Data centre capacity in India is expected to double to 1,700-1,800 megawatt (MW)¹ by fiscal 2025 from ~870 MW last fiscal, powered by the troika of data boom, digital adoption, and local data storage mandates. 

The sector have emerged as a favoured infrastructure asset class the world over as demand for data shoots through the roof. Thanks to the increasing use of smart devices by individuals, which has resulted in massive spurt in data usage. The launch of 4G services, coupled with price war, has led to a paradigm shift in data usage and trends in the country. India is amongst the highest mobile data consumption rate in the world, with data usage of ~18 gigabytes per data subscriber per month at present. In fact, wireless mobile data traffic in the country grew ~31% in 2021 to ~253 exabytes². 

Added to this, corporate embrace of advanced technologies such as Internet of Things (IoT) and big data analytics is driving cloud consumption.

As things stand, the sector is estimated to log a revenue CAGR of 24-25% over fiscals 2023-2025, to Rs 14,000-16,000 crore. And with 5G spectrum auction around the corner — slated to begin on July 26^th — demand for data and storage capacities can only reach higher. CRISIL’s first cut estimate indicates data usage per subscriber could reach ~25 GB per month within three years of 5G launch. Moreover, government norms on data localisation, seeking storage of sensitive data within the country, and digital initiatives would be another tailwind, though the final contours of and implementation of the Data Protection Bill and the Data Centre Policy would bear watching.

That said, coastal cities such as Mumbai and Chennai are likely to lead the capacity addition race, given their proximal access to sub-sea cables, optic fibre connectivity, uninterrupted power supply, and availability of skilled manpower. Mumbai, the financial capital of the country that accounts for around half of the existing capacity, alone is expected to add ~300 MW by fiscal 2025, while Chennai, Hyderabad and Pune will together add a further 400 MW or so. 

All that capacity addition will require hefty investments, estimated at over Rs 40,000 crore to double the capacity base from current levels. Of this, a third will be to acquire land, a fifth for substations, and the balance for civil work, purchase of equipment and fit-outs.

In addition, DCs are now opting for cheaper renewable power which will also require additional investments. This is so because data centres are major power guzzlers, as they require continuous uninterrupted power supply to cool the servers placed in racks. Thus, power alone accounts for 45-50% of their operating costs. 

Given the criticality of power, data centre operators also need to keep diesel generator sets as back up for any outage in grid power, to meet service level agreements. To be sure, most of the data centres in India are Tier-III³ certified, which has uptime guarantee of 99.982%.  

Renewable power could boost the operating margin by 200-300 basis points, and help sustain return on capital employed of the projects at 13-15%.

 That said, the sector is still emerging in India, and remains exposed to technological risks such as social engineering, cyber-attack, data theft and leakages, despite housing high levels of security, which would bear watching.

¹  Indicates IT power load. The capacity of data centres is measured in terms of power consumption required by the servers.
²  1 exabyte= 10^18 bytes
³ A data center receives international ranking from the Uptime Institute, an independent organization that determines the facility level primarily based on uptime guarantee, fault tolerance and service cost. This classification ranks facilities from I to IV, with I being the lowest and IV the highest-performing level.

Installed data centre capacity to double by fiscal 2025