Data centre industry has Rs 1.20 lakh crore investment in pipeline: Report
Jun 09, 2022
New Delhi [India], June 9 : Data centre capacity in India is estimated to post a five-fold jump in the next five years and attract an investment of around Rs 1.20 lakh crore during this period, as per a recent report by rating agency ICRA.
The Indian data centres industry has been clocking impressive growth for the last five years, and the coming years are expected to be even better. Around 3,900-4,100 MW of capacity is estimated to be added. The sector will attract investment to the tune of Rs 1.05-1.20 lakh crore, the report said.
In the last few years, large hyper-scalers like Amazon web services, Google, Microsoft, Facebook, IBM, Uber, and Dropbox are outsourcing their storage needs to third party Data Centre providers. Given the segment's potential, in the Budget 2022-23, Finance Minister Nirmala Sitharaman granted infrastructure status to the data centre industry. All these factors ensure that the data centre business in India continues to boom at a steady rate.
Many Indian organisations have started investing in Indian data centres to cater to the increased demand. Both Hiranandani Group and Adani Group have been making strategic moves in the space. There is also significant interest from foreign investors such as Amazon, EdgeConnex, Microsoft, CapitaLand, and Mantra Group have started investing in Indian Data Centres. Even existing players in the segment, such as NTT, CtrlS, Nxtra and STT India, are also expanding their capacities.
"In the past few years, there has been a flurry of investments in the data centre segment, resulting from the confluence of many factors. The favourable regulatory environment and the push toward the digital economy have been key drivers for the growth in this segment. Pockets such as Navi Mumbai, Hyderabad, Chennai, Bangalore and Noida have gained immensely from the proliferation of data centres. It is expected that the data centre market in India will continue to grow at a favourable pace and will touch $4 billion in the next 3-4 years," said Vinit Dungarwal, Director at AMs Project Consultants Pvt Ltd.
Aditya Kushawaha, CEO and Director, Axis Ecorp, said, "The Indian real estate sector has made a strong recovery post-pandemic. The data centres segment is seen as a sunrise sector, and in the budget 2022-23, it has been awarded an infrastructure status. This will help the companies in this segment to get longer tenured debt at competitive rates. There is already a healthy influx of PE investments in this sphere, and the demand has constantly increased. As we step into the 5G era, we believe that this demand will grow even further".
According to a recent report by Knight Frank, private equity investments in India (Q1 2022) reported a significant growth in private equity (PE) investments in data centres in India. It notes that the total PE investments in this sector were $2.209 billion in 2021, which is 259 per cent higher than what was clocked in 2016.
The sector commanded a 26 per cent share of all PE investments received by the real estate sector in India in 2021. Approximately 96 per cent of the total PE investments in data centres since 2011 in India have been made by foreign investors. The sector is expected to grow and attract PE investment, but it is also keeping pace with the times and brace sustainable measures.
"The data centre sector is likely to witness a five-fold increase in capacities in the next five years. Between the two major services provided by the Data Centre players, co-location services account for around 62-65 per cent of revenues as compared to managed services which account for 28-30 per cent of revenues," said Rajeshwar Burla, Group Head, Corporate Ratings, ICRA.
"The upcoming investments are geared towards meeting high demand in co-location services. Given the ESG considerations for most of the key tenants, Data Centre players are also expected to invest in green power to meet their power requirements. We can expect Data centre players to do substantial investments in solar power going forward," Burla said.
