Capex of Rs500 billion is needed over next three years
Naushad K. Cherrayil
Bengaluru: India has not yet fully tapped data centre capacity, though the country generates about 20 per cent of global data.
The internet user penetration in India is the lowest whereas mobile data consumption is highest compared to China, the US, and the European Union.
The data centre capacity per million internet users in India stands at just 1MW as against 4MW per million user in China and is significantly lower than the US and European Union.
However, in terms of the data centre capacity, India has a share of just three per cent.
The wave of digitisation, 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 (internet users as a percentage of population) from approximately 63 per cent in FY23 (refers to the period April 1 to March 31) to 87 per cent by FY29.
Data consumption to triple
Adoption of technologies such as 5G, IoT, and Artificial Intelligence are also expected to significantly augment demand for data and in turn data centre.
Collectively, these demand factors are projected to triple data consumption in India and lead the way for large capacity addition plans.
A report by CareEdge Ratings highlighted that India’s data centre capacity is estimated to double to 1950MW by 2026, from 877MW in 2023, and estimates a capex of Rs500 billion in this space is needed over the next three years till 2026.
“The data centre growth is driving/attracting large-scale investments in the expansion of the network connectivity ecosystem which is critical for high volume data transfer at low latency levels. It is imperative that for such large scale capacity addition, data centre players incorporate mix use of renewable energy and low carbon technologies to ensure cost competitiveness for sustainability,” Maulesh Desai, director at CareEdge Ratings, said.
“The per MW cost in India for setting up data centre was close to Rs40-45 crore and it has witnessed escalation due to incremental land, equipment and other soft cost with new capacities being set up at a cost of Rs60-70 crore/MW. This cost of data centre is also contingent upon provisions for scalability, design, and location.”
The capex cost for setting up a data centre in the country is roughly 45 per cent lower vis-à-vis the world average.
“The capacity addition of 1.1GW in data centre space needs to be corroborated with increased absorption in future/ medium term, as cashflow stability is an important consideration for the debt-funded investments,” Puja Jalan, associate director, CareEdge Ratings, said.
However, she said that rising costs need to be weighed adequately with competitive pricing to balance the leverage and profitability.
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