Data Center segment: Imagine a warehouse not filled with usual physical goods but with row upon row of servers, the beating heart of the digital age. These are data centers, the unseen silent giants powering our more connected world. Have you ever wondered how the mail you send, the videos you share, and the online purchase you make flow through the data center facilities? They act as a giant storage vault and processing hub which stores the growing mountain of information. 

Their importance goes beyond just storing data, they act as the foundation for cutting-edge technologies like cloud computing and artificial intelligence. The data center provides the processing power which fuels innovation and shapes the future from healthcare to entertainment.

As the world turns towards digital life data centers are supposed to get more advanced to play a vital role. Their efficient operations ensure a smooth and secure digital future for everyone. Let’s learn about the presence of data centers in India and their future segmental growth.  

Future Growth Prospects of Data Center Segment in India

India’s data center segment is experiencing tremendous growth, driven by the country’s exponential increase in data consumption and digital transformation. As of 2020, the data center industry was valued at US $ 4.4 billion and it is estimated to reach US $ 8 billion by 2026. This growth is fueled by several factors, like social media usage in India, expansion of digital commerce and digital entertainment.

Currently, the country has 130 data centers, with 80+ of these including third-party facilities. India is ranked the 13th largest data center market globally. However, this capacity is set to expand rapidly in the coming years. By the end of 2025, India is expected to have 45 new data centers adding 13 million sq feet of space and 1,015 MW of capacity.

This expansion is important as India’s digital economy is expected to surge from US $ 200 billion in 2017-18 to an estimated US $ 1 trillion by 2025. The data center industry in India’s growth is driven by key factors like an increase in internet users, widespread adoption of cloud computing, the emergence of numerous startups and investments made by the government in the IT sector.

Cloud service providers play a crucial role in the expansion of the data center industry. According to Crisil India, the capacity of data centers is predicted to double reaching 1,700-1,800 megawatts (MW) by 2025. They have also said that it would require investments of over US $ 4.84 billion for this expansion. 

The data center industry is also witnessing emerging trends like the development of smart data centers, advancements in networking capabilities, focus on eco-friendly operations and transition towards more powerful and flexible computing units like FPGAs and GPUs. The Government has also played a crucial role in supporting this growth.

The data center policy of 2020 aimed to attract investments and accelerate data center expansion. It included plans like the establishment of data center economic zones and the development of a separate category code for data centers under the National Building Code of India. Even the Digital Personal Data Protection Bill 2022 which protects user data and regulates the industry also significantly contributes to the development. 

List of stocks in the data center segment

Larsen and Toubro

L&T is an Indian conglomerate which operates in various sectors like construction, engineering, manufacturing and services. 

With the rising demand for data centers in India and abroad, L&T is well-positioned to cater the needs. The company plans to provide end-to-end solutions, from design and construction to operations and maintenance for data centers. They also see opportunities in both brownfield and greenfield data center projects. L&T aims to partner with the leading service providers and colocation operators to deliver data center solutions. With a focus on this segment, the aim is to tap high-growth markets and diversify its revenue streams.  

ABB India

ABB India is engaged in the business of manufacturing heavy engineering, construction and industrial equipment. They work in the fields of power transmission, energy production, transportation and process automation. 

ABB India Ltd provides packaged solutions and plugs to reduce data center deployment time by up to 50% as they are easier to place and quicker to commission onsite. The company also provides remote assistance through augmented reality technology to repair critical data center equipment and reduce time.

ABB is developing cooling solutions and power distributions specifically for data centers. It also offers an all-in-one data center-in-a-box solution called the Secure Edge Data Center, developed by partnering with HPE, for clients in need of data and applications locally.  

Cummins India

Cummins India is engaged in the business of manufacturing natural gas and diesel engines. They work in three business units which include power system, engine and distribution. 

Cummins India has recently completed a large order for data center gensets during Q3FY24 and anticipates this cycle to be continued. The company was awarded the full execution of gensets for a large hyperscale Data Center in India. By looking at this we can identify that the company is securing major projects to provide backup solutions for large data centers.

Cummins India’s CFO Ajay Patil in an interview said the data centers segment in India is growing rapidly due to digitalisation and he believes data centers will remain one of the company’s fastest-growing markets.  

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Voltas

Voltas is a Multinational company which manufactures and sells products like air coolers, air conditioners, washing machines, dishwashers and so on. 

Voltas acts as a key player in the commercial air conditioning segment, they provide cooling systems for data centers. The company secured MEP (Mechanical, Electrical and Plumbing) project for data centers in Noida as part of its Electro-Mechanical Projects & Service business. Voltas International Operations Business Group has also completed projects across the Gulf countries including projects related to data centers. 

Hitachi Energy India

Hitachi Energy India is engaged in the business of providing utility-serving industry customers with engineering, solutions, services and products in areas of power technology.

Hitachi Energy has a dominant presence in the data centers segment, Every one out of three data centers in India is run through their technology. They offer a range of services for data centers like high voltage automation and grid connections. The company has recently constructed a power quality factory and a new high-voltage direct current (HVDC) in Chennai, which addresses the need for both Indian and international data center markets. Hitachi Energy also has a dedicated segment manager for data centers who defines and implements sales and marketing strategies to achieve market penetration.

Siemens

Siemens is engaged in a business of offering products and integrated solutions for industry, transport, infrastructure and healthcare. 

Siemens is able to see a huge demand and strong pipeline in its Digital Industries Market especially in the data centers segment. But as far as the company is concerned they don’t have any major plans to localize manufacturing Digital industries products in India. They are mainly focused on other major segments like Mobility, Smart infrastructure and energy. Their emphasis appears to be more on leveraging its existing automation and digitalization solutions to serve the data center segment.

Conclusion

India’s data center segment is experiencing tremendous growth, driven by the country’s surging data consumption pattern and rapid digital transformation. This sector is particularly poised for significant expansion in the upcoming years, reflecting the country’s position as a major player in the global digital economy.

Cloud service providers play a pivotal role in driving the expansion of data center capacity as the industry embraces its trends towards advancements in networking capabilities, smart data centers and eco-friendly operations. These developments set the stage for the new generation.

As India continues its journey towards growth, the data center industry is set to play a crucial role in supporting through digital revolution. What do you think about the future of the data center segment? Will it prove to be big? Do let us know in the comments below. 

Written by Pavunkumar V M

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