Data

Centres
Powering Digital India
(Volume II)

August 2024
Table Of Contents

01. Industry Themes

Several Trends Shaping Up The Indian DC Industry
05

02. Key Geographical Markets

7 Key Cities Constitute Majority Of Total Demand And Supply In The Country
14

03. Market Landscape

Market can be broadly categorized into 4 buckets
17

04. Return Dynamics & Transactions

Asset Develop & Sell Model Can Deliver 25%+ IRR
22

05. Global Market Snapshot

Key Players, Investors And Valuation Metrics
28

06. About Avendus 34

 Data Centres | Powering Digital India

2 GW
Indian Data Center industry is
maturing with the influx of
long-term stable capital. The
demand remains high on 1 GW
account of digitization and data
26%
localization themes and is CAGR
expected to accentuate due to
AI implementation. ~ US$ 7 Bn[1]
investment

Dec 2023 Dec 2026

Developers have a pipeline of over 3 GW

to be delivered over next 10 years , requiring capex of ~ US$ 25 Bn[1]

3 Source: Avendus Estimates | (1) Including the potential increase in cost due to inflation
 Data Centres | Powering Digital India

Industry Has Witnessed Gradual But Steady Growth Historically

• Period following the • 122 new 2G licenses • Private operator launched • Sharp reduction in data
dotcom bust in 2000 saw granted to TelCos 3G services usage prices
Installed DC Capacity In India (MW)
slow growth, with 75 MW • Online financial • Advent of smartphones • Shift to digital payments
addition in seven years transactions led to high led to high growth of data post demonetisation 1,011
• Government formulated growth of data centres usage • Launch of competitively 936
the broadband policy, • India also entered 3G • Launch of 4G services in priced Reliance Jio 4G
which laid the foundation phase with the launch of 2012 ensured highspeed services in 2016 further 800
740
for internet penetration in 3G enabled mobile & data internet data services that propelled data usage 670
India services by MTNL & BSNL spurred further growth of 631
597
in 2008 data usage 566
540 540

315

185

75

2000 - 2007 2008 - 2010 2011 - 2014 2015 - 2019 Dec'19 Jun'20 Dec'20 Jun'21 Dec'21 Jun'22 Dec'22 Jun'23 Dec'23

Multiple Tailwinds Are Driving The Above Growth; These Tailwinds Are Expected To Continue Into The Foreseeable Future

Accelerated adoption of Artificial Data localization Roll-out of 5G & Explosion in data Business continuity &
cloud services Intelligence requirement increased bandwidth creation & consumption back-up plans

4 Source: Avendus Estimates

Data Centres | Powering Digital India

01.
Industry Themes
Several Trends Shaping Up The Indian
DC Industry
 Data Centres | Powering Digital India

Indian Data Center Industry Has Been Evolving With Numerous Developments

01
Evolving Hyperscale DC Market
As the data center industry in India is maturing, the market participants’ initial bet of hyperscale model is shaping into core real estate
asset class dynamics, with multiple RE funds and RE developers entering the segment

02 Enteprise Solutions Are Return Accretive

Pressure on rentals from hyperscalers is enticing players to work with enterprises and may also provide more offerings than
pure play colocation services

03
Hyperscalers Go For Own And Operate Model
Given the long-term view on Indian market and limited availability of large facilities, hyperscalers are going for self-
build/owned DC projects

04
Rise Of AI Demands Re-evaluation Of The Existing Data Centre Infrastructure
Generative AI has opened a world of possibilities, resulting in a significant surge in compute usage across multiple applications;
expected to create a second stream of data center demand comparable to the cloud

05
Edge Data Centers Are Up For A Long Run In India
Edge DC infrastructure to be a key factor in fostering inclusivity, enhancing user experiences, and propelling India towards the
forefront of the global digital economy

6
 Data Centres | Powering Digital India

1A
Evolving Hyperscale DC Market – Falling Rentals In The Industry
Increasing Number Of Developers Servicing The Same Hyperscalers; Leading To Price Correction

Increasing Number Of Developers[1] Have Entered The Industry To Cater To The Burgeoning Demand From Hyperscale Customers

Continuous Additions Of Players Into Hyperscale DC Development 18

15

10 11
8
5 6

2019 2020 2021 2022 2023 2024E 2025E

Real estate players started investing in 2021-22 and will have operational capacity from 2024 onwards

7 (1) Players with online capacity

 Data Centres | Powering Digital India

1B
Evolving Hyperscale DC Market – Falling Rentals In The Industry
Increasing Number Of Developers Servicing The Same Hyperscalers; Leading To Price Correction

Consumer Becoming The King: Limited Number Of Clients To Cater To In The Hyperscale Model

Hyperscale Cloud Large Internet BFSI

Service Providers Companies Clientele

DC Players Losing Negotiation Power Leading To Significant Correction In Rentals

Trend Of Historical Periodic Rentals (Low – High) in $/kW/Month

100 100 100 100

91

90
85
75 75 77

2019 2020 2021 2022 2023

Rentals have significantly come down from ~ US$ 100/kW/month to ~ US$ 80/kW/month impacting development returns for all players

