L&T to spend Rs 3,600 crore to set up 3 new data centres in India

A new-age business subsidiary of the industrial conglomerate, L&T Cloudfiniti offers end-to-end solutions in data centre, multi-cloud services and network & data security.

Data centre boom

Ambastha Mumbai is seeing the biggest demand in the country, causing a heavy concentration of these centres around the city, which has increased the cost of setting up these facilities.

"What we do is we need to keep the capital cost under control, extremely well monitored. Do as much optimisation as possible, including energy cost and make sure that the returns don’t get hurt," she added.

With the expansion of the 5G network and the entry of data providers such as Elon Musk’s Starlink, data centres will start coming up in tier 2 and 3 cities, which will help reduce the cost of building and operating these units, Ambastha said.

"Having a stable supply of power and network is key for the functioning of data centres. As the 5G network expands in India and we solve the issue of a stable power supply, I think there is a future for new data centres to come up in smaller towns as well — but smaller units of 5-10 MW," she said.

Growing competition in the space has led to a drop in rentals. "Per kW rates have stabilised, between $60-70,000 per kW. And then in some cases where there’s a little higher supply, you will see pressure on rates," she said, adding competition is not a reason for concern due to the future demand potential of the industry.

There is tremendous growth in digital, AI, cloud storage and other such areas and service providers will have to respond to the demand with the right product for the right market, she said.

Capital expenditure for the new data centres would be covered by the cash on the conglomerate's books, Ambastha said who did not rule out partnerships. “...we are not personally averse to joint venture with private equity as an SPV (special purpose vehicle) to build for specific needs or clients. Our capex comes from L& T corporate. We don’t see a need for leverage or debt,” she said.

She also downplayed the impact of the 25 percent US tariffs on steel and aluminium that came into effect last week.

"At this moment, I don't see tariff should really impact data centre industry. It should not impact data centre industry," Ambastha said.

Steel is used in creating the shell of data centres and experts have said that the new tariffs could lead to supply-chain disruptions and product shortages, potentially pushing back project timelines and increasing costs to create new centres.

Sunrise sector-+o9o

Several large players such as Blackstone, Amazon Web Services (AWS), CapitaLand, Reliance Industries and Adani Group, have announced investments in the growing sector.

In January, AWS said it planned to invest $8.3 billion into cloud infrastructure in the AWS Asia-Pacific (Mumbai) Region in Maharashtra to expand its cloud computing capacity in India. AWS had also announced plans to invest Rs 60,000 crore in Telangana to create data centres.

Blackstone plans to set up a 150-MW facility in Telangana with an investment of Rs 4,500 crore. Talking to Moneycontrol recently, Blackstone CEO Stephen Schwarzman expressed strong optimism about India’s data centre industry, terming it a high-growth segment.

Blackstone is the world’s largest developer and owner of data centres and sees significant growth in India, Schwarzman said.

India's operational data centre capacity is expected to rise to 2,000-2,100 MW by March 2027 from around 1,150 MW as of December 2024, requiring an investment of Rs 40,000-45,000 crore over FY25 and FY26, ratings agency ICRA has said.

The growth is set to be supported by investments estimated at Rs 40,000-45,000 crore in 2025-26 and 2026-27.

Both, established players and new entrants in the sector, have a pipeline of 3.0-3.5 GW of capacity, with total investments expected to be between Rs 2 lakh crore and Rs 2.3 lakh crore over the next seven to 10 years, ICRA said last week.

According to CBRE South Asia Pvt Ltd, India's data centre market has attracted investment committments of $60 billion in the last six years. The cumulative inflow is estimated to surpass $100 billion by the end of 2027.

The data centre market in India has experienced substantial investments from global operators, real estate developers, and private equity funds seeking to capitalise on the country's growing market.