and financial risk profiles of Nxtra. The business risk profile is supported by strong market position and continued healthy operating performance, leading to sound operating efficiency. Nxtra faces limited downside risks to profitability given the fixed-price terms of the contracts, pass-through of power expense, which accounts for majority of the operating expenses, and high customer stickiness because of the large investments made by them and the downtime risks associated with shifting. The financial risk profile is supported by stable cash flow and strong debt protection metrics. The ratings also factor in the strong operational, financial and managerial linkages with BAL, resulting in healthy financial flexibility. These strengths are partially offset by exposure to intense competition, capital-intensive operations, and exposure to project risks and risk of non-renewal of revenue contracts.

 

The company’s operating performance continues to be healthy driven by strong demand for data centre capacities. In fiscal 2025, operating revenue grew 14% to Rs 2,079 crore from Rs 1,826 crore in fiscal 2024 while operating profit grew by ~12% to Rs 820 crore from Rs 730 crore in fiscal 2024. The growth in revenue was led by capacity expansion. The operating margin remained healthy at 39.5% in fiscal 2025. The margin is expected to remain healthy over the medium term as power cost can be passed through.

 

The capex in fiscal 2025 was funded through a prudent mix of debt and internal sources, leading to a strong financial risk profile. External net debt was around Rs 1,383 crore as of March 2025. The financial risk profile is supported by strong debt protection metrics aided by heathy cash accrual.

 

The company plans sizeable capex towards increasing installed capacity, mainly towards large data centres which will be a mix of enterprise customers and hyperscalers. Despite the sizeable capex, the financial risk profile will likely remain healthy, supported by strong debt protection metrics. However, the ability of the company to timely tie up the planned capacities, leading to incremental revenue and profitability, will be monitorable.

Analytical Approach

Crisil Ratings has considered the standalone credit risk profile of Nxtra and has applied its parent notch-up framework to factor in the strong linkages of Nxtra with BAL.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

• Strong market position and operating efficiency: Nxtra is a key player in the data centre industry, with over 120 edge data centres and ~14 large data centres in key locations such as Mumbai, Pune, Bengaluru, Chennai, the National Capital Region and Bhubaneshwar. The company earns close to half of its revenue from BAL and the remaining from around 300 enterprise and some hyperscaler clients, spanning across global cloud providers, large enterprises, government, and small and mid-sized businesses (SMBs), including marquee technology companies.

 

In fiscal 2025, Nxtra’s operating revenue grew ~13% on-year, driven by addition of data centre capacity, and operating margin remained strong ~39%. The operating revenue will likely continue to grow in line with planned capacity expansion amid strong demand. The company is also scaling up use of green energy for its data centres and aims to procure the power required for its data centres through renewable sources. The operating margin will likely improve over the medium term backed by addition of sizeable data centre capacities and cost savings.

 

• Healthy financial risk profile: The financial risk profile is supported by healthy cash accrual. Interest coverage was around 15 times in fiscal 2025. Gearing was less than 0.5 time as on March 31, 2025, and is expected to remain healthy over the medium term. The Carlyle Group invested ~Rs 1,780 crore in Nxtra in fiscals 2021 and 2022, which was utilised for capex, leading to low reliance on debt. Nxtra is likely to fund proposed capex through debt and internal accrual, which will result in increase in debt over the medium term. However, debt protection metrics will likely remain comfortable supported by healthy cash accrual. Ability of the company to tie up the planned capacities on time, leading to incremental revenue and profitability, will be key to maintain comfortable debt protection metrics.

 

• Strong operational, financial and managerial linkages with BAL: Nxtra is strategically important to BAL as Nxtra helps the parent offer data centre services to enterprise clients, thus complementing the parent’s network product offering. Even after the investment by the Carlyle Group for 24.04% stake in Nxtra, BAL continues to have operational as well as managerial control over Nxtra.

 

The strong parentage, underscored by 76% ownership of BAL in Nxtra, continues to underpin the financial flexibility of Nxtra. Any concerns regarding Nxtra’s debt repayment ability will have a large reputation risk on BAL.

