India data centers: a decade-long capacity expansion opportunity, with the industrial equipment supply chain offering the greatest investment leverage

Overview

This report focuses on the long-term capacity expansion opportunity in India's data centers. The core view is that, driven by mobile data, internet users, cloud, SaaS, and AI demand, India's data center capacity will grow significantly faster than the APAC average; meanwhile, lower construction costs, flexible power procurement, and policy support make project returns attractive. Since most leading colocation operators are not listed, the report believes the more practical capital markets investment route is the industrial equipment supply chain.

Core views

The report's core views include: first, India's data center capacity is expected to grow at about a 30% CAGR in CY25-30F to around 7GW; second, about 5.1GW of new capacity could bring about USD35bn of capex opportunity; third, capex is increasingly concentrated in electrical, mechanical, cooling, and white space infrastructure rather than traditional real estate; fourth, although rents in India are lower than in developed markets, lower capex and power costs support mid-teen equity IRR; fifth, the key bottlenecks to supply realization are approvals, land, grid access, and reliable power delivery.

Analysis framework

Through supply-demand projections, review of announced pipelines, comparison of construction cost per MW, breakdown of capex composition, analysis of power costs and TCO, project IRR sensitivity analysis, and review of policy and regulation, the report assesses India's data center market capacity, returns, and supply chain beneficiaries.

Methodology notes

• Industry supply and demandCapacity and announced pipeline projection

  Estimate CY30F capacity based on current IT load, announced pipeline, and future realization ratio.

  The report combines an announced pipeline of more than 15GW with an assumed realization rate of about 30% over five to six years, deriving about 5.1GW of incremental capacity and about 7GW of total capacity.

• Capex analysisData center capex stack breakdown

  Break data center investment into real estate, core infrastructure, white space, and support costs.

  The report shows real estate at about 26%, core infrastructure at about 59%, and white space plus support costs at about 15%, so value creation is tilted more toward equipment, cooling, and EPC capabilities.

• Project returnsBuild-stabilize-exit IRR model

  Assess equity IRR based on development cost, rent, utilization, leverage, debt cost, and exit cap rate.

  The report believes Indian projects can still achieve mid-teen equity IRR under lower rents because of a low-cost base, but the results are highly sensitive to capex, rent, and exit multiples.

• Cost and TCOPower cost and total cost of ownership analysis

  Compare the impact of electricity tariffs, open access, renewable PPAs, and captive power on TCO.

  The report believes power accounts for about 20% of TCO, and India's effective power cost can be reduced to about 6-7 USc/kWh, delivering about 10-15% TCO savings relative to high-cost markets.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• CGPOWER IN

  Named by the report as a top pick for the India data center theme.

  Strengths

  The report believes its product coverage and market positioning make it likely to be one of the main beneficiaries of data center electrical equipment demand.

  Weaknesses

  The report does not disclose specific orders, valuation, or target price in the summary, so the investment thesis still depends on subsequent order conversion.

  Comparison

  Along with GVTD, it is listed as a top pick, ahead of other equipment suppliers not named as preferred picks.

  Risks

  Data center project delays, changes in equipment delivery cycles, a decline in premium pricing, or intensified competition could affect the pace of benefits.

• GVTD IN

  Named by the report as a top pick for the India data center theme and described as Buy.

  Strengths

  The report believes its product portfolio and market position in the power equipment supply chain are favorable for capturing multi-year data center orders.

  Weaknesses

  The text does not provide earnings leverage by business segment or a target price; the extent of benefit needs validation through actual orders and capacity delivery.

  Comparison

  Together with CGPOWER, it is among the supply chain names most favored by the report.

  Risks

  If new data center capacity comes online more slowly than expected, or if pricing discipline in the electrical equipment supply chain weakens, earnings realization may be delayed.

• ABB IN、SIEM IN、POWERIND IN、KKC IN

  The report mentions these companies as important participants in India's data center industrial equipment supply chain.

  Strengths

  The report believes competition is relatively concentrated in categories such as switchgear, transformers, UPS, generator sets, cooling, and racks, and suppliers have strong pricing power and order visibility.

  Weaknesses

  Some names are not the report's top picks, and ratings are differentiated; for example, ABB IN is Reduce, SIEM IN and KKC IN are Neutral, and POWERIND IN is Not rated.

  Comparison

  These companies form the pool of supply chain beneficiaries, but the report prefers CGPOWER and GVTD.

  Risks

  Higher requirements for high reliability, customization, certification, and on-site engineering support increase delivery difficulty, and customer project delays may affect revenue timing.

• RELIANCE IN、ADE IN

  The report views large conglomerates as important potential contributors to future incremental data center supply.

  Strengths

  They have advantages in integrating land, capital, construction, and power resources, potentially easing land, grid, and construction bottlenecks at the same time.

  Weaknesses

  The report notes that some conglomerates that announced multi-GW pipelines currently still have low actual operating market share in the colocation market, so their structural advantage is more reflected in future execution.

  Comparison

  Compared with current leading colocation operators, these groups have a stronger future pipeline narrative, but their existing operating share may not be leading.