8 Source: Avendus Research, JLL Reports

 Data Centres | Powering Digital India

2A
What Else If Not Hyperscale Model? – Enterprise Solutions Are Return Accretive
Amidst The Hyperscale Dominance; 50% Of The Market Continues To Be Enterprise

Current Installed Capacity Of ~ 1 GW Of Which ~ 30% Is Taken Up By BFSI And Tech Industry

Cloud repatriation (moving out of cloud to private data

50% 20% 11% centers) has started picking up

Hyperscale BFSI Technology All enterprises whether public or private have dependency
upon reliable, always-on DC operations

6% 5% 2% Few IT majors are also setting up self-owned assets. Infosys

had built a 250 sqm DC for its HQ in Bangalore

Telecom Retail & E-com Healthcare

Tenants investing INR 0.75 – 1.25 Bn in IT equipment per
MW

2% 1% 4%
Increased number of digital transactions are leading BFSIs
to invest more in Data Centre space
Entertainment / Media Energy Others

9 Source: Avendus Estimates, JLL Data Centre Update – H1 2023

 Data Centres | Powering Digital India

2B
What Else If Not Hyperscale Model? – Enterprise Solutions Are Return Accretive
A Business Model With A Different Value Proposition

The business strategy of catering to organizations that lack the space/IT resources to manage their own data centers is reaping rewards for service providers

Shift To Private Cloud/Colocation Shift Towards Managed Services

01 Shrinking rentals in hyperscale model putting enterprise play into spotlight 03 Organizations wanting to free up IT personnel and financial resources

02 Cost cutting pressure fueling the entire shift from public to private clouds 04 Clients gets operational flexibility while cutting down on capex cost

Rentals ($/kW/Mon) By Leased Capacity Key Highlights Return Profiles For The Different Buckets Of Enterprise Play

• Enterprise clients typically lease up to 1 Quantum Capex Cost Opex Operating Yield (Low) Yield (High)
< 1 MW Leased (per MW) Intensity Margin (%) (%) (%)
93 116 MW of capacity basis organizational needs
(Retail)
• Service providers have better negotiation Sub 1 MW US$ 6.5 Mn 3 65% 11.2% 14.0%
power with smaller enterprise customers
• Smaller customers go for bundled services 1 – 5 MW US$ 6.5 Mn 1 70% 10.6% 12.1%
1 – 5 MW
82 94 and thus the pricing is significantly
(Wholesale)
lucrative Same capex & higher opex but higher rentals leading to better yields

• Management of DC infrastructure, incl. servers,

storage, networking, and security systems 1.5x - Opex Operating Yield (Low) Yield (High)
Managed • Continuous monitoring and maintenance of the IT Intensity Margin (%) (%) (%)
Colocation and the virtual environments by experts Additional pricing No incremental
for managed capex for managed 4 30% 18.9% 23.7%
• Helps organizations with standard software product
needs as well services services

10 Source: Avendus Research, JLL Data Centre Update – H1 2023

 Data Centres | Powering Digital India

3
Hyperscalers Are Opting For Own And Operate Model
Land Banking Strategy For Captive Facilities Is At A Spree Amongst The Hyperscalers

Global hyperscales are eyeing India for expansion, and are increasingly opting ‘own and operate’ model

Part of the Data Protection Bill 2023[1], data localization restricts cross-border data storage
Land Parcels Acquired By The Three Hyperscalers In India
Sectoral regulators leading the way for data localization necessitating local DC presence
Pune
Directive On • All data related to payment transactions is to be stored in Mumbai # Land Parcels 1
Storage Of systems located in India # Land Parcels 4 Land size 25 acres
Payment System • RBI laid down guidelines to encourage entities to outsource Land size 74 acres
Data services to local DC players

• SEBI has mandated all regulated entities (such as stock

Framework For Mumbai Hyderabad
exchanges, brokers, depository participants, mutual funds,
SEBI Regulated
KYC agencies, etc.) to ensure that their data is being stored # Land Parcels 1 # Land Parcels 4
Entities in India
Land size 22.5 acres Land size 163 acres

• It ensures that government bodies takes cloud services from Maharashtra Telangana
GI Cloud empaneled players only
(Meghraj) • Empanelment requires data center facilities, and hardware
to be based in India While AWS and Google have banked land parcels in Mumbai,
Microsoft have opted for Hyderabad i.e., its corporate HQ city

Developers for Hyperscalers in India[2]

Who is • Hyperscalers do not typically build their own DCs – because there are players who are better
building positioned to acquire suitable land parcel and contract power supply
these • Preference to work with players who bank lands, provides high-grade level of electro-mechanical
facilities? systems, etc. EPC players deliver this and hand over the ready to occupy DC to hyperscalers

11 (1) Approved by the Parliament in August 2023, (2) Representative list

 Data Centres | Powering Digital India

4
AI Is About To Take The Data Center Industry By Storm
The Global Markets Have Started Witnessing The Impact Of AI; India Is Not Too Far Behind

