STT Global Data Centres India, a leading data centre provider, is planning to invest about $1 billion over the next 3-5 years to double its capacity to 500-550 MW, capitalising on the India’s thirst for data consumption and emerging new technologies.

“We are planning to increase our capacity footprint in the next 3-5 years. We are excited about our entire journey, and we will continue to grow, service our customers and retain our market leadership position,” Jatinder Singh Pabla, Chief Sales and Marketing Officer of STT GDC India told businessline.

The company, a subsidiary of STT GDC Singapore, is among the top three data centre operators in India and has about 30 per cent of the market share in the segment in terms of revenue. It currently has 24 data centres across nine cities with an IT load capacity of 250 MW.

Biz outlook

According to Frost & Sullivan, the Indian data centre co-location services market is seen growing annually at 22 per cent over the next four years, reaching about 2 GW by then and $1.8 billion in revenue. At the end of 2022, India’s data centre capacity was around 750 MW.

The main drivers for the growth in the sector has been from hyperscale cloud providers such as Amazon, Google, Microsoft and Oracle, OTT content platforms and the enterprise market, especially the banking and financial services segment. Pabla said that there are now new drivers to growth such as artificial intelligence, IoT, 5G networks, and remote working.

Preferred locations

Mumbai and Chennai are preferred locations for data centres due to the maximum concentration of submarine cables and strategically located cable landing stations. In a recent Knight Frank report on the data centre market, Mumbai was third on the list after Shanghai and Tokyo, which is seeing capacities of over 2 GW coming up.

But other cities are also catching up. “The demand is spread across India,” said Pabla adding that Pune, Hyderabad, the Delhi-NCR region, and Bengaluru were also seeing strong demand.

The company’s next data centre is a 100 MW campus in Mumbai that will be going live in the March quarter of 2024, but it is also setting up centres in Pune, Chennai, and Delhi-NCR. “So we have ensured that we continue to grow across all cities.”

Pabla pointed out that the data centre segment is receiving abundant funding, while costs related to land and leasing as well as the availability of power are elements that can be managed.

However, with a rush to build data centres challenges are emerging in rising costs of construction and in operations.

“What we have seen is that the cost of construction has materially increased, and a good amount of this cost increase is driven by speculative builds,” said Pabla. This has led to a rise in delivery lead times by 3-6 months and doubling in many cases. Being a capital-intensive business, returns in the data centre business start showing only after 7-8 years.

“So when there are 30-plus players and there are pressures on cost and time, we’ll see that many projects may not remain commercially viable,” he said. He added that this was likely to lead to consolidation and there would eventually be 5-6 serious long-term players.

The competition in the sector is also putting pressure on pricing, but Pabla pointed out that pricing is only one of the many factors that drive tenancy. He said that technical expertise and readiness and operational preparedness were two major factors that were attracting customers. “These are the factors which is helping us with the deals,” he said.