September 19, 2025 9:23:27 AM
Screenshot 2025-09-19 at 12-28-23 ANANTRAJ ₹614.20 (▲4.90_) Anant Raj Ltd Google Finance
Data centers offer a promising long-term investment theme, but success hinges on execution and overcoming operational challenges. Investors should focus on established players and ancillary opportunities while staying mindful of risks

Data centers are becoming a hot topic for investors on Dalal Street, as they chase the next big growth story. Experts predict that data center capacity in India will soar from 1.3 gigawatts (GW) in 2024 to around 8 GW in the next five years, driven by surging internet usage, the rise of artificial intelligence (AI), and data localization regulations.

Growth Potential

– Capacity Surge: Jefferies forecasts India’s data center capacity will grow to over 5 GW by 2030, requiring $30 billion (₹2.5 lakh crore) in investments. Leasing revenues could reach $8 billion by 2030.

– AI-Driven Demand: Kotak reports a 24% growth in data center IT capacity since 2019, with total capacity expected to hit 3–3.5 GW by 2030. Major players like Microsoft, Amazon, and Google are likely to drive 80% of this growth from 2024 to 2027.

Investor Excitement and Challenges

Vijay Agrawal from Equirus Capital highlights that demand is outstripping supply, with India’s IT load projected to rise from 1,332 MW in 2024 to 5,102 MW by 2030. This could attract over ₹5 lakh crore in investments over the next five years, creating a massive opportunity for investors.

However, challenges remain:

– Building a data center takes 2–3 years.

– Risks include unreliable power supply, rising energy costs, real estate shortages, and cybersecurity threats.

– Khushi Mistry from Bonanza notes that the busiest phase of construction will likely be between 2025 and 2030, with grid reliability and energy costs posing significant hurdles.

Global Comparison

India is emerging as the third-largest growth market for data centers, trailing only the US and China. Supportive government policies, such as potential tax exemptions for up to 20 years for developers meeting efficiency targets, could accelerate this growth.

Abhishek Jain from Arihant Capital emphasizes the sector’s potential: “Capacity could grow 5–7 times in the next 5–7 years, making it a top opportunity in digital infrastructure.” However, execution and regulatory risks could challenge smaller players.

Stock Market Impact

Investor enthusiasm is already evident:

– Anant Raj: Up 11% in five days after announcing data center plans.

– Netweb Technologies: Surged 36% in the past month.

– Orient Tech: Gained 15%.

– Tata Communications: Up 2% in the past month.

However, analysts compare the data center business to telecom towers, which require heavy upfront investments and long payback periods, with profits tied to consistent leasing revenues. Market veteran Shankar Sharma calls it a “hope trade,” noting that profitability depends on high utilization.

Future Outlook

The data center sector is a long-term opportunity, with significant growth expected between 2025 and 2030 as new facilities come online and leasing revenues scale. Ancillary sectors like IT hardware, networking equipment, and renewable energy could also benefit.

Jefferies predicts that Bharti Airtel, Reliance, and Adani Enterprises could dominate 35–40% of the market. Other companies like Tata Communications, Anant Raj, HCL, and Sterlite Technologies are also well-positioned.

Brokerage Insight: Emkay has set a target price of ₹800 for Anant Raj, expecting its data center business to generate ₹700 crore in revenue by FY27, up from ₹45.5 crore in FY25, with operations starting within three months.

Key Takeaway

Data centers offer a promising long-term investment theme, but success hinges on execution and overcoming operational challenges. Investors should focus on established players and ancillary opportunities while staying mindful of risks.

1 thought on “Data Centers: The Next Big Opportunity for Investors

  1. But, I wonder why the biggies like Tata Communications are not moving despite having technical expertise and financial resources for setting up large scale data center.

Leave a Reply

Your email address will not be published. Required fields are marked *