CRISIL Predicts Rs 45,000 Crore Investments in Data Centers by FY26
- ByStartupStory | November 2, 2023
The data centre industry is expected to witness significant investments totaling up to Rs 45,000 crore by the end of FY26, as reported by domestic credit ratings agency Crisil Ratings on Wednesday. This surge in investments is attributed to the growing demand for data and storage services, according to Crisil.
The agency noted that large enterprises are increasingly adopting cloud solutions, which, in turn, are driving the demand for data centres. Additionally, the rising use and popularity of Over-The-Top (OTT) platforms have led to increased retail data consumption.
Over the past five years, mobile data traffic alone has seen a remarkable annual growth rate of 45 percent. The recent launch of 5G services is expected to further boost data consumption among retail users, leading to an even greater need for data centre infrastructure.
Furthermore, there is a heightened regulatory focus on the local storage of personal data, as mandated by the Digital Personal Data Protection Act and policies established by sector regulators.
Crisil Ratings Deputy Chief Ratings Officer Manish Gupta explained, “The installed capacity of Indian data centres is expected to more than double and reach 1,700 MW by March 2026 from an estimated 780 MW as of March 2023. This would require investment of Rs 45,000 crore.” He also noted that a third of these new investments will be directed towards Mumbai, with the remaining funds allocated to the National Capital Region, Chennai, Hyderabad, and Pune.
Mumbai remains a preferred location for data centre investments due to its access to sub-sea cable landing stations, proximity to large enterprises, reduced latency, and a consistent power supply.
The investments are expected to come from established domestic and global data centre operators, private equity firms, as well as companies in the telecom, real estate, and engineering, procurement, and construction sectors.
Despite the increased financial leverage resulting from these substantial investments and heightened competition from new entrants, the credit profiles of large established data centre operators are anticipated to be supported by strong cash flow stability stemming from long-term customer contracts, according to Crisil Ratings.
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“The leverage of Crisil-rated data centre operators is expected to increase from 3.5x in fiscal 2023 to 4-4.5x over the next two fiscals before moderating in fiscal 2026,” added Director Naveen Vaidyanathan.
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