Indian Data Centres Expansion Expected to Add Up to 1.2 Lakh Crore Investment Over Next Five Years: Report

 Data centres capacity expansion in India by both foreign and local firms is expected to add investments to the tune of Rs 1.05 lakh to 1.2 lakh crore over the period of next five years, credit rating agency ICRA said on Tuesday.

The Indian data centres market is witnessing a healthy growth primarily driven by large hyper-scalers like Amazon Web Services, Google, Microsoft, Facebook, IBM, Uber, Dropbox etc. who are outsourcing their storage needs to third party data centre providers, ICRA said.

Indian corporates like the Hiranandani Group, Adani Group, foreign investors which include Amazon, EdgeConnex, Microsoft, CapitaLand, Mantra Group have started investing in Indian data centres.

"Along with them, existing players like NTT, CtrlS, Nxtra, STT India are also expanding their capacities. Overall, 3900-4100 MW of capacity involving investments of Rs. 1.05 – 1.20 lakh crore are likely to get added in the next five years," ICRA said.

The industry's revenues are expected to increase at a compound annual growth rate (CAGR) of around 18-19 percent during financial year 2022-2024 from 24 percent CAGR growth between FY 2018-2021, supported by an increase in rack capacity utilisation and ramp-up of new data centres.

With increase in revenues and better absorption of fixed costs, operating margins for the data centre companies are likely to improve and remain in the range of 40-42 percent.

"The favourable regulatory support, rapidly growing cloud computing, increasing internet penetration, government effort on digital economy, adoption of new technologies (IoT, 5G etc), growing needs of hyper-scalers are some of the major factors driving the demand for data centres in the country. The sector is likely to witness a five-fold increase in capacities in the next five years," ICRA's Corporate Ratings Group Head, Rajeshwar Burla said.

In addition, government has accorded infrastructure status to the data centres in Union Budget 2022-23 which will enable the players to get access to longer tenure debt at competitive rates and access to foreign funding through the external commercial borrowing route, he said.