Tsunami of AI demand hits the global data center market AI and 5G to revolutionize the data center industry in India

600 MW 420 MW 360 MW 300 MW High end computing infra (GPU servers) are being put into use to service this demand
Google signed a Microsoft signed a Microsoft signed a Microsoft signed a
deal in Texas deal in Leesburg, VA deal in Dallas deal in Chicago With ~600 GPUs across its 2 DCs, E2E was the 1st to use NVIDIA V100 GPUs,
the most advanced data center GPU in the market
Multiple 500+ MW requirements from hyperscalers in the market; indicating that incremental
demand from AI workloads might soon outpace traditional cloud computing
Yotta has launched Shakti Cloud consisting of 16,000 NVIDIA GPUs. Shakti is
India’s 1st AI-centric cloud, plans to scale to 32,000 GPUs by 2025
AI led demand growth expected to ramp up now for Indian DCs
Partnership with NVIDIA to set-up AI Data Centres in India via its Platform
India’s Generative AI Sector (US$ Bn) Digital Connexion

• India has ~1,300 AI companies currently

NVIDIA & Tata Communications to deliver AI computing infra and platforms for
28% • AI will lead to multi-fold rise in high density
CAGR developing AI
server racks (5 to 50 kW) and consequent
4.2 cooling requirements
• India’s generative AI market is expected to
0.8 grow at a CAGR of 28% from 2023-30 which A ChatGPT query needs ~10x as much power to process as a Google search[1]. And thus,
will translate into strong DC demand operators need to bring some infrastructural changes to manage the high-power demand

2023 2030

Expected demand for AI enabled DCs in India is ~500 MW over the next 4 years

Also, the existing infrastructure isn’t designed to handle this massive processing power that AI
workloads require and thus, a re-evaluation of traditional DCs is necessitated
Liquid-based Cooling Higher floor loading of Higher floor-to- ceiling
2,500 kg/m2 height of 18 ft
12 Source: Avendus Research, TD Cowen Equity Research, JLL Data Centre Update – H1 2023 | (1) Goldman Sachs Research
 Data Centres | Powering Digital India

5
The Buzzword Around Edge Data Centers Starting To Take Real Shape
Trend towards shift to edge DCs, though it will take 2-5 years for a significant footprint in Tier 2 & 3 cities

Current
Demand Drivers

Demand
Video Apps Video Streaming Audio Streaming Ride Sharing Remote Work/WFH Gaming

Demand Over
The Next
5 Years
Artificial Intelligence Internet of Things Virtual Reality Autonomous Vehicles OTT Penetration Content Delivery Networks

Why Edge Data Centers In India Are The Need Of The Hour? Deploying At Speed With Prefab Data Centers

Prefabricated modular DCs are emerging as a faster and scalable way to

01 Growth of Digital India serve more and remote locations. A prefab DC is an individual module or
container pre-fitted in a factory with equipment that can be stacked on a
Demand for better user experience with low latency data usage is increasing need basis
due to consumption of wide spectrum of digital services by businesses and
individuals

02 Digital Transformation in Enterprises Speed of Deployment Sustainability Benefits No Pre-existing Limitations

Digital initiatives are no longer solely HQ prerogative, with regional offices as A prefab DC can be delivered much By testing newer technologies in The unique ability to be customized
passive audience. Edge DCs offer the necessary security and reliability for quicker than traditional ones, and prefab modules, more sustainable to client specific requirements as
enterprises to host critical applications being assured of committed uptime easily expanded as needed solutions can be explored they sit outside of building fabric

Existing Pipeline Prefab Modular DC

Capacity Capacity Developers in India

13
Data Centres | Powering Digital India

02.
Key Geographical
Markets
7 Key Cities Constitute Majority Of
Total Demand And Supply In The
Country
 Data Centres | Powering Digital India

Established Markets – (1/2)

Established Markets Still Continue To Capture A Lion’s Share, Capacity In Other Locations To Come Up Gradually

Current Installed Capacity Of 1,011 MW Of Which

~94% Capacity Is Located In 7 Cities

Delhi - NCR Kolkata Mumbai and Chennai leading the race: inherent advantage
of dense wet cable ecosystem offering best global latencies
Total capacity 94 MW Total capacity 10 MW
Net absorption 22 MW Net absorption 5 MW 1. Mumbai:
1. Currently accounts for 48% of total DC capacity in India:
– Submarine landing stations
– Reliable power, roads, and fiber infrastructure
Mumbai Metropolitan Region
– Huge BFSI demand, telecom hub, and absence of any
Total capacity 490 MW major natural threats
Net absorption 153 MW 2. 35+% of total additional capacity over the next five years in
India is likely to be in Mumbai
Pune Hyderabad
2. Chennai witnessing massive demand due to similar
Total capacity 64 MW Total capacity 48 MW infrastructure network as that of Mumbai
Net absorption 9 MW Net absorption 15 MW – ~25% of incremental capacity expected to come in Chennai
– The landing of new MIST cable to attract demand from APAC
Chennai
Bengaluru
Total capacity 147 MW 3. Delhi and Kolkata being the only locations in North and East
Total capacity 97 MW Net absorption 70 MW India serves regional enterprise demand
Net absorption 20 MW – ~15% of incremental capacity expected to come from Delhi.
Strategically situated, Noida is coming up with substantial
capacity additions

