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Indian data centres capacity expanision is likely to witness a five-fold increase with expected investments worth ₹1.05 lakh to ₹1.2 lakh in the next five years, ratings agency Icra said Tuesday.
The data centres market is seeing health growth, according to Icra, driven by large hyper-scalers like Amazon Web Services, Google, Microsoft, Facebook, IBM among others, who are outsourcing their storage needs to third party data centre providers.
Indian corporates like the Hiranandani Group, Adani Group, foreign investors which include Amazon, EdgeConnex, Microsoft, CapitaLand, Mantra Group have started investing in Indian data centres.
“The favourable regulatory support, rapidly growing cloud computing, increasing internet penetration, government effort on digital economy, adoption of new technologies (IoT, 5G etc), growing needs of hyper-scalers are some of the major factors driving the demand for data centres in the country," said Rajeshwar Burla, Group Head, Corporate Ratings, Icra.
"The sector is likely to witness a five-fold increase in capacities in the next five years. In addition, government of India (GoI) accorded infrastructure status to the data centres in the Union Budget 2022-2023. This will enable the players to get access to longer tenured debt at competitive rates and access to foreign funding through the external commercial borrowing route," he said.
The industry revenues are expected to increase at a CAGR of around 18-19% during FY22-FY24, supported by increase in rack capacity utilisation and ramp-up of new DCs.
With increase in revenues and better absorption of fixed costs, operating margins are likely to improve and remain in the range of 40%-42%.
“Between the two major services provided by the DC players, co-location services account for around 62%-65% of revenues as compared to managed services which account for 28%-30% of revenues. The upcoming investments are geared towards meeting high demand in co-location services. These services have higher operating margins due to shared resources compared to managed services clients. On the cost structure, power expenses account for 55-60% of total costs towards maintenance of multiple cooling paths and redundancy. Given the ESG considerations for most of the key tenants, DC players are also expected to invest in green power to meet their power requirements. We can expect DC players to do substantial investments in solar power going forward," Burla said.
