Q&A with Pankaj Agrawal, Managing Partner, Capitel

I am a managing partner with Capitel, a techno-commercial due diligence firm that advises on major ($US500mn+) transactions in digital infrastructure. We work with global buy-out and infrastructure funds and have advised Brookfield, KKR, TPG and other clients on deals mainly in Asia Pacific. I grew up in India and studied electronics engineering as a Bachelors and completed my MBA from the Indian Institute of Management Ahmedabad. I have also lived and worked in Singapore, and currently Capitel is headquartered in Singapore. My academic training in finance and engineering, coupled with my professional experience leading the Analysys Mason team in India and working with Deloitte TMT strategy & operational teams in the past positions me well to advise our clients on some of the most complex techno-commercial issues. I share my views and thoughts at major industry conferences such as the MWC Shanghai and was recently a judge at the Global TMT M&A awards, and earlier at the Mobile World Congress in Barcelona. 

I have always worked in entrepreneurial roles, having set-up new consulting offices from scratch for two other companies before Capitel. I was part of the team that set up the Deloitte TMT AC and was also involved in the initial stages of scaling up BDA Connect, a firm that was acquired by Analysys Mason in India. Capitel was a natural progression of these roles, as we wanted to setup a pure play due diligence firm – there are consulting firms in the market but their focus ranges from business advisory, operational support, regulatory analysis, technology consulting to strategy formulation, and there are not even a handful of firms that focus mainly on buy side commercial due diligence, and this is the niche that we wanted to serve.

I am currently also involved in setting up Voult, a transaction advisory firm based on the west coast. Voult will advise on investments in deep learning and artificial intelligence. We plan to build a team of exceptional talent available in the Palo Alto and west coast area to develop this new venture. Voult will also fund startups in these areas in the range pre-seed and seed investments in the range of US$100K to US$500K, especially the ones in the fields of biotech and life sciences. We are very excited to be part of this intersection of deep learning that allows analysis of along with the advances in drug discovery and precision drug delivery, and hope this will allows us to participate in the AI-led growth at a global scale.    

Capitel’s focus is mainly on buy-side due diligence, assisting funds on evaluating the potential cash flows and underlying risks associated with long term investments in towers, fiber networks and data centers. Unlike other consulting firms, we believe we have almost an intuitive understanding of how investors thing about some of these decisions and we know what the right questions are, and the required analysis to find answers to these questions. We wanted to build a focused commercial due diligence advisory firm with a global footprint, and believe we are on the right track. We have advised on close to 70 engagements in the last five years across Asia Pacific and EMEA and continue to serve our core client base in new geographies and new business segments. We are the first port of call for our clients when they evaluate investments in large digital infrastructure platforms at least in APAC markets, and we hope to extend this position to other global markets as well.

We recently advised KKR on their award winning deal to enter the Philippines market with an investment in Pinnacle Towers. Our due diligence approach is data-driven, and we used significant amount of geographical mapping and topology analysis to develop a bottoms-up model for demand as well as competitor proximity – it’s this detailed bottoms-up approach with a per-site forecast that helps our customers make robust investment decisions. Global investment committees need to have reliable data and analysis to make these investment calls and we are the leaders in terms of such details, in-depth analysis that helps ICs underwrite such large investments. We also advised Brookfield on a US$4bn deal, the largest private equity transaction ever in India, and evaluated a portfolio of 140,000 towers, again at a very granular level to develop a per-site forecast. Our work in the data center space is also informed by a detailed bottoms-up forecast model, as seen in our advisory for the sale of GPX data centers to Equinix, along with multiple other data center deals in India, rest of APAC and EMEA. 

There are a few trends that we have seen advising on deals in the past year or so. One of the big trends is investor interest in setting up platforms, esp. in markets such as APAC and Europe. Given that investors have each set up 10bn+ funds that are focused on investments in infrastructure in these markets, they need big ticket deals. Individual markets such as Indonesia or the Philippines cannot support such investments due to the lack of scaled-up assets and the level of market maturity. In such cases we are increasingly seeing investors setting up Pan-Asia platforms for investments in towers, fiber and data centers. This allows them to build scale with say 50,000 towers or 2GW data center IT load, and such scaled up assets offer better exit options – investors can IPO these assets or else sell them to pension funds looking for stability and big ticket sizes. We have advised on five to six such platform deals in the past year itself.

 

The second key trend is around partnerships. Investments in categories such as data centers and tower, especially in some of the greenfield markets require a strong local operational footprint for site acquisitions, municipal and even locality permissions and multiple other considerations around energy, taxation, logistics and construction. Global investors, including strategic investors that have built data centers in other markets, are now relying on local partners to help them with these operational issues so that they can build the greenfield sites on time and as per spec, and then leverage their global relationships with cloud service providers to fill up these facilities. In the last year, we have seen and evaluated data center and tower partnership models in Japan, Indonesia, India, the Philippines and Korea, and expect to see a continuation of this trend in 2022 as well.    

I believe that the digital infrastructure investment wave is likely to sustain in Asia Pacific and other emerging markets (such as the recent US$1bn investment by Digital Colony in a data center platform for Africa) for the next few years. Capitel is well positioned to serve these clients and we expect to be one of the leading advisors for commercial due diligence of digital infrastructure assets for our investor clients, with our depth and experience with these deals. In addition, our existing and new clients are also investing in adjacent areas such as the changing nature of RAN (Radio Access Network) and we recently advised a fund to evaluate investments in Rakuten and its virtual / open RAN model. We are also seeing demand for deeper technical areas such as the economics of cloud and virtual machines, and a deeper integration of digital infrastructure with network technologies as well as core IT areas. I believe the due diligence for future transactions will be more technical, and less led by market knowledge, and this is a sweet spot for companies like Capitel.