Data centres to see Rs 45,000 Cr investments till FY26: CRISIL

The data centre industry is estimated to get investments of up to Rs 45,000 crore till the end of FY26, domestic credit ratings agency CRISIL said on Wednesday.

The higher investments will be on account of demand for data and storage, CRISIL Ratings said in a note.

Large enterprises are increasingly embracing cloud solutions, which is fuelling the surge in demand for data centres, the agency said, adding that rising usage and adoption of Over-The-Top (OTT) platforms are driving up retail data consumption.

It said mobile data traffic alone has risen at an annual rate of 45% over the last five years.

The newly launched 5G services will amplify data consumption among retail users even further, which will produce data that will finally be stored in data centres, the agency said.

Moreover, there is an enhanced regulatory emphasis on local storage of personal data as stipulated under the Digital Personal Data Protection Act, as well as through policies formulated by some of the sector regulators, the agency said.

"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 an investment of Rs 45,000 crore," Deputy Chief Ratings Officer at CRISIL Manish Gupta said.

A third of the new investments will come in the financial capital, while the rest will be in the NCR, Chennai, Hyderabad, and Pune, he added.

Mumbai remains the most preferred location because of the availability of sub-sea cable landing stations, proximity to larger enterprises that help in reducing latency and continuous availability of electricity, the agency said.

The investments will come from well-established domestic and global data centre operators, private equity firms and also telecom, real estate, and engineering, procurement and construction sector companies, it said.

Notwithstanding increasing financial leverage due to elevated investments and a rise in competition with the entry of new players, the credit profiles of large established data centre operators should continue to be supported by strong cash flow visibility from long-term customer contracts, the rating agency said.

"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," its Director Naveen Vaidyanathan said.