While cloud, 5G roll-out, machine learning and internet of things (IoT) are expected to generate enormous data and storage requirements, Generative AI-led high computing requirements present a new wave of demand for DC capacity and a significant opportunity for DC operators.
Further, the data explosion is supported by adoption of new technologies, rapid rise in consumption of digital content, the Government’s continued thrust on e-Governance, increased penetration of e-commerce and digital financial transactions.
This, along with favourable regulatory policies like the Digital Data Protection Bill, granting infrastructure status to data centres, dedicated policies and incentives by various state governments, are expected to boost DC investments in the country.
Given these triggers, the impact of the relaxation with respect to cross border data transfer, provided in the new Digital Personal Data Protection Bill 2023 on demand for DCs in India, is expected to be low.
The revenues for ICRA’s sample[1] set are expected to increase at a CAGR of 19-20% during FY2024-FY2025 (24% CAGR growth during FY2019-FY2023), supported by an increase in rack capacity utilisation and ramp-up of new DCs. With the increase in revenues and better absorption of fixed costs, the operating margins are expected to remain in the range of 43-44%.
The RoCE is expected to be modest as the DC players are in continuous capex mode and the ramp-up of new DCs will happen over a period of time. With competition heating up, the pricing flexibility may get constrained, thereby adversely affecting the margins for incremental business. This, along with the ongoing large debt-funded capex, would exert pressure on the credit metrics of the players.
