 "Employees walk in front of the Essar Group's logo outside its headquarters in Mumbai. Photo: Reuters")
Prashant Ruia, director at Essar Capital, which manages the group's investment portfolio, expressed confidence in the sector. Photo: Reuters
An executive at multinational conglomerate Essar Group said he sees huge growth potential for its technology subsidiary Black Box as rapid growth in artificial intelligence (AI) technology drives demand for new data centers and managed services around the world.
In an exclusive interview with PTI, Prashant Ruia, director at Essar Capital, which manages the group's investment portfolio, expressed confidence in the sector.
“The global growth in data centers and managed services is exponential, so this company is well positioned for tremendous growth,” he said.
Listed on the Indian stock exchange, Black Box operates in 35 countries but its main business is in the United States.
“Obviously we are listed in India but we are primarily headquartered in the US and our primary operations are in the US. Currently Black Box has revenues of about $800 million and about 75% of our market is in the US. It is a very large operation headquartered in Dallas with close to 3,000 employees,” he said.
More than $200 billion in data centers are being built annually in the United States alone, he said.
He attributed this to developments in artificial intelligence, which have “dramatically” increased requirements for computing power.
“Large data centres are being built in the US to cater to this requirement. It is a huge market opportunity. A large number of data centres will be built in India too,” he said.
But Luia said the company doesn't invest in data centers; it helps build and manage them.
Black Box reported a multi-fold increase in profits to Rs 1,380 crore in FY24, while revenue remained flat at Rs 6,282 crore.
Essar Group, founded in 1969 by brothers Shashi and Ravi Ruia and which formerly owned Hutchison Essar (now Vodafone Idea), has no plans to re-enter the telecoms market as it does not have the growth potential, Ruia said.
The group entered the telecommunications sector in 1995 with Essar Mobile Phones and launched its GSM (Global System for Mobile Communications) operations in Delhi the same year. Through its partnership with Hutchison Essar, it started acquiring telecommunications lines in India and by 2006 all lines were under the umbrella of Hutchison Essar Limited.
“1995 to 2010 was a great time for the telecommunications industry, and we certainly benefited from that investment and benefited from that growth. There were 10 to 12 telecom companies then, it wasn't a two- or three-company market,” he said, calling it a golden age for investment in the industry.
In 2006, Hong Kong-based Hutchison sold its 67% stake to Vodafone for about $13.1 billion and exited India.
Essar, which continued to hold a 33% stake in Vodafone Essar, also sold its shares and withdrew from the telecommunications business.
“When we started, nobody had a mobile phone, and we built the business. By the time we sold it to Vodafone, we had 90 million customers,” Ruia recalls.
Ruia said he believes the market was once ripe for growth and offered unique opportunities for scale and investment, but now he believes the same potential isn't there due to a lack of opportunities for scale and investment.
“We were working in an open market. Our customers didn't have mobile phones, and we were introducing them. But today, everyone already has a mobile phone, and everyone has the service.”
“So, unless you have a unique proposition, it's very difficult for anyone to enter the telecom industry at this stage,” he said.
(Only the headline and photo of this report may have been modified by Business Standard staff. The rest of the content is auto-generated from a syndicated feed.)
First Edition: June 15, 2024 | 6:01 pm IST