  Risks

  Approvals, land acquisition, grid access, fire and environmental permits, and power delivery could lengthen the commissioning timeline.

• India colocation data center assets

  The report believes this asset class has the potential for infrastructure-like long-term cash flows and mid-teen equity IRR.

  Strengths

  Low construction costs, relatively flexible power procurement, growth in digital demand, and policy support enhance project economics.

  Weaknesses

  Rental levels are at a discount to developed markets such as the US and Europe, so returns depend more on low cost, scale, and high utilization rather than high rent.

  Comparison

  India has lower costs than developed APAC and Western markets, but its grid tariff is not the lowest globally.

  Risks

  IRR is sensitive to utilization, rent, capex per MW, exit cap rate, and financing cost.

Key data

• Current India data center capacityAbout 1.5-1.6GW, in 2025The report says it was about 350MW in 2019, implying a CAGR of about 29% by 2025.
• CY30F capacity targetAbout 7GWCorresponds to about 30% CAGR in CY25-30F, expected to be above the APAC average growth rate.
• Announced pipeline15GW+The report estimates about 30% can be realized over the next five to six years.
• Incremental capacity estimateAbout 5.1GWIf large enterprises each contribute at least 1GW and other players contribute 400-500MW, cumulative capacity could reach about 7GW.
• Capex opportunityAbout USD35bn, or USD30bn+Based on about 5.1GW of incremental capacity and construction cost of about USD6-7mn/MW.
• India construction costAbout USD6-7mn/MWJLL data; lower than about USD10-18mn/MW in developed APAC and Western markets.
• Capex compositionReal estate about 26%; core infrastructure about 59%; white space and support costs about 15%Electrical systems account for about 42% of total capex, and mechanical and cooling about 16%.
• Effective power costAbout 6-7 USc/kWhThrough open access, renewable PPA, and captive power arrangements, lower than some grid tariff rates.
• TCO savingsAbout 10-15%The report believes power accounts for about 20% of TCO, and India's lower power costs can reduce total cost of ownership relative to high-cost markets such as Japan.
• India colocation rentAbout USD78-100/kW/monthLower than in developed markets such as the US and Europe; India is more driven by cost efficiency and scale.
• Project returnsMid-teen equity IRRUnder the report's base case, lower costs and moderate leverage support infrastructure-like long-term cash flows.
• Mobile data trafficFrom 10EB/month to 27EB/month, 2020-2025 CAGR about 23%The report cites Nokia MBit data.
• Internet usersFrom 622mn to about 950mn, 2020-2025About 1.5x growth over five years, showing room for further growth in digital demand.
• India PB/MWAbout 18PB/MWSignificantly higher than China's about 4-5PB/MW, indicating a gap between data generation and installed data center capacity.

Impact & implications

For investors, opportunities to invest directly in India colocation operators are limited because the companies currently controlling about 80% of market share are mostly unlisted or still in the listing process. Therefore, the report prefers the data center industrial equipment supply chain, especially categories such as low- and medium-voltage switchgear, transformers, UPS and batteries, backup generator sets, precision cooling, liquid cooling distribution, racks, busways, and structured cabling. For the industry, AI and high-density racks will increase MW demand per campus and raise standards for power, cooling, and reliability, strengthening the bargaining power of vendors with delivery capability and certification capability.

Risks

• The announced pipeline may be too optimistic, and actual commissioning is constrained by approvals, land, grid access, fire safety, and environmental permits.
• Land scarcity and local infrastructure constraints in core regions such as Mumbai may lengthen construction timelines.
• AI workloads bring higher rack density, bursty loads, and rapid ramp-up needs, which may increase pressure on grid stability and reliability.
• Renewable energy procurement, open access, and dual-path power supply arrangements may face execution and system coordination difficulties.
• Rising global costs for electrical equipment, steel, cement, and labor may increase capex per MW.
• India colocation rents are lower than in developed markets; if utilization or rent falls short of expectations, project returns may be below the base case.
• Changes in exit multiples, cap rates, and the interest rate environment will significantly affect equity IRR.
• If supply chain delivery cycles shorten or competition intensifies, premium pricing for industrial equipment suppliers may decline.

What to watch

• The actual construction start and commissioning ratio within the 15GW+ announced pipeline.
• Whether 400-700MW of new IT load per year in CY25-27F can be realized.
• Changes in land, power access, and submarine cable connectivity advantages in core and emerging hubs such as Mumbai, Chennai, and Delhi NCR.
• Whether open access, renewable PPAs, and captive power arrangements can keep effective power costs at about 6-7 USc/kWh.
• Whether India colocation rents remain around USD78-100/kW/month, or move higher as supply and demand tighten.
• Data center orders, delivery cycles, and gross margin trends for CGPOWER, GVTD, and other equipment suppliers.
• The strength of demand driven by AI and GPU high-density campuses for liquid cooling, power distribution, and backup power.
• Progress in implementation of data localization, the DPDP Act, RBI payment data storage rules, and state-level incentive policies.