New Delhi, Feb 21,2023: Amid the growing data localisation demand in India, the country is likely to witness 4,900-5,000 MW of capacity with an investment of Rs 1.5 lakh crore in the next six years, a report showed on Tuesday.

The industry revenues are expected to increase at a CAGR of around 17-19 per cent during FY2023-FY2025, supported by an increase in capacity utilisation and ramp-up of new data centres, according to credit rating agency ICRA.

To cater to the increasing demand, Indian corporates like the Hiranandani Group, the Adani Group (in JV with EdgeConnex), the Reliance Group and foreign investors like Blackstone, CapitaLand, Princeton Digital Group (PDG) and Big Tech firms like Amazon and Microsoft have started investing massively in data centres in the country.

“ICRA expects the sector to witness a six-fold increase in capacities in the next six years, with Mumbai, Hyderabad and Delhi-NCR to account for 70-75 per cent of the installed DC capacity,” said Anupama Reddy, Vice President and Co-Group Head, Corporate Ratings, ICRA.

Mumbai and Chennai have maximum landing stations, with the former being the preferred location for a data centre operator.

Chennai’s reputation took a dent due to the floods of 2017 and 2018.

“The other key emerging locations are Hyderabad and Pune, wherein some of the large hyper scalers are setting up huge data centres closer to their operation bases in India,” Reddy added.

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 and 5G, etc), growing user base for social media, gaming, e-commerce and OTT platforms.

“This, coupled with favourable regulatory policies, providing infrastructure status to data centres, special incentives 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 data centre investments in the country,” Reddy explained.

Data centre players are also expected to invest in green power to meet their power requirements.

With increase in revenues and better absorption of fixed costs, operating margins are likely to improve and remain in the range of 43-45 per cent during the next three years, the report noted.