Data centre capacity to more than double to 2-2.3 GW by fiscal 2027

• 24 Dec 2024
• TM Team
• 0 Comments

The data centre capacity is set to more than double to 2-2.3 gw by fiscal 2027 buoyed by the increasing digitalisation of the economy. Medium-term demand is expected to rise as enterprises increase their investments in cloud storage and consumers' demand for data coupled with the rising penetration of generative artificial intelligence (GenAI). Still, capacity additions will lag demand growth, keeping offtake risks low.

The domestic data centre capacity stood at 950 MW as of March 2024. According to a Crisil Ratings analysis of the industry players, representing 85 percent of the market share by operational capacity, the data centre capacity will more than double to 2-2.3 gw by fiscal 2027.

The industry needs to invest Rs 55,000-65,000 crore to add capacity over the next three fiscal. Data centres, which cater to the computing and storage infrastructure demand, are driven by two primary drivers--enterprises are rapidly shifting their businesses to digital platforms, including cloud, more so since the pandemic; secondly, increased accessibility of high-speed data has led to a surge in Internet usage, including social media, over-the-top platforms and digital payments.

Notably, mobile data traffic logged a compound annual growth rate of 25 per cent over the past five fiscals. It stood at 24 GB per month at the end of fiscal 2024 and is expected to rise to 33-35 GB by fiscal 2026, the report said Monday.

Another growth driver is the rapid advancement of GenAI, which requires higher computational power and low latency than traditional cloud computing functions and will also provide a tailwind to the data centre demand. For instance, processing an average ChatGPT query requires around 10x more electricity than a Google search.

According to Manish Gupta of the agency, to meet the growing 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 the overall capex– with the expectation of future tie-ups. According to Anand Kulkarni of the agency, amid significant capex plans for expansion, the debt-to-earnings before interest, tax, depreciation and amortisation ratio of operators is expected to increase to 5.4x this fiscal from 5x last fiscal, before improving from next fiscal as capacity utilisation ramps up.