Home/ Markets / Mark To Market/  Data centre capex, the emerging mega theme in India

In a post-covid world with an accelerated push for digital services, Indian corporates have increased investment in IT infra such as data centres. A data centre is a dedicated space to house computer systems and associated components.

In their latest report on trends in corporate capital expenditure (capex), analysts at Spark Capital Research pointed out that data centre capex is emerging as a new mega theme in India. The increased adoption of cloud amid a rising preference for a hybrid working model has seen sectors such as banking and financial services, retail, healthcare and e-commerce invest in data centres, said the report. Further, telecom firms gearing up for a 5G roll-out are also poised to increase their investment in data centres as data consumption is expected to jump.

Expanding footprint
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Expanding footprint

Analysts at Spark Capital added that derivatives of data centre spends should be visible in higher demand for switchgear, substation/transformers, building management system, cooling solutions and gensets. So, companies engaged in making these items stand to gain.

Another beneficiary of this emerging trend would be real estate, especially in metro cities. Interestingly, Adani Group, Japan’s NTT and Hiranandani Group are among companies that are looking to expand their data centre presence in India across Noida, Pune, Delhi and Mumbai. These companies have recently announced fresh investments for this purpose.

“The strategic location of Mumbai, being a coastal city and access to undersea cable landing destinations, makes the city a ripe choice for data centres," said Viral Desai, national director, occupier services at Knight Frank India.

“Chennai also serves as a data centre for other south Indian cities in proximity. Delhi-NCR, Hyderabad and Bengaluru are other locations that have seen increased interest as many major IT corporations have their India headquarters in these cities," Desai said. He further pointed out that data centres are a new segment in real estate that is estimated to contribute to 5-10% of the overall absorption of commercial realty in any market.

“From an investor’s standpoint, data centres constitute long-term stable assets that can provide steady and secure returns over long periods (20-30 years). The segment is already witnessing investments from global funds like Brookfield, Blackstone, ESR and Capitaland," he said.

Another property consultant, JLL India, estimates India’s data centre industry to double capacity and cross the 1 gigawatt mark by 2023. According to JLL India, global investors and data centre companies have increased their commitment during the past six months, announcing joint ventures with operators to set up sites. Their investment commitments to the tune of $3 billion highlight the growth potential of this asset, the property consultant said in its recent report.

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Updated: 22 Sep 2021, 01:15 AM IST
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