Indian data centres to receive Rs 1.05 cr-1.20 lakh cr investments
Real Estate

Indian data centres to receive Rs 1.05 cr-1.20 lakh cr investments

According to rating agency ICRA, the capacity of the Indian data centre sector is likely to rise fivefold over the next five years, with investments of Rs 1.05 cr-1.20 lakh crore.

Large hyper-scalers such as Amazon Web Services, Google, Microsoft, Facebook, IBM, Uber, and Dropbox, who outsource their storage needs to third-party DC providers, are driving strong development in the Indian data centres (DC) industry.

To meet the rising demand, Indian corporations such as the Hiranandani Group and the Adani Group, as well as international companies such as Amazon, EdgeConnex, Microsoft, CapitaLand, and the Mantra Group, have begun investing in Indian data centres.

Existing players such as NTT, CtrlS, Nxtra, and STT India are growing their capacity alongside them.

After experiencing a 24% compounded annual growth rate (CAGR) during the fiscal year (FY) 2018-2021, the market is expected to grow at an 18-19% CAGR during FY2022-FY2024, owing to increased rack capacity utilisation and the ramp-up of new data centres.

Operating margins are likely to grow and continue between 40% to 42% as sales rise and fixed costs are better absorbed.

As the data centre companies are in a continuous huge capital expenditure (CapEx) phase, where data centres are ramped up over time, the return on capital employed (ROCE) is projected to remain modest.

The primary difficulties for the industry include rising competition intensity, projected to put pressure on margins for incremental business, and large-debt-funded capital plans, which might put a strain on the companies' credit metrics.

Power costs contribute to 55-60% of overall expenditures for maintaining various cooling pathways and redundancy. Given the ESG concerns of the majority of critical tenants, data centre operators are likely to invest in green electricity to satisfy their power needs.

Some state governments, such as Maharashtra, Telangana, Karnataka, and Uttar Pradesh, have made provisions for specific incentives such as stamp and electricity duty exemptions, power subsidies, and land at a reduced cost, and other concessions to encourage data centre investment.

Furthermore, under a national policy framework for data centres, the information technology ministry wants to grant incentives of up to Rs 15,000 crore.

It includes a 4-6% incentive for procuring components such as IT gear and power from Indian manufacturing facilities, as well as a 3% incentive for using sustainable energy.

Rajeshwar Burla, Group Head, Corporate Ratings, ICRA, told the media that favourable regulatory support, rapidly growing cloud computing, increasing internet penetration, Government effort in the digital economy, adoption of new technologies (IoT, 5G, etc.), and growing needs of hyper-scalers are some of the major factors driving demand for data centres in the country.

According to him, the government's decision to provide data centres infrastructure status would allow them to get longer-term financing at competitive rates, including access to overseas investment via the external commercial borrowing route.

Image Source

Also read: Software Technology Parks to become operational soon in Amritsar

According to rating agency ICRA, the capacity of the Indian data centre sector is likely to rise fivefold over the next five years, with investments of Rs 1.05 cr-1.20 lakh crore. Large hyper-scalers such as Amazon Web Services, Google, Microsoft, Facebook, IBM, Uber, and Dropbox, who outsource their storage needs to third-party DC providers, are driving strong development in the Indian data centres (DC) industry. To meet the rising demand, Indian corporations such as the Hiranandani Group and the Adani Group, as well as international companies such as Amazon, EdgeConnex, Microsoft, CapitaLand, and the Mantra Group, have begun investing in Indian data centres. Existing players such as NTT, CtrlS, Nxtra, and STT India are growing their capacity alongside them. After experiencing a 24% compounded annual growth rate (CAGR) during the fiscal year (FY) 2018-2021, the market is expected to grow at an 18-19% CAGR during FY2022-FY2024, owing to increased rack capacity utilisation and the ramp-up of new data centres. Operating margins are likely to grow and continue between 40% to 42% as sales rise and fixed costs are better absorbed. As the data centre companies are in a continuous huge capital expenditure (CapEx) phase, where data centres are ramped up over time, the return on capital employed (ROCE) is projected to remain modest. The primary difficulties for the industry include rising competition intensity, projected to put pressure on margins for incremental business, and large-debt-funded capital plans, which might put a strain on the companies' credit metrics. Power costs contribute to 55-60% of overall expenditures for maintaining various cooling pathways and redundancy. Given the ESG concerns of the majority of critical tenants, data centre operators are likely to invest in green electricity to satisfy their power needs. Some state governments, such as Maharashtra, Telangana, Karnataka, and Uttar Pradesh, have made provisions for specific incentives such as stamp and electricity duty exemptions, power subsidies, and land at a reduced cost, and other concessions to encourage data centre investment. Furthermore, under a national policy framework for data centres, the information technology ministry wants to grant incentives of up to Rs 15,000 crore. It includes a 4-6% incentive for procuring components such as IT gear and power from Indian manufacturing facilities, as well as a 3% incentive for using sustainable energy. Rajeshwar Burla, Group Head, Corporate Ratings, ICRA, told the media that favourable regulatory support, rapidly growing cloud computing, increasing internet penetration, Government effort in the digital economy, adoption of new technologies (IoT, 5G, etc.), and growing needs of hyper-scalers are some of the major factors driving demand for data centres in the country. According to him, the government's decision to provide data centres infrastructure status would allow them to get longer-term financing at competitive rates, including access to overseas investment via the external commercial borrowing route. Image Source Also read: Software Technology Parks to become operational soon in Amritsar

Next Story
Infrastructure Urban

Paras Defence Subsidiary Wins Rs 460 Mn Anti-Drone Order

Paras Defence and Space Technologies (PDST) saw its shares rise 1.5 per cent to Rs 701 after its subsidiary, Paras Anti-Drone Technologies, secured a defence contract from the Ministry of Defence, Government of India, valued at approximately Rs 460.19 million.The order covers the supply of Anti-Drone Systems, including Drone Jammers, marking a significant milestone for Paras Anti-Drone in India’s growing counter-UAV segment. The contract is scheduled for execution by March 2026. According to official filings, the award is from a domestic entity, not a related party transaction, and no promot..

Next Story
Building Material

Jindal Stainless Launches First Stainless Steel Fabrication Unit in Mumbai

Jindal Stainless, India’s largest stainless steel manufacturer, through its subsidiary Jindal Stainless Steelway (JSSL), has inaugurated its first stainless steel fabrication unit at Washivali, Patalganga, Mumbai. The 4 lakh sq ft facility is designed to serve the bridge sector, fabricating critical components such as girders, arches, nuts, bolts, and handles. The unit was inaugurated by CEO & CFO Tarun Khulbe in the presence of senior leadership.Developed with an initial investment of Rs 1.25 billion, the facility strengthens Jindal Stainless’ position as a provider of end-to-end fabr..

Next Story
Infrastructure Energy

Hero Future Energies Secures Rs 19.08 Bn for 120 MW Hybrid Project

Hero Future Energies (HFE), through its SPV Clean Renewable Energy Hybrid Three, has secured Rs 19,080 million in funding from State Bank of India (lead) and Canara Bank for the development of its 120 MW renewable energy (RE) hybrid project in Kurnool, Andhra Pradesh.The project, contracted with SJVN, integrates wind, solar, and storage technologies to provide reliable peak power. The funding, structured with a 21-year repayment tenure, will support timely project execution and the commencement of commercial operations.This financial closure underscores the banking community’s confidence in ..

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

Advertisement

Advertisement

Talk to us?