The steady drumbeat of data centre announcements across India provokes a critical question: Does the country actually need all of them?
Industry projections suggest the demand is real. India’s data centre demand is expected to surge from 1.3 GW in FY2025 to 4.7-5.7 GW by FY2030, attracting a significant influx of investment from both domestic and global players.
Recent industry data, expert perspectives and insights from the draft prospectus of Sify Infinit Spaces (Sify)—India’s first pure-play data centre company heading to IPO—provide clarity on whether this boom is justified or overblown.
The underlying drivers are strong. Internet usage has expanded dramatically, and according to a September report by Kotak Mutual Funds, India generates 20% of global data but stores only 3% of it locally.
Two forces are now working to close this gap: the growing demand for lower latency and the government’s push for data localisation.
But there’s also a third force, one that created this gap in the first place and continues to amplify the need for localisation and speed: the explosive growth of wireless internet usage in India, which underpins everything from social media to AI-driven services.
The Wireless Explosion
India has transitioned from a low-data market to one of the world’s heaviest users, driven by the affordability of data and a rapid shift towards video-heavy consumption.
Source: Kotak Mutual Fund
One indicator of AI’s growing demand is India’s rapid adoption of tools like ChatGPT.
Depending on the source, India now ranks either first or second in global usage. India is also a significant market for a wide range of AI products.
Recognising this, AI companies are planning data centres equipped with the GPU-based infrastructure needed to support these workloads.
Furthermore, the IndiaAI Mission, approved in March 2024 with a ₹10,372 crore outlay, aims to expand national AI infrastructure through a public-private partnership model.
Over 34,000 GPUs have been committed so far, with 17,000 already deployed by data centre providers such as Yotta, Netmagic and Sify, who supply compute power to startups and researchers via a shared platform.
This large-scale rollout not only fuels AI research but also accelerates the expansion of data centre capacity across India.
“India consumes a huge amount of digital assets and generates a massive amount of data that can be used to train models,” explained Amit Agarwal, president of Techno Digital.
This dual role positions India as an attractive location for AI companies looking to build and train their models.
Sify states that AI-related workloads will surge from less than 1% of total data centre workloads in India in Fiscal 2025 to 15-20% by Fiscal 2030.
Regulatory mandates also aid the demand.
The Reserve Bank of India’s 2018 directive mandated that all payment data be stored exclusively within India. SEBI’s 2023 mandate extended this requirement to stock exchanges, brokers, mutual funds, depositories and KYC agencies.
The upcoming Digital Personal Data Protection Act, 2023, added another layer of data localisation requirements across sectors.
Other policies, such as Digital India, BharatNet and National Digital Communications Policy, are all, in one way or another, promoting increased internet usage in India.
The Economics That Make It Work
But demand alone doesn’t build data centres. The economics must work—and in India, they do, often in ways that surprise people familiar with developed markets.
Data-centre development costs in India average just $7 per watt, among the lowest globally. Electricity costs are 20% lower than in the United States.
For infrastructure players with deep roots in the power sector, these numbers are especially compelling.
The country has solved the infrastructure constraint that would typically limit this kind of build-out. India transitioned from a power-deficient to a power-sufficient status, reaching a total installed capacity of 452.69 GW by October 2024, with essentially zero power deficit.
“Wherever there is power availability, the data [centres] will go there, not the other way around,” Agarwal pointed out. This inverts the traditional model where you build a data centre and then figure out power.
In May last year, the country reached its peak demand of around 250 GW and has met 242 GW so far in 2025. Renewable capacity reached 203.18 GW, accounting for 46.3% of total power.
Sify Infinit Spaces estimates that data centres currently consume less than 0.5% of India’s total power generation capacity, which means there’s headroom for massive expansion without straining the grid.
India also serves as a critical hub for global data transfers. The country hosts 17 international subsea cables, which land at 14 stations across five coastal cities: Mumbai, Chennai, Kochi, Tuticorin and Thiruvananthapuram.
In an earlier interaction with AIM, Sify’s CFO MP Vijay Kumar said these cities, especially Mumbai and Chennai, function like “international airports for data”.
These subsea cables enable high-speed, high-capacity data transmission, reducing latency and disruptions. Their proximity to landing stations makes these regions prime locations for large-scale data centre development.
Beyond these fundamental factors, both state and central governments are providing substantial incentives to establish data centre facilities.
Tamil Nadu offers a three-year waiver on electricity duty and stamp duty concessions. Uttar Pradesh provides an electricity duty exemption for 10 years and a stamp duty exemption on the first transaction. Meanwhile, Maharashtra offers 100% stamp duty exemption along with a permanent exemption from electricity duty.
Why Infrastructure Players are Flooding In
The macro story makes sense on paper, but understanding why established infrastructure players are flooding this market requires looking at their actual deployments.
Take Techno Digital, which carries a 40-year legacy in power infrastructure through its parent, Techno Electric & Engineering Company. In October 2024, the company announced a $1 billion investment to build 250 MW of data centre capacity across India.
The rollout commenced with a 36 MW facility in Chennai, which launched in July, followed by an 18 MW facility in Noida and a 13 MW facility in Kolkata. “Tamil Nadu is one of the most conducive states in terms of doing business,” Agarwal noted, alluding to the policy backing the company received.
Techno’s foundations in engineering, procurement and construction, coupled with decades of experience delivering mission-critical power infrastructure, give the company a distinct advantage in designing, building and operating data centres closely integrated with power supply.
The same pattern holds across the industry. Telecom giants like Airtel, broadband specialists like Sify, and conglomerates with expertise in power and real estate, such as Adani, have all entered the market, each leveraging their core strengths.
