Global DC Capacity Likely To Be Around 19 GW; Top 10 Cities To Add 57%: Report

The rating agency Icra in a report has said that the global data centre (DC) capacity is estimated to be around 19 GW with the top 10 cities contributing to around 57 per cent of the capacity.

The report mentioned that Mumbai is the only Indian city which is on the list of the top 50 cities in terms of DC capacity and is ranked in 18th position. 

Further, India now accounts for 4 per cent of the global installed capacity. However, this is expected to sharply increase in the medium term, supported by the exponential increase in data consumption and favourable regulatory policy initiatives.  

Notably, digitisation drivers like the adoption of new technologies (cloud, IoT, generative AI, big data and 5G rollout), increase in digital penetration (internet usage, mobile penetration), ecommerce, government focus on digital infrastructure and favourable regulatory policies like Digital Data Protection Bill, infrastructure status, special incentives from central and state governments are expected to boost DC investments in the country.

Also, DC players derive revenues primarily from two sources – co-location and managed services. The co-location services refer to offering racks to customers, wherein the customers purchase their own server hardware and software licences and place them in a data centre.

The managed services are one in which the client leases an entire server without sharing with anyone else. For the incumbent players, co-location accounts for 67 to 69 per cent of revenues compared to the managed services, which account for 26 to 28 per cent and others like internet bandwidth and sale of services contribute to 4 to 6 per cent.  

To cater to the strong demand prospects for DCs, Indian corporates, foreign investors and existing DC players have started investing massively in Indian DCs. Overall, 5,100 to 5,200 MW of capacity involving investments of Rs 1.60 lakh crore are likely to be added in the next six years. 

The majority of the upcoming investments are geared towards meeting the high demand for colocation services. This will continue to be driven by hyperscalers and verticals such as the BFSI and IT/ITES, according to the report.

The revenues for Icra’s sample are expected to increase at a compound annual growth rate (CAGR) of 19 to 20 per cent during FY2024-FY2025, 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 to 44 per cent. 

However, the RoCE is expected to be modest as the DC players are in continuous capex mode. The intense competition is likely to constrain the margins for incremental business and large debt-funded capex plans would exert pressure on the credit metrics of the players.