Why Indian data centre industry at rise in 2025?

Key factors driving the data centre boom

Here are the key factors driving the growth of these data centres:

• Rapid digital adoption across India: With over a billion mobile connections and increasing internet penetration, data generation is exploding. Enterprises and individuals alike are consuming and producing more data than ever.
• Accelerated cloud migration by businesses: Businesses are moving from on-premises IT infrastructure to cloud platforms. Major global players like AWS, Microsoft Azure, and Google Cloud are expanding aggressively in India, requiring local data centre capacity.
• Supportive government policies and initiatives: Policies like the Digital India initiative, incentives for green energy, and a push for local data storage under data sovereignty laws are creating a favourable regulatory environment.
• 5G rollout and AI driving infrastructure demand: Faster connectivity and AI applications warrant low-latency, high-performance storage and processing, driving demand for modern, energy-efficient data centres.
• Rising domestic and foreign investments: Both domestic and foreign investors are pouring capital into Tier-2 and Tier-3 cities, anticipating lower costs and long-term growth, making the sector attractive for long-term wealth creation.

Challenges of the data centre sector

Here are the challenges of the data centre sector:

Power infrastructure crisis in India

Here's the reality check! By 2030, India will require 40-50 Terawatt-hours (TWH) of additional electricity and 45-50 million square feet of real estate space to meet the projected demand for AI-driven data centres. That's equivalent to powering several medium-sized cities!

Data centres are power-hungry beasts. A single large facility can consume as much electricity as a small town. With India's power grid already stressed, ensuring a reliable, clean energy supply becomes a critical challenge.

Shortage of skilled workforce

Building and maintaining sophisticated data centres requires specialised skills. This includes everything from cooling system engineers to cybersecurity experts. While India produces excellent technical talent, the specific expertise needed for data centre operations is still developing.

Wars for digital real estate and land acquisition

Data centre operators have increased their investment in large-scale projects with capacities over 100+ MW in various parts of the country. However, finding appropriate land with proper connectivity, power access, and regulatory approvals is still a huge challenge, especially in prime locations.

Navigating India's complex compliance and regulations

Data localisation laws, environmental clearances, and varying state policies create a complex regulatory maze. Even though most of the policies are supportive of the company's overall goals, the complexity of navigating through multiple requirements often slows down the project timeline.

Environmental and sustainability concerns

Data centres contribute significantly to carbon emissions. With growing environmental consciousness and potential carbon taxes, operators must invest heavily in renewable energy and efficient cooling technologies, increasing capital requirements.

Having the ability to foresee and analyse these challenges gives you an advantage in investing and securing the best returns. Make sure to choose the best smallcase company that can not only ensure thoughtful curation but also risk management and long-term financial success.

What can smallcase investors make out of it?

Smart money is already flowing into this space, and smallcase investment strategies can help you participate in this growth story.

There are various publicly listed companies which directly benefit from this data centre boom:

• Real estate companies that own land in data centre hubs are witnessing appreciation in their assets.
• Construction, infrastructure, and engineering-based companies are building these data centres.
• Various technology-based service companies provide cloud services, data management, and more.
• Power companies are ensuring reliable power supply solutions to data centres.
• Then, there are some companies, such as financial services, telecom and semiconductor companies, which have gained indirect benefits from this data centre boom.

You should prefer to choose themed portfolios instead of picking individual stocks to get the best outcome. You must look for smallcase portfolios focusing on:

• Digital Infrastructure themes
• Technology and Innovation portfolios
• AI and emerging technology baskets
• Infrastructure development themes

Some of the best smallcase portfolios, such as PINC Classic Compounder Fundamental, offer stocks with growth potential of 15 to 20% in a 3 to 5-year horizon, demonstrating leading growth in the past.

Conclusion

India's data centre isn't just an investment trend but the foundation of the digital future ahead.

The world is indeed witnessing the history of infrastructure transformation in the making, especially with the market set to hit USD 10.70 billion by 2030.

The bottom line is that every WhatsApp message, UPI transaction, and Netflix binge needs a digital home. And that home is being built in India, right now!

Investors need to reorient their portfolio to benefit from this boom. However, you will need a wealth advisory service through which you can leverage their expertise, experience and market insight to make the most of it.

We at PINC Wealth are a leading wealth management brand offering expert-curated, research-backed and thoughtfully structured smallcase portfolios, helping you achieve your financial goals. Start your investment journey today!