India’s data centre capacity to double in 3 years

India’s data centre capacity is expected to double in three years from 0.9 GW (Gigawatt) in 2023 to around 2 GW in 2026, according to CareEdge Ratings.

The credit rating and analytics company said that additional capacity built up has created substantial investment prospects due to the estimated capex requirement of Rs 50,000 crore in the next three years.

The CareEdge Ratings report highlights significant under-penetration of data centre capacity in India.

As per the report, India has a data centre capacity share of only three percent globally despite generating 20 percent of the global data. The report stated that mobile data usage in India is the highest globally compared with exabytes usage per month.

Puja Jalan, Associate Director, CareEdge Ratings said, “The growth plans have also created substantial investment prospects and CareEdge Ratings estimates a capex of Rs 50,000 crore in this space over the next three years till 2026. However, the project execution challenges, in terms of land and equipment availability and management of vendor ecosystem needs to be addressed for the fructification of the planned capacity addition.”

Jalan said that the cost per MW of setting up a data centre has also been rising with costs escalating to levels of Rs 60-70 crore per MW from an average per MW cost of Rs 40-45 crore.

The report also expected data localization to trigger compulsorily investment in data centres, tax SOPs, and cost-saving incentives by states to attract investments.

CareEdge Ratings in its report highlighted that the absorption levels have gone up from 82 percent in 2019 to 93 percent in 2023. As capacity was added, industry players’ revenue increased by nearly 25 percent CAGR from FY17 to FY23.

Over the next three to four years, revenue growth is anticipated to continue, with CareEdge Ratings projecting a 32 percent CAGR growth during FY24–26. It is anticipated that the EBITDA margins are likely to remain stable in the next three years, the report stated.

Maulesh Desai, Director, CareEdge Ratings said, “We expect more entry of new players in the segment with multiple domain expertise which will help dilute the market share (capacity-wise) occupied by top 5 players from 90 percent to 75 percent. The industry is expected to see 5 GW capacity addition announcements over 5-6 years. Long-term revenue visibility with strong counterparty augur well from the credit perspective.”

He added that India is making the shift from a developing to a developed market economy, and the digital revolution is spurring economic expansion and producing vast amounts of data.

Some of the key drivers of this rapid digitization are e-commerce, internet payments, online streaming, and the adoption of new technologies such as 5G, IoT, and AI. Share of edge data centres is also expected to increase to meet growing demand from tier II and tier III cities to ensure lower latency, Desai added. Moneycontrol