15 Source: Avendus Estimates, CBRE Indian DC Market – Dec’23, JLL Data Centre Update – H1 2023 | Note: Annual Absorption is for CY23
 Data Centres | Powering Digital India

Established Markets – (2/2)

Mumbai Continues To Be The Key Location For Existing As Well As Upcoming Data Center Capacity In India

MW Mumbai Chennai Bengaluru Delhi – NCR Pune Hyderabad Kolkata

Total capacity 490 147 97 94 64 48 10
Vacancy (%) 3.6% 6.9% 10.5% 16.5% 1.2% 6.4% 1.7%
Under – Cons.[1] 347 259 50 162 45 34 51

Total assets[2] 42 22 31 33 18 13 8
Landing Stations[3] 12 4 - - - - -

Most active market; has

State policy with more Majorly on pre-
been on the radar of Ever-growing wholesale New DC builds expected Large Supplying to eastern
Supply incentives to push for commitment by
many international colocation market to attract occupiers self builds India
more DCs hyperscalers
players

New cable landing to

Deal sizes are growing Mostly hyperscale Enterprise demand.
spur increased pre- Technology, fintech, and Cloud / Hyperscaler BTS demand from cloud
Demand with larger hyperscaler demand followed up by Landing station may
commitments from e-commerce demand dependent players
deals getting signed BFSI sector change fortune
cloud players

< 250 kW 100 – 136 100 – 109 91 – 109 95 – 113 86 – 100 95 – 113 100 – 118
Pricing
($ per 250 kW – 1 MW 91 – 113 95 – 104 89 – 104 89 – 100 80 – 95 89 – 100 91 – 100
kW per 1 – 5 MW 82 – 95 86 – 95 86 – 95 80 – 91 77 – 86 80 – 91 NA
month)
> 5 MW 77 - 91 77 - 82 79 - 82 77 – 86 73 – 77 77 - 86 NA

Strategic significance Secure location for DCs: Availability of land, BTS solutions – Pledged investments
Best location for DCs in Meets East-India
Remarks coupled with growing India’s least active attractive policies, & on- Proximity to Mumbai from major tech-giants
the country enterprise demand
presence of enterprises seismic zone ground gov. support but better risk profile and hyperscalers

16 Source: Avendus Estimates, JLL Data Centre Update – H1 2023 | (1) Excl. the hyperscale self-build supply, (2) India has ~50 more assets in other cities of the county, (3) India has total of 19 landing stations; 1 each in Kochi, Tuticorin and Trivandrum
Data Centres | Powering Digital India

03.
Market Landscape
Market can broadly be categorized
into 4 buckets
 Data Centres | Powering Digital India

Key Players – (1/4)

Players With Sizeable Online Capacities And Established Presence In The Market

Company

Airtel (76%) ST Telemedia (74%) Pioneer Group, Promoter (84%)

Key Shareholder NTT Data Inc (Japan) Hiranandani Group
Carlyle (24%) Tata Comm. (26%) Sculptor (29%) ADRs (16%)

12 Hyperscale DCs 2 Hyperscale DCs

Operational Assets 18 DCs 19 DCs 11 DCs 12 DCs
120+ Edge DCs 1 Edge DC

Operating Capacity (MW) 265 198 158 121 108 61

Upcoming Capacity (MW) 145 239 230 86 250 151

All 7 hubs
Mumbai, Bangalore,
All 7 hubs All 7 hubs (-) Pune All 7 hubs Mumbai, Delhi NCR,
Geographic Presence Chennai,
(+) Bhubaneshwar (+) Ahmedabad (+) Lucknow (-) Pune Gandhinagar
Delhi-NCR
(+) Patna

FY23 Revenue / EBITDA 22,583 / 16,410 / 18,235 / 11,213 / 10,125 / 1,028 /

(INR Mn) 8,807 6,199 8,326 6,148 4,131 34

Partnered with Vi Business

Will invest INR 50 Bn to Intends to increase the To invest US$ 2 Bn over Kotak DC Fund invested
(Vodafone Idea's
NTT’s business in India is build 6 new hyperscale share of renewable energy the next 6 years to expand INR 16,000 Mn in Sify
enterprise arm) to
Remarks growing at 40% CAGR over DCs and expand its to 70%. Have invested in into Asia and Middle East Infinit Spaces (Sify's DC
enhance the data center
the last 3 years capacity by 2x to 400+ renewable plants owned intending to add 350 MW arm) to expand DC
and cloud services
MW by O2 Power and Avaada of AI and cloud-ready DCs capacity
portfolio

18 Source: Avendus Research

 Data Centres | Powering Digital India

Key Players – (2/4)