As these operators leverage their power and infrastructure strengths, data centres are expanding well beyond Tier-1 hubs.
Mumbai acts as the financial and global gateway, Noida benefits from government proximity and land availability, and Hyderabad offers a growing IT ecosystem with cost advantages.
Land economics drive this diversification. Premium micro-markets, such as Powai, West Hyderabad and Gurugram, are expensive; mid-range areas, including Thane-Belapur Road, Noida and Ambattur, offer a more balanced approach. Meanwhile, emerging zones like Panvel and South Hyderabad provide low entry costs and room for growth.
Latency is also a crucial technical factor driving this geographic expansion. “India is not a very big country, but it is a sizable country where east-to-west coverage, or north-to-south coverage, can take anywhere between 30 milliseconds and 45 milliseconds in the connected world,” Agarwal explained.
He pointed out how AI, which promises a variety of real-time applications and use cases, might lose its importance if latency increases to a second. This is pushing infrastructure towards Tier 2 and Tier 3 cities, where power is available and land costs are lower.
Read More: India’s Most Powerful AI Data Centres by Capacity
The Global-Local Partnership Model
A conducive ecosystem is forming between local and global players. Global hyperscalers like Google aren’t building everything from scratch; they rely heavily on Indian partners for land, power, construction and regulatory navigation. In turn, local firms gain access to cutting-edge AI and cloud platforms.
The Indian conglomerate Adani Group, for instance, was chosen to supply renewable energy to Google’s Indian cloud and data centre operations. In Jamnagar, Gujarat, Reliance Industries Limited (RIL) and Google Cloud are collaborating to build a dedicated AI cloud region.
RIL will design, build and power the facility, while Google Cloud supplies its global-standard AI infrastructure, compute, software stacks and services.
This data advantage, combined with competitive costs, power availability, a regulatory push and strategic partnerships, suggests that India’s data centre boom is a response to genuine market forces.
Inside a Major Operator: The Sify Model
In addition to these on-the-ground insights, Sify’s Draft Red Herring Prospectus (DHRP) offers deeper insight into the quantitative aspects of how a large-scale player operates in India.
It ranks among the top three colocation service providers in India, with a 15.26% market share by built IT capacity as of March 31.
The company continues to expand aggressively, including through large-scale projects such as its 130 MW AI-ready data centre campus in Siruseri, near Chennai.
Sify operates 14 operational colocation data centre facilities with a power capacity of 188.04 MW as of June 30.
These facilities are spread across six cities: Mumbai, Chennai, Noida, Hyderabad, Bengaluru and Kolkata.
The core capacity serves enterprise clients across banking, financial services, insurance, fintech and media, as well as hyperscaler customers, all of which require over 99.99% uptime and carrier-neutral hyperconnectivity.
For specialised AI workloads, Sify has deployed three new NVIDIA-certified DGX-Ready campuses engineered for high-density computing.
Sify Infinit Spaces is currently profitable. For the financial year ended March 31, revenue from operations was ₹1,428.36 crores and profit after taxes was ₹126.36 crores.
This explains why state electricity duty exemptions matter so much. A permanent exemption from electricity duty in Maharashtra doesn’t just improve margins by a few basis points; it fundamentally changes project economics. Various state policies also ensure that data centres receive an uninterrupted power supply.
The capital expenditure breakdown reveals where money actually goes when building a data centre. Land and the building shell account for 25-30% of project costs. Power-based infrastructure, such as substations and high-voltage systems, accounts for 4-6%. The remaining 60-65% goes to power-optimised design fit-outs covering electrical, mechanical, and cooling systems.
Besides, the state government’s support directly translates into Sify’s bottom line, in ways that go beyond tax exemptions.
The company’s Chennai 02 facility is situated on 4.90 acres of land leased from the State Industries Promotion Corporation of Tamil Nadu, a state government entity.
The terms include a 93-year lease, an upfront payment of ₹22.13 crores, and annual rent of ₹1 per year for 92 years—one rupee per year.
This type of arrangement makes projects pencil out faster by eliminating land cost escalation risk for nearly a century.
The Customer Concentration Reality
The top three clients of Sify, all hyperscalers, accounted for 67.04% of revenue in Q1 fiscal 2025.
While Sify has not explicitly revealed any names, it states that hyperscalers refer to companies such as AWS, Microsoft, Google and Oracle, which are consuming approximately 55% of Indian data centres’ IT megawatt capacity as of March 31.
That said, with hyperscalers building more of their own capacity in India, insourcing remains a real competitive risk for colocation providers.
Sify serves over 500 clients in total, including three of the top four global hyperscaler companies, seven of the top 10 Indian banks and four of the top 10 Indian insurance companies.
Contract economics show the long-term nature of the business. As of June 30, 67.04% of Sify’s revenue came from contracts with terms of at least seven years.
The average relationship length with the company’s top five clients was seven years. Most contracts include built-in rental increases of 2-4% annually, providing predictable revenue growth.
Sify’s utilisation profile shows steady absorption of the capacity it brings online. The gap between installed and operational capacity is narrow, which signals that most of what it builds is quickly backed by customer commitments.
Among Sify’s 188.04 MW of built capacity, 131.88 MW is installed, meaning 70.2% is usable today. 113.67 MW is operational, which is 60.4% of the total built capacity.
India’s data centre surge reflects genuine digital demand and strong economics, but it shouldn’t eclipse broader priorities.
As operators scale, the real test is whether growth can coexist with responsible resource use—and whether the country can extend reliable power, water and connectivity to households with the same urgency it brings to hyperscale infrastructure.
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