Indian Economy News

Rs. 45,000 crore (US$ 5.40 billion) in investments to be made in data centres over three fiscal years: CRISIL Ratings

  • IBEF
  • November 6, 2023

According to a survey by CRISIL Ratings, the growing demand for data and storage is piquing the interest of a diverse set of companies, which means that the Indian data centre market is expected to attract investments above Rs. 45,000 crore (US$ 5.40 billion) over the three fiscals through 2026.

Recently, there has been an increase in demand for data centres due to large enterprises adopting cloud solutions. Additionally, the increasing use and adoption of over-the-top (OTT) platforms are increasing the amount of data consumed by retailers. Over the previous five years, mobile data traffic increased tremendously at a compounded annual growth rate (CAGR) of 45%. Furthermore, the introduction of 5G services will cause retail users' data consumption to increase even more. In the end, data centres would have to be used to store all of this data.

Furthermore, the report said that local storage of personal data is subject to increased regulatory emphasis, as mandated by the Digital Personal Data Protection Act and regulations developed by certain industry regulators.

Mumbai has proven to be the most preferred location for this due to the availability of sub-sea cable landing stations, its proximity to larger enterprises that help in reducing latency, and its constant availability of electricity.

A wide range of players are planning data centre investments considering the strong demand prospects. These include not just well-established domestic and international data centre operators and private equity organisations, but also companies from the real estate, telecom, and engineering, procurement, and construction sectors.

According to Mr. Manish Gupta, Senior Director and Depuy Chief Ratings Officer of CRISIL Ratings, the installed capacity of Indian data centres is predicted to more than double, from an anticipated ~780 megawatt (MW) as of March 2023 to ~1,700 MW by March 2026, in order to meet this growing need for data. He said, “Investments would primarily be concentrated in a few cities such as Mumbai, National Capital Region, Chennai, Hyderabad, and Pune, with Mumbai alone garnering about a third of these investments.”

As per Mr. Naveen Vaidyanathan, Director of CRISIL Ratings, “Amidst increased competition and elevated capex, the leverage of CRISIL-rated data centre operators is expected to increase from ~3.5x in fiscal 2023 to 4-4.5x over the next two fiscals before moderating in fiscal 2026.”

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.