Data Center Platforms Started By Financial Investors

Company

Warburg Pincus, OTPP, Blackstone RE & Tactical

Key Shareholder CapitaLand Bain Capital SWFs, Pension Funds I Squared Capital
Mubadala Opportunities Fund

Operational Assets 1 DC - - - - -

Operating Capacity (MW) 24 - - - - -

Upcoming Capacity (MW) 24 600 150 20 50[1] -

Mumbai, Chennai, Bangalore,

Geographic Presence Mumbai Mumbai Mumbai Mumbai -
Hyderabad

FY23 Revenue / EBITDA

- - - - - -
(INR Mn)

Signed a 25 years Pan-Asian DC platform set-

By 2030, Blackstone plans 1st phase of the Mumbai The first asset is under
agreement with Tata Have launched ESR DC up by I Squared; actively
to set up data centers in DC will deliver 30.5 MW construction and will
Remarks Power to meet the power Fund 1 for development of looking for potential land
five Indian cities with a and will be Ready-for- deliver 8 MW by 2024 and
needs of its 48 MW its data centre business parcels to enter Indian
total capacity of 600 MW Service by mid-2025 20 MW at full build-out
Mumbai DC Market

19 Source: Avendus Research | (1) Only Core & Shell

 Data Centres | Powering Digital India

Key Players – (3/4)

Global Players Strategically Making Their Presence In India With Different Ventures

Company

RIL, Digital Realty, AEL (50%), Everstone, Digital Edge (50%),

Key Shareholder Fidelity Investments Equinix Pacific LLC
Brookfield Infrastructure Edge Connex (50%) Yondr NIIF (45%), AGP (5%)

Operational Assets 1 1 1 3 - -

Operating Capacity (MW) 22 20 17 10 - -

Upcoming Capacity (MW) 170 120 487 70 30 300

All 7 Hubs (-) Bangalore

Geographic Presence Mumbai, Chennai Mumbai, Chennai Mumbai, Chennai Mumbai Mumbai
(-) Kolkata (+) Vizag

FY23 Revenue / EBITDA 159 / 839 /

- - - -
(INR Mn) 12 352

Planning to invest ~US Reliance invested US $45 Will invest around US

The 1st DC under the JV is
$1.3 Bn for developing Mn to become a 33% Aims to deliver DC Acquired a 6-acre land $170 Mn in setting up the
getting constructed in
~270 MW total DC shareholder along with Capacity of 1 GW by 2030. parcel in Chennai to Navi Mumbai DC with a
Remarks Mumbai. It'll deliver 12
Capacity in Mumbai and Digital Realty and Planning to invest ~US $5 expand its footprint in capacity of 15 MW for the
MW of IT load in the first
Chennai over the next 3-5 Brookfield Infrastructure in Bn over the next 5 years India first phase of the project of
phase
years this JV overall size 300 MW

20 Source: Avendus Research

 Data Centres | Powering Digital India

Key Players – (4/4)

Domestic Indian Players Continue To Serve Their Share Of The Market

Company

Iron Mountain (54%), Promoter (55%), EVP & MLC PE (28%), Intel Capital, IFC, Promoters (63%),
Key Shareholder Larsen & Toubro Promoters
Promoters (46%) GEF Capital (41%) Angel Investors (24%) Iron Mountain Futuristic Capital (21%)

Operational Assets 6 DCs 4 DCs 2 DCs 4 DCs 4 - -

Operating Capacity
33 8 8 7 600 Racks - -
(MW)

Upcoming Capacity
64 18 - 21 500 Racks 90 24
(MW)
Mumbai, Noida,
Mumbai, Nashik, Vijayawada, Mumbai, Delhi, Noida, Jaipur, Raipur,
Geographic Presence Bangalore, Hyderabad, Mumbai, Chennai Chennai, Kolkata
Bangalore, Mohali Kochi Ahmedabad, Bangalore Chennai
Pune

FY23 Revenue / 948 / 2,671[1] / 331 / 1,984 / 1,236 /

- -
EBITDA (INR Mn) 223 818[1] 102 520 250

Planning to expand
Signed MoUs /
Amongst the preferred operations to Plans to develop 250
Agreements to invest Targeted to invest INR
managed DC and cloud Hyderabad with an Upcoming facilities in MW of hyper density
Remarks in data centers in 13 Bn to develop more -
service providers for investment of INR 200 Mumbai and Chennai data centers in India
Chennai, Telangana, assets
SMBs Cr over a period of next over the next 5 years
and Bangalore
2 years

Few other developers

include

21 Source: Avendus Research | (1) FY24 numbers

Data Centres | Powering Digital India

04.
Return Dynamics
& Transactions
Asset Develop & Sell Model Can
Deliver 25%+ IRR
 Data Centres | Powering Digital India

Return Dynamics
Delivers Better Development Returns Vis-à-vis Other Yielding Real Asset Classes