 

Weaknesses:

• Exposure to intense competition: The data centre business is competitive with a few large players dominating the market. Over the past few years, new players have entered this space owing to favourable demand and expectation of healthy returns, intensifying competition. The ability of Nxtra to maintain pricing (or realisation) for new capacities amid increasing competitive pressure will remain monitorable.

 

• Capital-intensive operations: Data centres require sizeable capex towards land, building, power supply and infrastructure. Nxtra plans to increase its capacity over the medium term and is likely to invest in existing as well as new locations, which would require sizeable capex. At present, over 90% of the company’s capacity is revenue generating and the Bharti group continues to account for a sizeable portion of revenue. While the revenue from the Bharti group will continue to grow gradually due to increasing requirement, the upcoming capacity is expected to be largely tied up with third parties, resulting in demand risk. However, the project risk associated with investments in new capacities is largely mitigated by the modular nature of capex based on visibility of contracts. Nevertheless, the ability to maintain high utilisation for new properties and the impact on cash accrual will be key rating sensitivity factors.

 

• Exposure to project risks: Nxtra is undertaking large capex and will remain in execution phase over the medium term. Timely commencement of commercial operations within budgeted cost and stabilisation of operations are monitorable. Tie-ups for power supply arrangements and with clients will remain monitorable, too.

 

• Risk of non-renewal of revenue contracts: The company’s existing capacity is tied up with a mix of hyperscalers and enterprise customers. The planned capacity expansion will be majorly towards large data centres which will be a mix of hyperscalers and enterprise customers. While the revenue contracts with hyperscalers are for longer tenor, revenue contracts with enterprise customers are for shorter tenure, leading to risk of non-renewal of contracts. The risk is mitigated by high customer stickiness because of the large investments made by them and the downtime risks associated with shifting. Timely renewals of contracts at favourable realizations will be key to protect profitability. Nxtra has an established track record of operations with sufficient history of contract renewals.

Liquidity: Superior

Cash and equivalents were around Rs 55 crore as on May 31, 2025, with access to sufficient unutilised bank lines. Crisil Ratings expects annual net cash accrual to be healthy over the next few years and to be more than sufficient to cover the external debt obligation. Capex will likely be financed through a mix of cash accrual and external debt over the medium term. Financial flexibility derived from the parent should help access funds through banks and capital markets, when required.

Outlook: Stable

The business risk profile will continue to benefit from the strong market position of Nxtra, while the financial risk profile will benefit from healthy cash accrual and strong parentage.

Rating sensitivity factors

Downward factors:

• Downgrade in the credit rating of BAL by one notch or more
• Significant, debt-funded capex weakening the financial risk profile
• Any technological and regulatory changes constraining the business risk profile

About the Company

Incorporated in 2013, Nxtra sets up data centres and provides managed services. It is 75.96% owned (directly and indirectly) by BAL. Headquartered in New Delhi, Nxtra offers secure data centre services to leading Indian and global enterprises, hyperscalers, startups, small and medium enterprises (SMEs) and governments. The company has a portfolio of ~14 large data centres and more than 120 edge data centres pan-India, providing customers with co-location and other related services.

 

About the parent

Headquartered in India, BAL is a global communications solutions provider with ~59 crore customers in 17 countries across South Asia and Africa as on March 31, 2025. The company ranks among the top three mobile operators globally and its networks cover over two billion people. Airtel is the largest integrated communications solutions provider in India and the second-largest mobile operator in Africa. Airtel's retail portfolio includes high speed 4G/5G mobile broadband, Airtel Xstream Fiber with convergence across linear and on-demand entertainment, streaming services spanning music and video, digital payments and financial services. For enterprise customers, Airtel offers a gamut of solutions that include secure connectivity, cloud and data centre services, cyber security, internet of things (IoT), ad tech and cloud-based communication. The company had 36.1 crore mobile subscribers in India and ~17 crore in Africa as on March 31, 2025.

Key Financial Indicators

As on/for the period ended March 31	Unit	2025	2024
Operating income	Rs.Crore	2,112	1,861
Adjusted profit after tax (PAT)	Rs.Crore	224	232
Adjusted PAT margin	%	10.6	12.5
Adjusted debt/adjusted networth	Times	0.49	0.33
Interest coverage	Times	15.22	20.83

Note: These are Crisil Ratings-adjusted numbers

Any other information: Not applicable