Along with them, existing players like NTT, CtrlS, Nxtra, STT India are also expanding their capacities. Overall, 4,900-5,000 MW of capacity involving investments of ~Rs. 1.50 lakh crore are likely to be added in the next six years.

ICRA expects the sector to witness a six-fold increase in capacities in the next six years, with Mumbai, Hyderabad and NCR to account for 70-75% of the installed DC capacity.

Data localisation and data explosion are paving the way for a data centre (DC) revolution in India. To cater to the increasing demand, Indian corporates like the Hiranandani Group, the Adani Group, in JV with EdgeConnex, the Reliance Group; foreign investors viz. Blackstone, CapitaLand, Princeton Digital Group; captive consumers viz. Amazon, Microsoft - have all started investing massively in Indian DCs. Along with them, existing players like NTT, CtrlS, Nxtra, STT India are also expanding their capacities. Overall, 4,900-5,000 MW of capacity involving investments of ~Rs. 1.50 lakh crore are likely to be added in the next six years.

Providing more insights, Ms. Anupama Reddy, Vice President and Co-Group Head, Corporate Ratings, ICRA, said: “The key triggers for digital explosion in India are the increasing internet and mobile penetration, the Government’s thrust on e-governance/digital India, adoption of new technologies (cloud computing, IoT, 5G etc), growing userbase for social media, gaming, e-commerce and OTT platforms. This, coupled with favourable regulatory policies viz. the draft Digital Data Protection Bill 2022, providing infrastructure status to data centres, special incentives from Central and state governments like land at subsidised cost, power subsidies, exemptions on stamp duty, discounts on usage of renewable energy and procurement of IT components made locally, and other concessions are expected to boost DC investments in the country.” 

“ICRA expects the sector to witness a six-fold increase in capacities in the next six years, with Mumbai, Hyderabad and NCR to account for 70-75% of the installed DC capacity. The presence of landing stations, fibre connectivity, uninterrupted power supply, proximity to tenant’s headquarters and high score on disaster proofing are some of the key parameters a DC operator would look for in a location. Mumbai and Chennai have maximum landing stations, with the former being the preferred location for a DC operator. Chennai’s 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 hyper scalers are setting up huge DCs closer to their operation bases in India,” Ms. Reddy added.

Given the ESG considerations for most of the key tenants, DC players are also expected to invest in green power to meet their power requirements. 

The industry revenues are expected to increase at a CAGR of around 17-19% during FY2023-FY2025 (24.5% CAGR growth during FY2018-FY2022), supported by an increase in capacity utilisation and ramp-up of new DCs. With increase in revenues and better absorption of fixed costs, operating margins are likely to improve and remain in the range of 43%-45% during next three years.