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

To cater to the increasing demand, Indian corporates like Hiranandani Group, Adani Group, in a joint venture with EdgeConnex, the Reliance Group, foreign investors like Blackstone, CapitaLand, Princeton Digital Group, and captive consumers like Amazon, Microsoft have all started investing massively in Indian DCs, ICRA said.

Along with them, existing players like NTT, CtrlS, Nxtra, and STT India are also expanding their capacities.

Overall, 4,900-5,000 MW of capacity involving investments of Rs 1.5 lakh crore are likely to be added in the next six years, the credit rating agency said.

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 user base for social media, gaming, e-commerce and OTT platforms.”

This, coupled with favourable regulatory policies such as the draft Digital Personal 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, she said.

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“The new Bill has increased penalty for breaches and eased cross-border data flows where data can be stored in trusted nations compared to the earlier Bill, which had mandatory requirement for storage of personal data locally. The impact of the new Bill on demand for data centres in India remains to be seen,” said Reddy. ICRA expects the sector to witness a six-fold increase in capacities in the next six years, with Mumbai, Hyderabad and the National Capital Region (NCR) to account for 70% to 75% of the installed DC capacity.

The industry revenues are expected to increase at a CAGR of around 17-19% from FY2023 to FY2025, supported by an increase in capacity utilisation and ramp-up of new DCs.

The presence of landing stations, fibre connectivity, uninterrupted power supply, proximity to tenants’ headquarters and high score on disaster proofing are some of the key parameters a DC operator would look for in a location, Reddy explained.

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, she said.

“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,” Reddy added.