Data Centres: Powering India’s Digital Future

India’s data revolution is running on an invisible backbone — the data centre. Every time you stream a movie, shop online, trade stocks, or use AI-powered tools, you’re tapping into the massive digital infrastructure that sits inside sprawling facilities filled with servers, cooling systems, and power networks.

And this backbone is expanding at breakneck speed. India’s data centre capacity, currently ~950 MW, is expected to nearly double to 1,800 MW by 2026, with industry revenue projected to grow at ~40% CAGR over the next five years.

This is more than just an infrastructure story — it’s a structural shift enabling India’s digital economy, and investors have a once-in-a-decade opportunity to participate.

Sector Insight: Why Data Centres Matter

Data centres are the beating heart of today’s digital economy. They house the computing power and storage infrastructure required to run IT operations, process data, and deliver seamless user experiences.

They provide:

• Data Storage & Processing: For enterprises, hyperscalers, fintech, and e-commerce players.

• Business Continuity: Redundancy, uptime, and disaster recovery.

• AI & Cloud Enablement: Compute-heavy infrastructure for training and deploying AI models.

The physical infrastructure of a data centre includes power, cooling systems, servers, networking, and storage, while the virtual layer involves automation, virtualization, and security software to ensure seamless performance.

Four Tiers of Data Centres: Understanding Uptime

The Uptime Institute defines four globally recognized tiers:

• Tier 1: Basic setup, single power & cooling path, 99.671% uptime.

• Tier 2: Adds some redundancy, 99.741% uptime.

• Tier 3: Dual-powered components, multiple power paths, 99.982% uptime.

• Tier 4: Fully fault-tolerant, can handle multiple failures, 99.995% uptime.

India is rapidly upgrading towards Tier 3 and Tier 4 facilities to meet hyperscaler and enterprise requirements.

India’s Data Centre Landscape: The Growth Imperative

• Capacity: 950 MW in 2024 → 1,800 MW by 2026.

• Market Size: $1.2B in 2021, up 216% since 2014.

• Global Ranking: 13th globally with 138 operational data centres.

• Demand Drivers: Data localization mandates, rising digital payments, OTT consumption, cloud adoption, AI workloads.

Key Growth Catalysts:

• Digital India push & data localization laws driving hyperscale cloud demand.

• AI and 5G adoption creating latency-sensitive workloads.

• India’s cost advantage — competitive power tariffs and real estate costs compared to Singapore or Tokyo.

• Policy support — tax breaks, infrastructure status, and state-level data centre parks (Maharashtra, Tamil Nadu, UP, Telangana).

Breaking Down the Data Centre Value Chain

A modern data centre ecosystem involves multiple layers, each representing an investment opportunity:

1. Design & Engineering

Companies like L&T Technology Services and Techno Electric & Engineering plan and design robust, energy-efficient, and scalable facilities. This is where location planning, redundancy design, and power optimization are critical.

2. Construction & Leasing

Real estate developers and REITs like Anant Raj Ltd, DLF Ltd, Mindspace Business Parks REIT build and lease space for hyperscalers (AWS, Google, Microsoft) and enterprises. This is where India's REIT market offers a listed route for investors.

3. Cooling Solutions

Cooling is one of the largest cost centres in a data centre. Companies like Voltas Ltd and KRN Heat Exchanger and Refrigeration Ltd provide advanced air and liquid cooling systems, crucial for operational efficiency.

4. Power Infrastructure

Reliable, uninterrupted power is non-negotiable. Salzer Electronics Ltd and Schneider Electric Infrastructure Ltd play key roles with transformers, UPS systems, and backup generators.

5. IT Equipment

Servers, networking devices, and storage systems are supplied by players like Orient Technologies Ltd and HFCL Ltd — providing the brain and nervous system of a data centre.

6. Managed Services & Colocation

Tata Communications Ltd provides colocation and managed services, enabling businesses to house their IT gear without managing the facility themselves.

