India’s data center sector is believed to be stepping into a development phase, projected to reach a doubled capacity to almost ~2000 MW by 2026, according to CareEdge Ratings.

The expansion ambitions are said to have attracted a great amount of investment opportunities as per the ratings.

Until 2026, the spending is anticipated to be Rs.50,000 crore in this sector in the course of the next few years, indicated the rating.

CareEdge ratings also noted a significant amount of data center capacity which is under-penetrated and is said to facilitate ambitious plans to install a lot of capacity.

The data indicated that India is transitioning to a developed market economy from a developing one.

The growth factors driving this wave of digitization are said to be the e-commerce, fintech, online streaming, and gaming services is driving this wave of digitization, which is expected to increase internet penetration (internet users as a percentage of population) from roughly 63 percent in FY23 (April 1 to March 31) to 87 percent by FY29. India contributes over 20 percent of the world's data generation, while only three percent of the world's data center capacity is located there.

According to CareEdge Ratings, the need for data centers is predicted to rise dramatically as a result of the deployment of technologies like artificial intelligence, 5G, and the Internet of Things. It is predicted that all of these demand variables will cause India's data usage to quadruple.

The CareEdge Ratings report, which emphasizes the necessity of data centers, notes that the cost per MW in India has increased due to increases in land, equipment, and other soft costs; new capacities are currently being set up at a cost of Rs 60–70 crore/MW. The cost of the data center also depends on the location, design, and scalability features.

CareEdge Ratings notes that revenue growth for data center operators has been roughly 24 percent CAGR from FY17 to FY23, in line with capacity increases, based on an evaluation of the financials of significant data center businesses in India.

According to CareEdge Ratings, revenue will increase by 32 percent CAGR between FY24 and FY26. Due to increased occupancy and improved fixed cost absorption, EBITDA margins have increased since FY19 and have stabilized at about 43 percent in FY22–23. We anticipate that these margins will not change over the next two to three years.