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India’s data centre operational capacity likely to increase to 2,000-2,100 MW by March 2027: ICRA
Mar-12-2025

Credit rating agency ICRA in its latest report has said that India’s data centre (DC) operational capacity is likely to increase to 2,000-2,100 MW by March 2027 from around 1,150 MW as of December 2024, involving investment of Rs 40,000-45,000 crore in FY2026- FY2027, supported by internet/data usage and data localisation initiatives. Further, it said established DC players and new players, which have entered this sector in the last 3-4 years, have a development pipeline of 3.0-3.5 GW to be delivered in the next 7-10 years, involving significant investments of Rs 2.0-2.3 lakh crore.

The report said as part of the Union Budget 2025-26, the government’s proposal to set up a centre of excellence in AI for education, the BharatNet project to provide broadband connectivity to all gram panchayats and start Deeptech Fund of Funds to provide access to skilled professionals in AI, cyber security and cloud computing, compliments the strong growth prospects for the DC sector in India. It said the presence of landing stations, fibre connectivity, uninterrupted power supply, proximity to tenant’s headquarters and high score on disaster proofing are some of the key parameters a DC operator would look for in a location. Mumbai and Chennai have maximum landing stations, with the former being the preferred location for a DC operator. Around 75% of the upcoming capacities in the next three years are concentrated in Mumbai, Chennai and the Hyderabad markets. 

ICRA estimates the revenues for top 5 DC players (which account for around 75-80% of overall industry revenues and operational capacities in India) to expand by a sharp 18-20% YoY in FY2026, supported by an increase in rack capacity utilisation and the ramp-up of new DCs. The operating margins are expected to remain healthy in the range of 40-41% in FY2026. The return on capital employed (RoCE) is likely to be modest as the DC players are in continuous capex mode and new DCs will ramp up over a period of time. As competition is heating up with the entry of new players, pricing flexibility is getting increasingly constrained, which will exert a drag on the profitability and return metrics for the incremental business. However, it anticipates the leverage and coverage metrics of the players to remain comfortable in the medium term. 


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