Data centre capacity to treble by 2025: Analysts

India’s data centre industry, which expects revenues to grow 20% y-o-y in FY21, is experiencing huge demand for expansion, as the country’s appetite for consuming data grows at a scorching pace. Buoyed by the sentiment, analysts project the current capacity of around 360 megawatt (MW) to treble in the next four-five years as the digital economy landscape matures further. According to a report by Crisil, industry capacity is likely to expand over three-fold to hit 1,100-1,200 MW by FY25 on the back of $4-5 billion investments announced over the past three years for both brownfield and greenfield expansion.

“Also, on account of Covid, data consumption has seen a sharp 38% rise y-o-y in Q1 FY21. On the back of this, we expect the industry to log a rapid 25-30% CAGR to $4.5-5 billion by FY25. Growth drivers include an exponential surge in data being generated and growing need for local data storage in line with the government’s thrust on data localisation,” it noted.

The Indian data centre industry, which accounts for 1-2% of the global share, is estimated to have clocked a modest CAGR of 15-20% since FY16 to touch around $1 billion in fiscal 2019 and about $1.2 billion (around Rs 8,900 crore) in FY20, Crisil said. According to a joint report by TAIPA-EY in September this year, data centres are witnessing a steep growth trajectory and the market in India is expected to grow at 8.4% CAGR from 2018-2023.

JLL India, in a report launched in August, projected the industry to add 703 MW by end-2025, translating into an opportunity of 9.3 million sq ft of real estate development. Mumbai is expected to garner a significant share of this impending opportunity owing to its existing infrastructure, followed by Chennai and Hyderabad. These capacity additions would require greenfield investments to the tune of $4.9 billion (around `36,300 crore) to fuel the future development of the sector, the real estate consultancy said.

Besides, the ministry of electronics & IT (MeitY) is also working on developing the industry. On November 5, MeitY floated a draft data centre policy for benefit of the sector and ecosystem. It has sought stakeholder comments by November 20. The draft report will be followed by a detailed scheme with implementation guidelines and particulars of fiscal and non-fiscal incentives to be provided by the Centre and states.

The traction this segment is experiencing can be gauged from the fact that in about 10 days three large expansion plans have been announced. On October 28, Yotta Infrastructure, a Hiranandani group firm, said it will invest up to Rs 7,000 crore for setting up a data centre park in Greater Noida.

Then on November 3, Nextra Data, a Bharti Airtel subsidiary, said it has inked an MoU with Maharashtra Industrial Development Corporation to establish two data centres in Mumbai and Pune. On Friday, Amazon Web Services announced investment of $2.7 billion (about Rs 20,700 crore) in Telangana to set up multiple data centres.

Crisil says the huge demand for storage is being driven by exponential increase in data volume and penetration (around 75% by fiscal 2025).

The increase in data volume would be supported by high growth in e-commerce, increase in usage of social media, greater preference for over the top (OTT) platforms, government’s impetus to Digital India and data localisation norms, which support development of local data centres, it added.

This is also good news for cities beyond the metros and tier-II towns. Crisil Research expects the share of the top four cities to decline marginally in the next five years as lack of space and higher rental costs along with improved infrastructure availability in next-rung cities leads to some larger hyper-scale data centres being set up in those cities. Due to lack of quality and reliable infrastructure across a majority of locations in India, about 60% of the total number of data centres are located in the top four cities. In fact, the top seven cities accounted for more than 75% of the total data centres in India.