The use of artificial intelligence (AI), cloud computing and digital services is growing rapidly in India. As a result, the demand for data centres to store and process data is also increasing. This has made the data centre sector an emerging area of investment and business activity in the country. The expansion could also benefit several industries, including banking, power, engineering and cooling.
Let us understand India’s data centre boom in detail and explore whether this theme could become a major investment opportunity.
What’s Happening?
Data centre capacity in India is expected to grow rapidly over the coming years. According to The Economic Times, the country’s operational data centre capacity could reach approximately 2 gigawatts by December 2026 and rise to 5-8 gigawatts by 2030. This expansion will require significant capital investment.
Data centres are more than just buildings that house servers and computers. Their operations require land, electricity, cooling systems, networking and other technical facilities. As a result, their expansion could create opportunities for companies involved in real estate, power, engineering and electrical equipment.
New Opportunities for the Financing and Banking Sector
Building data centres requires significant capital. According to The Economic Times, the physical infrastructure of this sector in India could attract investments of Rs 2–5 lakh crore. Of this amount, approximately 60-70% could be raised through debt. This could create a lending opportunity of Rs 1.2-3.5 lakh crore for banks and financial institutions.
Developing one megawatt of data centre capacity could cost around Rs 50–70 crore. Therefore, access to long-term financing will be important for completing these projects. According to the report, SBI and Central Bank have already extended a loan of Rs 5,500 crore to CtrlS. Meanwhile, AdaniConneX has secured funding of up to $1.44 billion from international banks.
Rising Need for Electricity and the Role of Nuclear Energy
As data centres expand, their demand for electricity will also increase. A stable and reliable power supply is essential to keep servers running continuously and maintain cooling systems. In this situation, India will need to explore additional sources of electricity generation. As part of this effort, the country has set a target of increasing its nuclear power capacity to 100 gigawatts by 2047.
At present, India has 24 nuclear reactors with a combined capacity of 8.78 gigawatts. Another nine units, with a total capacity of 7.5 gigawatts, are under construction. The government has also made a provision of Rs 20,000 crore for the development of Small Modular Reactors (SMRs).
What Does This Mean for Investors?
The benefits of rising demand in the data centre sector are not limited to technology companies. Companies involved in engineering, equipment manufacturing and cooling solutions could also find new business opportunities.
MTAR Technologies has received an initial order worth Rs 45 crore from SLB, while its potential demand pipeline linked to data centre infrastructure has increased eightfold. The company aims to generate revenue of Rs 350–450 crore from this business by FY29. Meanwhile, in Q2FY27, its revenue rose 200% to Rs 406.8 crore, while net profit increased nearly 14 times to Rs 59.8 crore.
Aeroflex Industries, on the other hand, provides liquid cooling solutions for data centres. In Q2FY27, the company’s revenue increased 87% to Rs 207.4 crore, while net profit rose 156.8% to Rs 36.6 crore. The company is planning a capex of Rs 202 crore and aims to achieve revenue of Rs 1,500 crore by FY30. The growth prospects of these companies highlight the opportunities emerging from the data centre theme. However, investors should assess their financial performance and valuations before making investment decisions.
What’s Next?
India’s data centre market could expand rapidly, but this growth also comes with certain challenges. According to HSBC estimates, India’s data centre capacity could increase from 1.5 gigawatts to 6.5 gigawatts. This expansion could add approximately $105 billion to the country’s import bill, equivalent to nearly 2.5% of GDP. Chips alone are estimated to account for around $90 billion of this amount.
This highlights that while the data centre sector offers significant opportunities, challenges such as import dependence and the availability of electricity will remain.
Investors should therefore look beyond the sector’s growth prospects and assess individual companies based on their order books, profitability, debt levels and valuations. Over the long term, companies with strong technological capabilities and sound financial positions could be better placed to benefit from this theme.
Disclaimer: This article is for educational and informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. The companies mentioned are cited as examples within the context of market developments. Investors are advised to conduct their own due diligence and consult their financial advisor before making any investment decisions.
Investments in the securities market are subject to market risks. Read all related documents carefully before investing.
