Data Center Industry Revenues to Grow at a CAGR of 18%-19%
The industry revenues are expected to grow at a CAGR of 18% to 19% during FY22 – FY24, supported by an increase in rack capacity utilisation and ramp-up of new data centers. The operating margins for the companies are also expected to improve with better absorption of fixed costs. The operating margins could go up from 40% to 42%. ICRA pointed out that the ROCE (return on capital employed) will be modest because the data center companies are usually spending big for capex as capacity ramp-up happens over a significant period of time. The credit metrics of the data center players could be hurt because of the large debt-funded capex plans and increasing competition in the market that will certainly affect the margins of the companies. But the state governments understand how data centers are a crucial aspect of infrastructure for digital connectivity and thus offer various incentives such as subsidising the cost of land, exemption on stamp and electricity duty, and other concessions. The IT ministry is also offering incentives worth up to Rs 15,000 crore under a national policy framework to the data centers. This includes a 4% to 6% incentive on the components.
