According to a report by CRISIL Ratings, data centre capacity in India is expected to double to approximately 1,700-1,800 megawatt (MW) by fiscal 2025 from approximately 870 MW last fiscal, powered by the troika of data boom, digital adoption and local data storage mandates. The report further noted that this will require investments of over Rs 400 billion.
As per the report, the corporate embrace of advanced technologies and digital infrastructure, and the increasing use of smart devices by individuals have led to a massive spurt in data and cloud usage (wireless mobile data traffic grew approximately 31 per cent to around 253 exabytes in 2021), creating huge demand for data centres.
Meanwhile, the launch of 5G services (likely by the end of fiscal 2023) will further boost demand for data and storage capacities. Government norms on data localisation, seeking storage of sensitive data within the country, and digital initiatives would be another tailwind.
Commenting on the report, Nitesh Jain, director, CRISIL Ratings, “Indeed, data centres are emerging as an attractive infrastructure asset class in India. The industry is expected to add approximately 850-900 MW capacity during fiscals 2023-25. Mumbai, the financial capital of the country that accounts for around half of the existing capacity, is expected to add approximately 300 MW. This growth would be supported by proximal access to sub-sea cables, optic fibre connectivity, uninterrupted power supply and availability of skilled manpower. Hyderabad, Chennai and Pune will follow suit, and likely to add approximately 400 MW capacity cumulatively.”
The report further noted that of the Rs 400 billion investments, a third will be to acquire land, a fifth for substations, and the balance for civil work, purchase of equipment and fit-outs. Moreover, capital expenditure (capex) will also be required for captive renewable energy sources, which are cheaper than grid energy.
As per Rakshit Kachhal, associate director, CRISIL Ratings, “With electricity accounting for 45-50 per cent of the operating expense (opex) of data centres, there is sharper focus on an optimum mix of grid power and renewables. The share of renewables in data centre power consumption is expected to increase to approximately 35-40 per cent by fiscal 2025 from less than 15 per cent now. Renewable power being cheaper will improve the operating margins of the sector by approximately 200-300 basis points by fiscal 2025 and help sustain project’s returns on capital employed at 13-15 per cent.”
However, with that said, the final contours and timelines for the implementation of the Data Protection Bill and the Data Centre Policy, and the mass uptake of 5G services are upsides that can give a further fillip to the demand for data centres in India. The report also raised concerns the emerging sector still remains exposed to technological risks such as social engineering, cyberattack, data theft and leakages, despite high levels of security. Moreover, as the sector is still emerging in India, other vulnerabilities might unfold, so these will bear watching.