Development yields – Tier III Core yields Development equity IRR

Parameter Value Parameter Value Parameter Value

Capex / MW INR 540 Mn Capex / MW INR 540 Mn

EBITDA INR 56 Mn
Revenue / kW US$ 80 / month
Debt : Equity 55 : 45

Revenue / MW INR 80 Mn / annum

Avg. Cons/Leasing
Cap Rate 8.25% 24 months
Period
EBITDA Margin 70%[1]

Exit Value INR 676 Mn

EBITDA / MW INR 56 Mn / annum
Enterprise Value INR 676 Mn
Equity IRR – Cons.
Development Yield 10.3% ~25%
Period

• Industrial / commercial / retail asset classes generate

• The parameters will vary as per the location, land cost, • Core Investors are keen to acquire leased out assets
equity IRR of 18% - 22% during development phase
technical specifications, end tenant profile etc. at sub 8.25% Cap Rate.
• DC industry is closer to the higher end of return
• Development yields vary between 10% and 11% for • With a 4% annual escalation, the same translates
spectrum and is delivering returns in range of 22% -
Tier 3 and Tier 4 data centers into a FCFF return of ~12.5%
28% IRR

23 (1) Electricity expense is a pass-through

 The Real Estate Play In Data Center Space
Return And Yield Profiles

Square Footage Analysis | Equivalent to 1 MW IT Load

Parameter Value Remarks

Core & Shell Cost MEP Cost
Land / MW 3,485 sqft 8 acres of land to build 100 MW of IT load; 4x FSI available INR 13,500/sqft INR 25,250/sqft

Rack Capacity 10 kW Incremental industry average rack density

Rack Area 60 sqft Typical white space per rack

White Space / MW 6,000 sqft White space required Development Yield Development Yield
9.5% 10.8%

Built-up Area / MW 14,000 sqft Met by 40% - 45% Floor Area Ratio on white space

Total Capex / sqft INR 38,750 Capex of INR 540 Mn to build 1 MW of IT load EBITDA Margin EBITDA Margin
90% 63%
Revenue / sqft / month INR 476 Current pricing of US$ 80/kW/month in the industry

Shell Cost / sqft INR 8,000 Typical build-cost in the industry

Fit-out Cost / sqft INR 3,500 Typical build-cost in the industry

Rent - Core & Shell Rent – MEP
INR 119/sqft/month INR 358/sqft/month
Land Cost / sqft INR 2,000 All-inclusive land price of INR 350 Mn/acre in Mumbai

24 Avendus Estimates
 Data Centres | Powering Digital India

Data Center Ecosystem Offers Opportunities For All Types Of Investors

Real Estate like characteristics IT like characteristics

Hyperscale Developers Enterprise Colocation Cloud Service Providers Managed Service Players

• Developer, Owner and Manager of large- • Providing IT services to organizations

• Operators of facilities with large • Offers storage, processing and
Market scale facilities • Manpower driven business models
enterprises as clients applications as services which can be
Overview • Predominantly limited/few tenant occupied scaled as per need • Usually taken up by organizations
• Predominantly caters to multiple clients
facilities operating on Public Cloud servers

4 4 3 0
Capex Real Estate development and leasing Capex is same as the hyperscale model 3-4x to that of Hyperscale projects Opex heavy businesses
Intensity Payback of 8-9 Years Payback of 7-8 Years Payback of 3-4 Years Negligible capex investments

• Leasing Risk • Alternatives: In-house DC or Cloud • Obsolesce in equipment • Economies of scale

Key Risks
• Capacity oversupply, reducing rents • Capacity oversupply, reducing rents • In-house DC; security requirements • In-house IT operations

Commercial Considerations And Return Profiles

Pricing • Charges for the quantum of space leased • Charges for the quantum of space leased • Charges for compute & storage needs • Charges for service type and manpower
Terms • INR 6,500/kW/month • INR 8,000/kW/month • INR 70,000/TB RAM, INR 3,000/TB Storage • Billed basis FTE model[1], # tickets raised

• Power is a pass-through expense • Power is a pass-through expense • Ownership of servers increases opex • Employee salaries is the major expense
Margins
• EBITDA Margin: ~ 70% • EBITDA Margin: ~ 65% • EBITDA Margin: 40 - 50% • EBITDA Margin: 25 - 30%

• Plain vanilla leasing model; reducing rentals • Though higher opex but has higher rentals • Small capacities servicing large client base • Businesses with operating leverage
Returns
• IRR: ~15% for a 5-year period • IRR: 20 - 24% for a 5-year period • IRR: 30-35% for a 5-year period • Avg. ROCEs: 22%+; Avg. ROEs: 30%+

25 (1) Full Time Employee

 Data Centres | Powering Digital India

Domestic Transactions

Deal Date Target Deal Type Deal Size Investors Remarks

Mar-2024 PE Growth 84 Group of HNIs Proceeds from the stake sale to be used to pare group (Shapoorji Pallonji) level debt as well as towards growth capital

Sep-2023 PE Growth 73 Funds to be used to expand DC capacity across India and invest in renewable energy