7. Renewable Energy Integration

Sustainability is becoming non-negotiable, with hyperscalers demanding 100% renewable power. Adani Green Energy Ltd and Tata Power are driving the shift toward green data centres.

8. Cybersecurity & DCIM

Data centres must be secure and optimized 24/7. Tech Mahindra and Infosys offer Data Centre Infrastructure Management (DCIM) and cybersecurity solutions.

9. Cloud Enablement & Specialized Networking

Players like Sterlite Technologies Ltd provide fiber optic and networking solutions for hyperscale cloud integration and low-latency connectivity.

Where We Can Expand Further – Deep-Dive Insights

1. Global Market Mapping

India is among the fastest-growing data centre markets globally, but it still lags behind mature hubs:

• US: Over 500 hyperscale data centres, with the lowest power cost per kWh globally.

• Singapore: A leading APAC hub but now restricting new builds due to sustainability concerns — opening opportunities for India.

• China: Massive state-backed growth, but with data sovereignty restrictions that keep global players cautious.

Global M&A activity is accelerating — Brookfield, Blackstone, and Digital Realty have been acquiring data centre assets worldwide, and many are now targeting India as a core growth market.

2. Policy & Regulation Insight

The National Data Centre Policy 2023 provides tax incentives, faster clearances, and infrastructure status recognition — making financing cheaper.

State-level leaders:

• Maharashtra, Tamil Nadu, Uttar Pradesh: Offering land, power subsidies, and data park incentives.

• Data Localization: RBI and government rules mandating local storage of financial and personal data are creating stickier demand for domestic data centres.

3. Financial Performance Trends

Different segments of the data centre value chain have different economics:

• Colocation Providers (Mindspace, Anant Raj): Enjoy 60–75% OPM due to recurring rental revenues.

• Construction & EPC Firms: Mid-teen margins, cyclical but benefit from massive capex pipelines.

• Cooling & Power Solution Providers: 10–20% OPM but with strong volume growth potential.

Globally, the data centre market is projected to exceed $400 billion by 2030, driven by cloud, AI, and IoT adoption.

4. Technology & Innovation Angle

The next phase of data centre evolution is here:

• Edge Data Centres: Bringing compute closer to the user for low-latency applications like autonomous mobility and AR/VR.

• Modular Data Centres: Rapidly deployable, scalable solutions for Tier-2/Tier-3 cities.

• AI-Ready Infrastructure: High-density racks, liquid cooling, and automation for running GPU-heavy workloads.

• Green Data Centres: Powered by renewables, with immersion cooling and energy reuse.

5. Investor Lens Enhancement

REITs like Mindspace Business Parks and Brookfield India REIT provide a listed vehicle for exposure to this theme.

Private equity and sovereign wealth funds including GIC, CPPIB, ADIA are placing billion-dollar bets on India’s DC market, signaling confidence in its structural growth story.

6. Case Study: Hyperscaler Impact

When AWS announced its Hyderabad region, it committed $4.4 billion investment through 2030 — triggering demand for local construction, power, and IT equipment suppliers.

This has a cascading effect: EPC players get contracts, cooling solution providers see orders rise, and local employment surges.

Strategic Conclusion: Why This Matters for Investors

India’s data centre sector is no longer a supporting act — it is becoming the spine of the digital economy, enabling fintech, AI, e-commerce, and Industry 4.0.

With global capital flowing in, regulatory tailwinds, and hyperscalers expanding aggressively, the next five years could be transformative for companies across this value chain.

Early movers — whether in colocation, construction, cooling, or renewable integration — are likely to capture disproportionate value.

Disclaimer

This analysis is meant purely for educational and informational purposes and should not be construed as investment advice or a buy/sell recommendation. Companies mentioned in the article are to understand the complete value chain and are not a recommendation to buy or sell. Investors should conduct their own research or consult a SEBI-registered investment advisor before making investment decisions. Investing in equities is subject to market risks. Please understand the risks carefully before investing.