New Delhi, May 24 (IANS): The Indian data centre market is likely to add 3,900-4,100 MW of capacity with Rs 1.05-Rs 1.20 lakh crore as investment in the next five years, a new report showed on Tuesday.

Larger hyper-scaler companies like Amazon Web Services, Google, Microsoft, Facebook, IBM, Uber and Dropbox etc are outsourcing their storage needs to third-party data centre providers.

To cater to the increasing demand, Indian corporates like the Hiranandani Group, Adani Group; foreign investors viz. Amazon, EdgeConnex, Microsoft, CapitaLand, Mantra Group have started investing in the Indian data centres, according to credit rating agency ICRA.

Existing players like NTT, CtrlS, Nxtra and STT India are also expanding their capacities.

"The favourable regulatory support, rapidly growing cloud computing, increasing internet penetration, government effort on digital economy, adoption of new technologies (IoT, 5G etc), growing needs of hyper-scalers are some of the major factors driving the demand for data centres in the country," said Rajeshwar Burla, Group Head, Corporate Ratings, ICRA.

The government accorded infrastructure status to the data centres in the Union Budget 2022-2023.

"This will enable the players to get access to longer tenured debt at competitive rates and access to foreign funding through the external commercial borrowing route," Burla added.

Some of the state governments (Maharashtra, Telangana, Karnataka, and Uttar Pradesh) have provisions of special incentives like exemption on stamp and electricity duty, power subsidies, land at subsidised cost and other concessions by some of the state governments to boost data centre investments.

Further, the IT ministry has plans to offer incentives worth up to Rs 15,000 crore under a national policy framework for data centres.

This includes an incentive of 4-6 per cent if the components (IT hardware and power) are procured from Indian manufacturing units and incentive of up to 3 per cent for use of renewable energy, the report noted.

The industry revenues are expected to increase at a CAGR of around 18-19 per cent during FY2022-FY2024, supported by increase in rack capacity utilisation and ramp-up of new data centres.

"Between the two major services provided by the DC players, co-location services account for around 62-65 per cent of revenues as compared to managed services which account for 28-30 per cent of revenues," said Burla.

The upcoming investments are geared towards meeting high demand in co-location services, the report said.