Revenue of India’s data centre operators is expected to reach ~Rs 20,000 crore annually by fiscal 2028, translating to a robust annual growth of 20-22% as both enterprises and retail consumers dial up usage of digital technologies and platforms.

To cater to the buoyant demand, capacity in the industry is expected to double to 2.3-2.5 gigawatt (GW) by March 2028. While capital expenditure (capex) is set to rise and will require sizeable debt funding, credit profiles should remain healthy as stable cash flows from operating capacities will keep leverage (gross debt / earnings before interest, taxes, depreciation and amortisation [Ebitda]) in control.

Our analysis of data centre operators making up 75-80% of the operational capacity in India indicates as much.

The data centre industry growth will be driven by three factors. One, the rapid adoption of public cloud by enterprises amid ongoing digital transformation and technological advancements. Two, growing investments in artificial intelligence (AI) technologies, which will accelerate the demand for high-density computing infrastructure. And three, proliferation of 5G technology, which drives demand for low latency applications, such as video streaming, gaming, and internet of things-based devices, requiring data centre capacity in close proximity to demand.

Says Anand Kulkarni, Director, Crisil Ratings, “The healthy revenue growth of 20-22% for data centre operators will emanate from robust industry capacity addition, which is expected to double by March 2028. The incremental capacity of 1.1-1.3 GW estimated to be commissioned during fiscals 2026-2028 is expected to achieve timely tie-up backed by strong demand and India’s data centre density2 of just ~65 MW per exabyte, one of the lowest globally. This will translate into comfortable utilisation of 90-95%, in line with the past three fiscals.”

The strong demand environment provides significant headroom for the supply side to catch up.

Says Nitin Bansal, Associate Director, Crisil Ratings, “The industry is expected to incur capex of Rs 55,000- 65,000 crore over fiscals 2026-2028 to cater to the surging demand. While this would require sizeable debt funding, growing Ebitda from operational capacities will keep leverage steady at 4.6-4.7 times and support credit profiles.”

Credit profiles of data centres also benefit from customer stickiness, given the high switching costs and long-term agreements with customers, especially hyperscalers3. Notably, the share of hyperscalers in the overall revenue mix has been rising. They now account for more than half of the capacity tie-ups, providing stable and predictable cash flow visibility to data centre operators.

Nevertheless, hyperscalers enjoy strong bargaining power due to their scale. Additionally, they are expected to set up captive data centres over the medium term, potentially leading to competitive pricing for third-party data centre operators. Given this, the average pricing for the new contracts, which has remained largely stable over the past two fiscals, remains monitorable.

Going forward, the ability of data centre operators to commission capacities in a timely manner and tie up with customers at adequate rates will bear watching.