Sunil Gupta, MD and co-founder at Yotta Data Services, recently unveiled plans for the development of five more data centre projects, expanding its data centre business. With plans to build two data centre parks in Mumbai, one in GIFT City in Gujarat, a multi-building park in Chennai, and a 30MW campus in Dhaka, Bangladesh—in an attempt at exploring global markets beyond India. 

In the past few months, there has been a flurry of announcements of investment in data centres across India. Be it Sify’s commitment of upwards of $360 million, Atlassian’s plans to set up data centres across India, or AWS’ plans to invest $12.7 billion to expand their data centres in India. To support all of this, investments are also coming in from entities like Kotak Alternate Assets, which has revealed its plans to invest $800 million to support the development of 5-7 large data centres across the country’s key property markets.

Data localisation and cost efficiency are the main driving factors for data centre demand in India. The push for data localisation, spurred by India’s data protection norms and the proposed data centre policy, has swayed global data majors towards the country. 

Sify chief financial officer MP Vjay Kumar, reiterated the same. He said, “There is no point for the content which is consumed in India to get hosted somewhere else where it goes all the way and comes back every time. The data should be localised.”

The need for data localisation was reiterated as the government introduced the concept of “trusted geographies,” which intensified the demand for data centres in India, limiting cross-border data storage to selected nations. This galvanised hyperscalers to mount on the backs of the likes of Sify and their data centres which serve both, hyperscalers like AWS, Microsoft, Google, and Oracle. and enterprise clients. 

As businesses migrate to the cloud and segments such as (banking, financial services and insurance) BFSI, and government drive demand, followed by e-commerce, media, manufacturing, and retail, India’s data centre market is booming, attracting investments in hyperscale data centres. Nasscom predicts global investments to hit $200 billion annually by 2025, with India expected to draw around $5 billion annually within two years.

Gauging the trend, Indian conglomerate Adani, in partnership with EdgeConneX has also bid for a piece of the pie. The JV has raised $213 million to advance its ongoing data centre initiatives, collectively encompassing 67 MW in Noida and Chennai. This collaboration aspires to become a leading data centre operator by 2030, augmenting its capacity by 1 GW. 

The endeavour entails providing comprehensive data centre solutions across India, including massive hyperscale campuses and slick edge facilities, leveraging EdgeConneX’s global expertise.

Addressing Growing Enterprise Needs

The current surge in data centre development has been brewing for over a decade. Cloud made services universal, and analytics aided data comprehension. Subsequently, AI, IoT, and machine learning, and now generative AI, is accelerating these trends.

Presently, India is witnessing the mainstream adoption of digital technologies, yielding robust use cases and business models. This transition results in a significant influx of data, necessitating its generation, storage, management, and consumption on an extensive scale.

Sydney-based software company Atlassians’ plans to invest in establishing data centres in India is in collaboration with Amazon to implement its products within these Indian data centres—which would address existing customer and new enterprises’ needs.

Atlassian, with its team collaboration and productivity software products like Jira, Confluence, Bitbucket, and Trello has prominent Indian names such as Ola Cabs, Reliance, Walmart Labs, and Flipkart as its customers. Atlassian also emphasises that data remains in the designated location. Co-Founder and Co-CEO Scott Farquhar explained that despite using Amazon’s data centres and infrastructure, Atlassian will put in place the necessary systems for the same. Additionally, Farquhar cited India’s burgeoning economy and talent pool as driving factors behind this strategic move. 

More Cloud, More Money 

To top it all, there are investments coming in from the likes of Kotak Alternate Assets, which is poised to invest $800 million into the development of five to seven expansive data centres within India and is pivotal.

The central focus of the Kotak Data Centre Fund is directed towards strategic investments in regions such as Mumbai, Chennai, Noida, and Hyderabad. These locales have been experiencing a notable surge in demand for data centre services.

Rahul Shah, the executive director at Kotak Investment Advisors Ltd., articulates the rationale behind this commitment, stating that the data centre industry inherently necessitates substantial capital expenditures for capacity expansion. “We have been studying the data centre industry for the last 3-4 years… The current data centre capacity in India is significantly lower than the fast-growing requirement,” Shah said.

He views this scenario as an opportunity for equity investment to empower partners in the creation of such capacities. The fund’s pivotal role lies in supplying strategic risk capital to partners while concurrently delivering value-added assistance to address this gap.

Investments Galore

The incoming investments are not a new phenomenon, and they follow on the heels of developments from 2022 when India witnessed a surge of significant data centre announcements, shaping its technological landscape. 

India possesses numerous attributes that make it an attractive data centre hub. These include a cost advantage, robust legislation, minimal climate risks, a skilled workforce, and enticing governmental incentives. Acknowledging their significance, the government has designated data centres as part of the infrastructure sector, streamlining the process of raising capital. Furthermore, India’s climate poses no significant threats to data centre operations. The convergence of real estate, tech expertise, a thriving enterprise market, a high number of smartphone users, and the government’s reliance on data for governance all contribute to India’s ideal data centre ecosystem.

Sustainable Way Forward 

As investors with a long-term perspective explore the capital-intensive data centre landscape, developers and investors find ample opportunities in this sector. Notably, the emphasis on sustainability is growing, driving the adoption of low-carbon and energy-efficient technologies by global operators. Edge data centres emerge as a promising avenue, contributing to sustainable transitions through their smaller footprint and lower energy consumption.

While metro cities remain data centre hubs, Tier-II cities are also gaining traction. Despite currently holding just 3% of India’s total data centre stock, Tier-II cities like Vijayawada, Nagpur, Raipur, Kochi, Patna, and Mangalore are being eyed by key data centre operators for the establishment of edge data centres and disaster recovery sites. 

Several patterns emerge as one looks at these developments—data centre capacity growth, hyperlocal data providers providing their facilities to hyperscalers to enhance their cloud offerings for Indian enterprises, and foreign investment driven by local demand. However, as the data centre landscape evolves, India’s potential in this sector remains substantial, heralding an era of robust digital infrastructure, innovation, and resilience.