Jul-2023 JV 120 This JV succeeds BAM Digital Realty, the previous India-focused JV between Digital Realty & Brookfield Infrastructure

Jun-2023 EPC Contract 85 Prestige to construct 3 data centers buildings in NTT’s 100 MW DC campus in Bangalore

Jan-2023 JV NA Acquired land parcel to develop 300MW in Mumbai

Nov-2021 PE Growth 135 To develop new DCs in Mumbai, Noida, Chennai, Bangalore, and Hyderabad

Sep-2021 M&A 161 Acquisition of 2 DCs in Mumbai

Jul-2021 JV 1,000 JV to develop hyperscale DCs across India

Apr-2021 JV 150 To expand operations, locations and customers across India

Feb-2021 JV – 50:50 JV to develop hyperscale DCs across India

Jan-2021 PE Growth 23 Intel Capital Invested in 2013, 2015; IFC invested in 2015; Iron Mountain invested in 2021

Oct-2020 PE Growth 235 Transaction valued the company at US$ 940 Mn

Jun-2018 M&A 16 HCL Services Limited reported revenues of INR 5.6 billion and net worth of INR 539.6 million for the year ended 2017

Jun-2018 PE Growth 24 Primary + Secondary (Exit of Canbank which invested US$ 4 Mn in Feb ‘15)

26 Note: Deal Size in USD Mn

 Data Centres | Powering Digital India

Evolving Nature Of Transactions In The Data Center Space In India

F Y 18 - 24 FY 24 - 28 F Y 2 8 Onw ards

Primary Investments Primary + Secondary Data Center REITs

Activity on this front is expected\to pick up now as the \

Industry in nascent stage: Growth capital infused by investors Data Centers have emerged as one of the top performing
companies backed by early stage investors seems ready
looking at PE style returns asset classes in the global REIT market space
for the next leg of growth

In advanced stages of raising growth capital and Global portfolio of ~2.5 GW with 300+ DCs
providing exit to current shareholders Has increased its dividend for 17 consecutive years

SPAC listing to fund AI growth and provide platform Global portfolio of 250+ DCs with ~356,500 racks
for exit Recently announced a 10% increase to the dividend

Global portfolio of ~200 MW with 500 MW planned

Period also witnessed JVs/partnerships being created Dividend payout ratio of ~66% for 2023
indicating that developers/investors were committing large Secondary Transactions And IPOs
pools of capital 20%+
Global DC Global REIT
34 GW 7 GW
\ are expected to eye for
Large investors (SWFs, PFs, etc.) Capacity Capacity
companies with existing investors which have achieved
significant scale
India has seen successful REITs/InvITs in the commercial,
Carlyle looking to monetize its stake and in retail, and warehousing segments
discussion with several PFs and SWFs[1]

Some strategic investments as well marking entry of global IPO activity is also expected to pick pace with some players
players to ride the hockey stick growth wave of the DC industry citing this route to raise capital for next phase of growth

Likely to go for listing over next 12-24 months for With strong interest of ecosystem participants in the Indian DC
potential exit of current investors and raise funding space, the emergence of DC REITs is expected in next 5 years

27 (1) News Articles, (2) Company press release

Data Centres | Powering Digital India

05.
Global Market
Snapshot
Key Players, Investors And
Valuation Metrics
 Data Centres | Powering Digital India

Global Players
Several Players Have Emerged Across Various Geographies

Global

North
America

Middle East,
Africa, And
Latin America

Europe

Asia
Pacific

29
 Data Centres | Powering Digital India

Global Investors
Sector Offers a Mix Of Stable Returns as Well as High Growth Opportunities, and Hence Has Multitude of Investors

Pension & Sovereign

Private Equity Investors Real Estate Investment Trusts
Wealth Funds, DFIs

(M Cap. - 71.4) (M Cap. – 48.3)

(M Cap. – 91.2) (M Cap. – 26.2)

(M Cap. – 0.7) (M Cap. – 8.2)

(M Cap. – 2.3) (M Cap. – 4.4)

(M Cap. – 2.8)

30 Source: Capital IQ; Market Cap (US$ Bn) is as of 28th June 2024
 Data Centres | Powering Digital India

Global Transactions
Globally, Industry Witnessed Several US$ 200+ Mn Fund Raises And Several Multi-Bn M&A Transactions

Fund Raises M&A Transactions

Date Target Deal Size Investors Date Target Deal Size Buyer

Jun-24 1,300 Mar-24 575

Mar-24 587 Group of Institutional Investors Jan-24 168

Feb-24 850 Nov-23 775

Jan-24 6,400 Sep-23 800

Nov-23 656 Apr-23 3,815

Aug-23 90 Dec-22 1,000

Jun-23 500 Nov-22 1,200

Feb-23 500[1] Oct-22 1,462

Jun-22 1,250 May-22 11,000

Mar-22 1,106 Nov-21 15,000

Jun-21 500 Nov-21 10,100

Mar-21 332 Jun-21 10,000

Nov-20 505 Jun-21 3,900

31 Note: Deal Size in US$ m | (1) Equity commitment to the platform

 Data Centres | Powering Digital India

Global Valuation Multiples – (1/2)

