ICRA expects a six-fold increase in data centre capacity to 5,100-5,200 MW involving investments of ~Rs. 1.60 lakh crore to be added in the next six years supported by significant data explosion and favourable regulatory policy initiatives by both states and the Centre. Consequently, India’s share in global installed capacity is expected to sharply increase to 15-17% by 2028 from around 4% (19 GW) as of 2022. Majority of the upcoming investments are geared towards meeting high demand in co-location services. This will continue to be driven by hyperscalers and segments, which require strict data confidentiality like BFSI, IT/ITES etc.
Giving more insights, Ms. Anupama Reddy, Vice-President and Co-Group Head, Corporate Ratings, ICRA, said: “While cloud, 5G roll-out, machine learning and internet of things (IoT) are expected to generate enormous data and storage requirements, Generative AI-led high computing requirements present a new wave of demand for DC capacity and a significant opportunity for DC operators. Further, the data explosion is supported by adoption of new technologies, rapid rise in consumption of digital content, the Government’s continued thrust on e-Governance, increased penetration of e-commerce and digital financial transactions. This, along with favourable regulatory policies like the Digital Data Protection Bill, granting infrastructure status to data centres, dedicated policies and incentives by various state governments, are expected to boost DC investments in the country. Given these triggers, the impact of the relaxation with respect to cross border data transfer, provided in the new Digital Personal Data Protection Bill 2023 on demand for DCs in India, is expected to be low.”
Location, proximity to landing stations, fibre connectivity, uninterrupted power supply and high scoring on disaster proofing are some of key parameters to decide on a location for setting up data centres. For these reasons and proximity to tenant headquarters, Mumbai has emerged as the biggest DC destination. Chennai also has presence of landing stations, but its reputation took a dent due to the floods of 2017 and 2018. The other key emerging locations are Hyderabad and Pune, wherein some of the large hyperscalers are setting up huge DCs closer to their operational bases in India. Overall, Mumbai, Hyderabad, NCR and Chennai are likely to account for 85% of the installed DC capacity by 2028.
“The revenues for ICRA’s sample set are expected to increase at a CAGR of 19-20% during FY2024-FY2025 (24% CAGR growth during FY2019-FY2023), supported by an increase in rack capacity utilisation and ramp-up of new DCs. With the increase in revenues and better absorption of fixed costs, the operating margins are expected to remain in the range of 43-44%. The RoCE is expected to be modest as the DC players are in continuous capex mode and the ramp-up of new DCs will happen over a period of time. With competition heating up, the pricing flexibility may get constrained, thereby adversely affecting the margins for incremental business. This, along with the ongoing large debt-funded capex, would exert pressure on the credit metrics of the players” Ms. Reddy added.
