Data centre capacity in the country is expected to double in the next three years, from nearly 0.9 gigawatt (GW) in 2023 to ~2 GW in 2026, according to CareEdge Ratings.
This additional capacity built up has an estimated capex requirement of Rs 50,000 crore in the next three years, the rating firm said in a report.
As per the report, India has a data centre capacity share of only 3% globally despite generating 20% of the global data. While mobile data usage in India is highest globally when compared with exabytes usage per month.
Puja Jalan, associate director, CareEdge Ratings said, “The growth plans has also created substantial investment prospects. 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 planned”
“Further, cost per megawatt (MW) of setting up data center has also been rising with costs escalating to levels of Rs 60-70 crore per MW from average per MW cost of Rs 40–Rs 45 crore” Jalan added.
The rating firm said that the absorption levels have gone up from 82% in 2019 to 93% in 2023. As capacity was added, industry players’ revenue increased by nearly 25% CAGR from FY17 to FY23. Over the next three to four years, revenue growth is anticipated to continue with a 32% CAGR Growth during FY24–26. It is anticipated that the Ebitda margins are likely to remain stable in the next three years.
“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 over 90% to ~75%. 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. Going forward, cost competencies, innovative designs to accommodate scalability and adoption of newer technologies to meet ever rising energy and cooling requirements are critical success factors for the industry,” Maulesh Desai, director, CareEdge Ratings said.
“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 adoption of new technologies such as 5G, IoT, and AI. Share of Edge data center is also expected to increase for meeting growing demand from tier II and tier III cities for ensuring lower latency”, Desai added.