India likely to witness Rs.1.5 lakh cr worth investment in data centres in next 6 years

Mumbai and Chennai have maximum landing stations, with the former being the preferred location for a data centre operator

PGurus Newsdesk

February 21, 2023

Mumbai and Chennai have maximum landing stations, with the former being the preferred location for a data centre operator

Data centre capacity expected to surge six-fold in the next six years, says ICRA

Amid the growing data localization demand in India, the country is likely to witness 4,900-5,000 MW of capacity with an investment of Rs.1.5 lakh crore in the next six years, a report showed on Tuesday.

The key triggers for the digital explosion in India are the increasing internet and mobile penetration, the government’s thrust on e-governance/ digital India, the adoption of new technologies (Cloud computing, IoT and 5G, etc), the growing user base for social media, gaming, e-commerce, and OTT platforms.

The industry revenues are expected to increase at a CAGR of around 17-19 percent during FY2023-FY2025, supported by an increase in capacity utilization and ramp-up of new data centers, according to credit rating agency ICRA.

To cater to the increasing demand, Indian corporates like the Hiranandani Group, the Adani Group (in JV with EdgeConnex), the Reliance Group, and foreign investors like Blackstone, CapitaLand, Princeton Digital Group (PDG), and Big Tech firms like Amazon and Microsoft have started investing massively in data centres in the country.

“ICRA expects the sector to witness a six-fold increase in capacities in the next six years, with Mumbai, Hyderabad, and Delhi-NCR to account for 70-75 percent of the installed DC capacity,” said Anupama Reddy, Vice President, and Co-Group Head, Corporate Ratings, ICRA.

“The other key emerging locations after Mumbai and Chennai are Hyderabad and Pune, wherein some of the large hyper scalers are setting up huge data centers closer to their operational bases in India,” Reddy added.

“Favorable regulatory policies, providing infrastructure status to data centers, special incentives like land at a subsidized cost, power subsidies, exemptions on stamp duty, discounts on the usage of renewable energy and procurement of IT components made locally, and other concessions are expected to boost data center investments in the country,” Reddy explained.

Data center players are also expected to invest in green power to meet their power requirements.

With the increase in revenues and better absorption of fixed costs, operating margins are likely to improve and remain in the range of 43-45 percent during the next three years, the report noted.

[With Inputs from IANS]

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