India’s data centre capacity to more than double by 2027

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New Delhi, Dec 23 (IANS) The Indian data centre industry’s capacity is set to more than double to 2-2.3 GW by fiscal 2026-2027 due to increasing digitalisation of the economy as enterprises increase their investments in cloud storage and consumer demand for data surges, according to a CRISIL Ratings report released on Monday.

“Further, rising penetration of Generative Artificial Intelligence (GenAI) will drive the demand over the medium term,” the report states.

Incremental capital expenditure (capex) to support the strong demand would see a higher proportion of debt funding, resulting in a moderate increase in debt levels. However, capacity additions will lag demand growth, keeping offtake risks low. As a result, the industry can expect healthy and stable cash flows, which will keep the credit profiles of players steady, the report observes.

The CRISIL Ratings said the analysis is based on industry players, representing around 85 per cent of the market share by operational capacity.

Data centres cater to the computing and storage infrastructure demand, which is driven by two primary drivers. One, enterprises are rapidly shifting their businesses to digital platforms, including the cloud, a trend that has accelerated post Covid-19 pandemic. Two, increased accessibility of high-speed data has led to a surge in Internet usage, including social media, over-the-top (OTT) platforms and digital payments, the report points out.

Mobile data traffic logged a compound annual growth rate (CAGR) of 25 per cent over the last five financial years. It stood at 24 GB per month at end-fiscal 2024 and is expected to rise to 33-35 GB by fiscal 2026, according to the report.

In addition to the ongoing demand, the rapid advancement of GenAI, which requires higher computational power and lower latency than traditional cloud computing functions, will also provide a tailwind to the data centre demand in India, the report adds.

CRISIL Ratings senior director Manish Gupta said, “To meet the growing data centre demand, an investment of Rs 55,000-65,000 crore is required over the next three fiscals, primarily towards land and building, power equipment and cooling solutions. Data centre operators typically build infrastructure — land and building, which account for 25-30 per cent of overall capex — with the expectation of future tie-ups. While this approach may expose incremental capacities to utilisation risks, strong demand is expected to support capacity utilisation to reach 80-90 per cent within a year or two.”

The capacity additions are driven by expansion plans of the existing players as well as the entry of new players. These are on the back of significant demand from hyperscalers. As hyperscalers typically wield high bargaining power due to large capacity requirements in a data centre, they are able to secure competitive pricing. Typically, the pricing of hyperscalers is likely to be 10-20 per cent lower than other customers. Hence, balancing the ramp-up in capacity utilisation with pricing remains key for returns on data centre investments, the report added.

–IANS

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