Anant Raj data centre demerger targets pure-play growth and separate listing

Investment View and Proposed Demerger

Motilal Oswal Financial Services Limited (MOFSL) reiterates its BUY rating on Anant Raj Limited (ARL) and raises its sum-of-the-parts-based target price to Rs 710 per share. The July 22, 2026 company update focuses on the Board-approved plan to separate ARL’s data centre and cloud businesses into Ashok Cloud Private Limited (ACPL).

MOFSL views the data centre and cloud business as a key value generator. A separate listing of ACPL could create a pure-play data centre platform, while ARL would continue to benefit economically through its holding in the new company.

Composite Scheme and Ownership Structure

Under the approved composite scheme, Anant Raj Cloud Private Limited (ARCPL), ARL’s wholly owned subsidiary, will first merge into ARL. The consolidated data centre and cloud operations will then be demerged into ACPL, which will remain an ARL subsidiary and be separately listed, subject to stakeholder and regulatory approvals.

ARL shareholders will receive one ACPL share for every ARL share held. Following the transaction, ARL will own 51% of ACPL, while ARL promoters and public shareholders will own 28.14% and 20.86%, respectively.

Given the promoters’ current 57.43% holding in ARL, their effective ownership of ACPL would be 79.14%. MOFSL expects this to require promoter stake dilution to 75% or below under regulatory norms. Any proceeds from the dilution could potentially be used for data centre growth capex.

Funding Priorities and Key Monitorables

Before the demerger, free cash flow from ARL’s real estate business has supported the capital-intensive expansion of the data centre business. MOFSL expects future ACPL capex to be funded through rental income from operational capacity, which stood at 28 MW as of FY26, and through fund transfers from ARL earmarked for the data centre business. Potential fundraising from promoter dilution is an additional funding avenue.

The key monitorables identified by MOFSL are:

• Management’s roadmap for completing the demerger.
• Deployment of real estate free cash flow remaining within ARL after the separation.
• ACPL’s plan for financing data centre expansion.

Data Centre Capacity Roadmap

MOFSL’s capacity roadmap envisages 50 MW of IT load at Manesar, a further 57 MW at Panchkula, another 200 MW at Rai and 50 MW in Andhra Pradesh. This would take potential IT load capacity to 357 MW by FY32E.

Financial Outlook

MOFSL forecasts consolidated revenue to increase from Rs 25.1 billion in FY26 to Rs 35.2 billion in FY28E, implying an 18% CAGR. EBITDA is projected to rise from Rs 6.6 billion to Rs 12.4 billion over the same period, while the EBITDA margin is expected to expand from 26.1% to 35.3%.

Adjusted PAT is estimated at Rs 7.5 billion in FY27E and Rs 9.3 billion in FY28E, compared with Rs 5.5 billion in FY26. This implies a 30% CAGR between FY26 and FY28E. MOFSL also forecasts RoE to improve from 9.6% in FY26 to 12.6% in FY28E, and RoCE to increase from 9.5% to 13.7% over the same period.

Sum-of-the-Parts Valuation

MOFSL values Anant Raj using a sum-of-the-parts approach. Residential cash flows are discounted at a 12.4% weighted average cost of capital, with a 25% NAV premium assigned for growth visibility from land aggregation in Sector 63A, Gurugram. Commercial cash flows use an 8.0% capitalisation rate and 4% terminal growth. The data centre business is valued using DCF, with a 25% NAV premium for growth visibility.

Principal Execution Considerations

• Completion of the demerger, including stakeholder and regulatory approvals.
• Funding of the data centre expansion.
• The eventual use of ARL’s real estate cash flows after the separation.