Data centres are emerging as the next big theme in India and are set for explosive growth over five years, with a Jefferies report pegging the capacity rising five-fold by 2030 to reach 8 Giga Watts on the back of $30 billion worth of capex.
Leasing revenue is expected to surge five times to $8 billion, driven by rising internet traffic, growing adoption of artificial intelligence (AI) and stricter data localisation mandates.
Rising Capacity and Investment Surge
A recent Kotak Institutional Equities report added to this optimism, forecasting India’s data centre market to quadruple by FY28, attracting $20-25 billion in fresh investments. Kotak said data centres may account for 4-5% of India’s total power capacity by FY30, creating tailwinds for renewable energy producers and grid infrastructure. It has projected a 25% CAGR in demand for specialised real estate, with Mumbai, Chennai, Hyderabad and Pune emerging as key growth corridors due to their submarine cable access and supportive state policies.
The data centre boom is creating downstream opportunities across multiple sectors, including real estate ($6 billion), electrical and power systems ($10 billion), racks and fit-outs ($7 billion), cooling systems ($4 billion), and network infrastructure ($1 billion).
Read More: India may grant 20-year tax exemption, GST credit to supercharge data centres: Report
Telcos Well-Positioned to Benefit
Telcos, accustomed to capex-heavy, long-gestation businesses are well-placed to benefit from this tailwind. In India, three of the top five data centre operators - NTT GDC, STT and Airtel Nxtra - are telco-owned. Bharti Airtel’s 15% market share, strong free cash flow and established enterprise client relationships position it well to capture this opportunity, according to Jefferies.
Demand Fuelled by Digital Growth and AI
The brokerage also noted that the surge in data traffic - 30x since FY17 - driven by internet and smartphone adoption, OTT platforms, digital payments and e-commerce, has fuelled demand for data centres. AI adoption is expected to further boost demand as AI servers require 5-6 times more power and liquid cooling than standard servers. Mumbai and Chennai, with proximity to sub-sea cable landing stations, account for 70% of colocation capacity, while top players dominate 90% of the market. Incremental capacity is expected to be led by AdaniConneX and Reliance Industries, the note said. Read More
Diversify Across the Ecosystem
So how should investors position themselves to capture this theme? Market expert Sunil Subramaniam told Moneycontrol that the key for investors is diversification across the ecosystem.
“Don’t try to pick individual winners. Invest across the sector. Buy the story, diversify across telecom, power, infrastructure, and real estate, and ensure your portfolio captures the manifold benefits of this growth theme.”
Read More: Data centre boom - $20-25 billion investment to take capacity to 4,500 MW by 2030
Opportunities Beyond Operators
A Balasubramaniam, Managing Director and CEO of Aditya Birla Sun Life AMC too underscored the importance of looking beyond just data centre operators.
“One of the sectors directly related to data centres is real estate. Second is power and third is the technology providers. All three form part of this opportunity, and they’re being captured by large companies with a focused push into data centres. A big beneficiary will be the power sector, because uninterrupted, high-voltage supply is critical for data centres to operate at speed without disruptions,” said ABSL’s CEO.
Vinit Bolinjkar, Head of Research at Ventura Securities added a global perspective. “With India’s data centre capacity set to triple by 2030, backed by $25+ billion in investments, rapid AI adoption, and digitalisation, opportunities extend beyond traditional realty and infra, investors can gain exposure through companies like Anant Raj, Netweb Technologies, Black Box, L&T, and others such as E2E Networks, Tata Communications, and Adani Enterprises. In this capital-intensive sector, value creation hinges on business leverage, execution, and tenancy ramp-up, not just thematic positioning.”
As the demand for data centres looks poised to grow exponentially, investors looking to ride the next big theme in India would do well to consider a diversified portfolio across this high-growth ecosystem, from renewable energy and power infrastructure to specialised real estate, telecom, and technology providers.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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