Cap Rates For Global DC REITs Average ~5%

Market Cap Enterprise

REIT Market DC Only? EV / EBITDA Key Investors
(US$ Bn) Value (US$ Bn)

USA 91.2 143.3 19.7x

USA 71.4 87.1 25.2x

USA 48.3 68.1 23.2x

USA 26.2 41.7 17.6x

Singapore 8.2 13.3 21.2x

Singapore 4.4 6.6 20.1x

USA 2.8 5.2 14.0x

Singapore 2.3 3.3 19.5x

Singapore 0.7 1.3 21.3x

Average 20.3x

32 Source: Capital IQ | Note: (i) Market Cap is as of 28th June 2024, (ii) Forward EV/EBITDA Multiple
 Data Centres | Powering Digital India

Global Valuation Multiples – (2/2)

EV/EBITDA Multiples For DC Platforms Average At ~16x

Market Cap Enterprise Value Revenue EV / NTM EBITDA EV / NTM Revenue

Company Domicile EBITDA Margin
(US$ Bn) (US$ Bn) (US$ Mn) (x) (x)

Australia 6.0 6.5 282 45% 41.0x 22.5x

Indonesia 5.2 5.2 86 67% NM NM

USA 2.3 4.0 811 43% 28.8x 6.2x

China 2.1 2.3 1,110 17% 12.1x 2.3x

China 1.8 7.8 1,407 41% 11.4x 5.3x

Australia 1.6 1.6 235 23% 18.5x 5.5x

Hong Kong 1.3 3.2 323 62% 16.6x 11.8x

China 1.0 1.3 210 74% 10.3x 7.0x

Qatar 0.6 0.7 116 27% 14.8x 4.3x

China 0.5 2.5 1,048 23% 8.7x 2.3x

Average 42% 16.1x 5.6x

33 Source: Capital IQ | Note: Market Cap is as of 28th June 2024. The companies whose EV/NTM EBITDA is in the range of 10 – 30x and EV/ NTM Revenue is less than 15.0x have only been considered for determining the average numbers
Data Centres | Powering Digital India

06.
About Avendus
 Data Centres | Powering Digital India

Avendus Capital
India’s Premier Financial Services Franchise

Investment Bank of the Year – VCCircle Awards 2023

Investment
Banking
191 M&A Transactions
Value: 294 PE Transactions
Value: 18 ECM Transactions
Value: 42 Deals in FY24
Deal Value: India #1 PE Advisor 2023 (Venture Intelligence,
USD 16.64 bn USD 26.25 bn USD 2.4 bn USD 5.33 bn VCCEdge)

AsiaMoney
Brokers Poll
2023 Best Domestic Brokerage Overall Country Research, Sales & Brokerage
Institutional
Equities 260+ Stock coverage
with Market Cap 400+ Global Fund
Relationships 15 Sectors covered
(80% of the
Transformation

of USD 2.8 tn Market cap) 2022 Best Domestic Brokerage Overall Country Research & Sales Execution

Best Digital Private Bank

AUM Asiamoney Private Banking Awards 2023
Wealth
Mgmt. USD 6.6 bn 1,592+ # of Families and Corporate
Treasuries serviced Highly Best Private Bank for UHNWIs
commended The Asset Triple A Private Capital Awards 2021 & 2022

Avendus Absolute Best Single Country Fund, 18th HFM AsiaHedge Awards Hong Kong 2019
AUM
Asset
Mgmt. ~USD 630 mn 4 Specialized
Strategies
Return Fund Best AIF CAT 3 Long Short (2 Years of Risk-Adjusted Returns), 2021
#1 Indian Equity Fund, HFM Asia Performance Awards 2022
Avendus Enhanced
Return Fund Best Multi Strategy Fund, HFM Asia Performance Awards 2021

Credit ~INR 43 bn 150+

Transactions
INR 1,100 cr+
Book size within 5 years
A+ Crisil Rating
Solutions Disbursements till date
till date of operation

35 Data as of June 30, 2024

 Data Centres | Powering Digital India

Investment Banking | Infrastructure & Real Assets

Leaders In Introducing New Global Partners For Growing Domestic Businesses

Leaders In Indian Infrastructure & Real Assets Space

30+ 15 10 US$ ~2.5 bn

Deal/JV and Platform Dedicated team size, Deal closures by the Aggregate value of
transaction closures by among the largest in the team in FY23 and FY24 transactions closed in
the team till date country FY23 and FY24

Sectors Covered

Representative List Of Clients / Investors For Deals Closed

36 Data as of June 30, 2024

 Data Centres | Powering Digital India

Avendus Contacts
Prateek Jhawar
MD & Head – Infrastructure & Real Assets
Email: [email protected]
Mobile: +91 98675 77502

Vaibhav Garg
Vice President
Email: [email protected]
Mobile: +91 77188 08843

Vinod Saran
Analyst
Email: [email protected]
Mobile: +91 72320 53536

37
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