India's third-party data centre capacity to double by FY28: ICRA

New Delhi [India], September 25 (ANI): India's digital backbone is set for a major boost as third-party data centre capacity is projected to double to 2,400 to 2,500 MW by FY28 from 1,250 MW in FY2025, supported by investments of nearly Rs 90,000 crore during FY 26-FY28, according to rating agency ICRA.

The rating agency said the planned expansion is part of a larger roadmap, with industry players announcing long-term development of 3.0 GW to 3.5 GW over the next 7 to 10 years. This would entail an outlay of Rs 2.3 to Rs 2.5 lakh crore, underlining the sector's vital role in India's digital transformation journey.

Mumbai continues to dominate the domestic data centre ecosystem, contributing over half of the existing operational capacity and ranking 21st globally. The city's robust power infrastructure, strategic location and proximity to cable landing stations have made it a preferred destination for operators, noted ICRA.

India currently accounts for around 3 per cent of the global data centre capacity of 42 GW, compared to the United States 50 per cent share. However, the share is expected to rise, aided by surging data consumption and supportive government policies.

Edge data centres, smaller decentralised units closer to end-users are gaining traction, particularly in sectors such as banking, healthcare, agriculture and defence.

The focus on renewable energy is another key trend, with green power now meeting 15 to 20 per cent of the overall energy needs of operators. ICRA expects this to rise to 30 to 35 per cent by FY28 as ESG mandates and diversification imperatives gather momentum.

The policy environment is also enabling expansion, with the Digital Personal Data Protection Bill, infrastructure status for data centres and state-level incentives driving growth. Maharashtra, Telangana, Odisha and Tamil Nadu are among states attracting investments through subsidies and exemptions.

Anupama Reddy, Vice President and Co-Group Head, Corporate Ratings, ICRA, said the draft proposal of the Ministry of Electronics and Information Technology to provide a 20-year tax exemption could be a "game-changer" for the sector.

"By offering input tax credits on capital investments like construction and electrical systems, the policy aims to lower upfront costs and improve project viability. This long-term incentive is expected to attract significant domestic and global investments, enabling developers to scale operations with greater confidence," she said.

ICRA also highlighted rising competition in the sector, which is expected to restrict pricing flexibility and weigh on profitability. However, operators have tapped long-tenure funding of 12 to 18 years, enabling them to maintain a comfortable credit profile despite elevated leverage. ICRA projects the leverage ratio at 4.5 to 5.0 times in the medium term, while the debt service coverage ratio is expected to stay at 1.5 to 1.7. (ANI)

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