Forecast on investment in India’s data center capacity

India’s data center capacity is expected to double to around ~2000 MW by 2026, according to CareEdge Ratings.
Eaton's Brightlayer Data Centers suiteInvestment in India’s data center capacity expansion is estimated to reach a Capex of Rs 50,000 crore over the next three years till 2026.

This wave of digitization, driven by the expansion of e-commerce, fintech platforms, online streaming, and gaming services, is anticipated to increase the number of internet users and boost internet penetration from 63 percent in FY23 to 87 percent by FY29.

India generates about 20 percent of the global data. In terms of the Data Center capacity, India has a share of 3 percent.

CareEdge Ratings believes that adoption of technologies such as 5G, IoT, and Artificial Intelligence are expected to significantly augment demand for data and in turn Data Center. Collectively, these demand factors are projected to triple data consumption in India.

CareEdge Ratings report mentions that per MW cost in India for setting up Data Center has witnessed escalation due to incremental land, equipment and other soft cost with new capacities now being set up at a cost of Rs.60-70 crore/MW. This cost of data centre is contingent upon provisions for scalability, design and location.

Revenue of data center operators has witnessed growth of 24 percent CAGR from FY17 to FY23.  CareEdge Ratings forecasts a revenue growth of 32 percent CAGR during FY24-FY26. Since FY19, EBITDA margins have expanded due to higher occupancies and better absorption of fixed costs and thereafter stabilising at ~43 percent during FY22-23. These margins are expected to remain steady for the next 2-3 years.

Puja Jalan, Associate Director, CareEdge Ratings said, “The capacity addition of ~1.1 GW in Data Center space needs to be corroborated with increased absorption in future/ medium term, as cashflow stability is an important consideration for the debt-funded investments.”

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