Budget 2022: With easy credit, companies will ramp up data centers this year

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Companies will accelerate investment in data centers boosted by the status of the industry infrastructure sector.

On Tuesday, the union’s finance minister, Nirmala Sitharaman, announced the state of data center infrastructure and energy storage systems, which will give companies access to long-term financing and reduced interest rates.

“This year, we will accelerate our capacity increase in data center parks in Mumbai, Pune, Bangalore, Hyderabad, Delhi NCR and Kolkata. We will also add new capacity in our edge sites (small data centers) to enable 5G and security services,” said Rajesh Tapadia, CEO of Airtel’s data center subsidiary, Nxtra.

“Additionally, Oracle will be building their cloud capacity in the West India region with us in 2022, which is a huge endorsement of our association with hyperscalers,” he added. The company last October announced an investment of Rs 5,000 crore by 2025 to triple the capacity of its data center to 400MW by 2025.

Other companies are also gearing up for expansion. Sunil Gupta, CEO of Hiranandani Group-led Yotta Infrastructure, said the company has already announced plans to develop large-scale data centers in key hubs in India and recognition of infrastructure status will help to accelerate plans. The company is running a data center in Navi Mumbai and setting up another facility in Noida.

STT GDC India said it is working on new facilities and expansion in Noida, Pune, Chennai and other cities. “The company is also evaluating its expansion into Tier II cities beyond the nine cities where we already have a presence. This is to meet growing customer demand for edge locations,” said Bimal Khandelwal, CFO of STT GDC India.

The expansion of the data center industry is driven by growing digital penetration and cloud adoption.

“Data center industry capacity is expected to double from 499MW in the first half of 2021 to 1008MW in 2023. Increased fiber optic network and 5G spectrum allocation would mean higher digital push which will increase the demand for real estate,” said Radha Dhir, CEO and country manager of consulting firm JLL.

According to India Ratings, the total investment in the data center industry in India is expected to reach Rs 70,000-72,000 crore over the next five years. “According to the historical trend, around 40-50% of the total investment was financed by debt with an average term of 3-7 years. Since data center investment has a long gestation period (3-6 year payback period), access to cheap and long-term financing was necessary. Granting infrastructure status to data centers would certainly pave the way for the same,” said Prashant Tarwadi, Director, India Ratings and Research.


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