Data center sector is likely to go from 0.9 GW in 2023 to 2GW by 2026: CareEdge

Data Centre industry grew: The data centre industry sector is now in a growth phase likely to register a doubling of capacity over the next three years from approximately 0.9 Gigawatts (GW) in 2023 to around 2 GW by 2026, presenting substantial investment opportunities, the report by CareEdge said on Wednesday. 

With the impending surge in data centre capacity, investment prospects are ripe, with an estimated Rs 50,000 crore capex requirement in the pipeline for the next three years. Puja Jalan, Associate Director at CareEdge Ratings, highlights the need to address execution challenges to ensure the successful realization of planned capacity additions.

However, the industry grapples with rising costs, with the average cost per megawatt (MW) soaring to Rs. 60-70 crore from Rs. 40-45 crore. Despite this, absorption levels have surged, climbing from 82 per cent in 2019 to an impressive 93 per cent in 2023. Industry players have enjoyed substantial revenue growth, with a projected 32 per cent CAGR expected during FY24–26.

Maulesh Desai, Director at CareEdge Ratings, emphasizes the need for sustainability measures, urging the adoption of renewable energy and low-carbon technologies. The entry of new players with diverse expertise is anticipated, potentially disrupting the dominance of the top 5 players. Moreover, India's transition to a developed market economy, coupled with rapid digitization propelled by e-commerce and emerging technologies, promises further sectoral growth.

Desai anticipates a rise in edge data centres, particularly to cater to the burgeoning demand from tier II and tier III cities. This expansion aims to ensure lower latency and bolster digital infrastructure nationwide, aligning with India's digital transformation goals.