Five data centre stocks to benefit from India's digital revolution

As businesses, governments, and consumers shift their activities online, the demand for secure, high-capacity data storage is skyrocketing.

The numbers tell the story…

India’s data centre market is now worth around $10 billion, with revenues hitting $1.2 bn in 2023-24, according to Anarock Capital, the investment banking arm of the Anarock Group and a leading real estate services company in India.

Also Read: Top 5 undervalued data centre stocks: From gensets to cloud computing

The sector has attracted a staggering $6.5 bn in investments over the past decade, and capacity is set to surge 44% to 2.1 gigawatts by 2025.

For investors, this boom presents a compelling opportunity. A handful of companies stand to benefit significantly from the sector’s rapid expansion.

Let’s take a closer look at five players poised to ride this wave.

Tata Communications Ltd

Tata Communications (originally VSNL) came under the Tata group’s umbrella in February 2002 after the Government of India divested a 25% stake to a strategic partner.

Over the years, the company has evolved into a global digital ecosystem enabler, leveraging its extensive infrastructure to strengthen its foothold in emerging markets.

When it comes to the data centre industry, Tata Communications plays a pivotal role by offering high-performance connectivity, cloud interconnect solutions, and managed hosting services.

In India, it dominates the data centre interconnectivity space, continuously investing in metro connectivity solutions to enhance network efficiency.

The company is expanding its portfolio with next-geneneration technologies like hybrid cloud networking, software-defined WAN (SD-WAN), and edge computing.

Through its IZO Multi Cloud Connect platform, Tata Communications ensures seamless data centre-to-cloud and cloud-to-cloud communication, making enterprise networks more scalable, secure, and flexible.

Between 2019-20 and 2023-24, sales and net profit have reported a compound annual growth rate (CAGR) of 4.9% and 68.5%, respectively. The company’s average return on capital employed (RoCE) stands at 18%.

Also Read: What will it take for India to become a global data centre hub?

Looking ahead, the company has identified artificial intelligence (AI) cloud, multi-cloud connectivity, and edge computing as high-growth areas. It is also monetizing non-core assets, including land, which could potentially be repurposed for data centre development based on market demand.

Aurionpro Solutions Ltd

The company's data centre business is housed within its Technology Innovation Group (TIG), where it contributes roughly a third of the segment's revenue. TIG itself accounts for around 45% of Aurionpro's overall enterprise revenue​.

Aurionpro primarily operates as a design and build partner rather than owning and running data centres. It has a capable data centre design team and works on complex projects with leading industry players.

The company collaborates with key strategic partners, including Webworks and Iron Mountain, to design and manage data centre construction. The business currently operates at margins that are below the enterprise average but is growing at a robust 30-40% annually​.

While most of its operations are India-centric, Aurionpro has started expanding into select international markets, particularly in emerging economies. However, its global footprint remains small at this stage.

The company’s expertise spans designing large data centres of up to 60MW capacity, and its projects adhere to Tier III and Tier IV standards set by the Uptime Institute​.

Between 2019-20 and 2023-24, sales and net profit have registered a CAGR of 12% and 18.9%, respectively. The returns have also been rangebound with the RoCE and RoE averaging 10.3% and 12.2%.

With its focus on high-margin design services and strategic partnerships, the company aims to deepen its presence in this rapidly growing industry.

Adani Enterprises Ltd

Adani Enterprises, the flagship company of the Adani Group, is known for incubating and scaling infrastructure businesses across diverse sectors.

The Adani Group, through its joint venture AdaniConneX with EdgeConneX, is rapidly expanding its presence in the data centre business. The company has already established significant operational capacity.

The Chennai 1 facility, with 17MW of renewable-powered capacity, has maintained 100% uptime in 2023-24. Additionally, the Hyderabad Data Center's Phase I, offering 9.6MW, is now fully operational.

Progress is also evident at the Noida data centre, where construction is nearly complete for a 50MW core and shell and 10MW MEP, while plans for an extra 40 MW MEP are already in motion.

Pune's two data centres, each designed for 9.6MW, are steadily advancing, with completion rates of 59% and 73% for Phase I.

Between 2019-20 and 2023-24, sales and net profit have registered a CAGR of 19% and 71.3%, respectively. The returns have also been rangebound with the RoCE and RoE averaging 10.6% and 5.4%.

Also Read: Mint Primer: Can India turn into a global hub for data centres?

Looking ahead, AdaniConneX has ambitious plans to scale its data centre capacity to 1GW by 2030. With a committed investment of $6.5 bn, the company is focusing on building hyperscale campuses in key cities like Noida, Pune, Hyderabad, and Navi Mumbai.

These facilities will serve enterprises and large-scale cloud service providers, capitalizing on the growing demand for digital infrastructure in India.

By offering integrated solutions and ensuring operational excellence, Adani is positioning itself as a dominant player in the sector.

Larsen and Toubro Ltd

Larsen & Toubro (L&T) has entered the data centre and cloud services space with L&T-Cloudfiniti.

While a relatively new entrant, L&T brings strong parentage and synergies with LTIMindTree and L&T Technology Services, leveraging its experience in building large-scale government and private sector data centres.

The company is taking an end-to-end approach, offering data centre infrastructure, multi-cloud services, cloud management, network security, and application integration—all under a single-point responsibility model.

It is also investing heavily in modern hyperscale data centres, starting with Mumbai and Chennai, with plans for further expansion.

L&T is integrating next-gen cooling technologies like direct liquid cooling (DLC), liquid immersion cooling (LIC), and in-row cooling, designed to enhance energy efficiency, reliability, and security.

As India’s data centre capacity surges, L&T’s expertise in infrastructure development and advanced cooling solutions places it in a strong position to compete with global players in the sector.

Coming to its financials, L&T's revenue and net profit have grown at a CAGR of 10.3% and 10%, respectively, between 2019-20 and 2023-24. This robust growth has led to a strong RoCE and RoE averaging 17.1% and 13.3%.

ABB India Ltd

ABB India is emerging as a strong player in the fast-growing data centre market, leveraging its expertise in power distribution, automation, and energy management.

While it does not own or operate data centres, it has expanded its presence by supplying electrification and control solutions to major operators.

Active in the sector since 2017-18, ABB’s data centre business has grown significantly, securing a large order in Q42024. Though the exact revenue share is undisclosed, the segment has become a key contributor.

ABB’s power distribution portfolio includes transformers, circuit breakers, switchgear, and remote power panels designed to enhance energy efficiency and reliability for data centres.

It also offers UPS solutions for uninterrupted operations and advanced cooling systems to optimize power usage and costs.

Beyond hardware, ABB provides Data Centre Infrastructure Management (DCIM), integrating real-time monitoring and automation to improve efficiency and uptime.

Also Read: Generative AI, data centres to define India’s tech industries in 2025

The company is positioning itself to serve hyperscale and edge data centres, leveraging its expertise in smart power and sustainability.

Coming to its financials, ABB India has maintained a strong financial position over the past five years.

Between 2019 and 2023, its revenue and net profit have grown at a CAGR of 9.3% and 37.5%, respectively. This robust growth has led to a strong RoCE and RoE averaging 19.4% and 14% .

Conclusion

From powering cloud computing to supporting AI and 5G networks, these data centre giants are building the backbone of the country’s digital revolution.

For investors seeking opportunities in the rapidly expanding tech ecosystem, the companies leading this charge could offer promising long-term growth.

Keep an eye on their progress because as India's digital economy scales new heights, so will those driving the infrastructure behind it.

Investors with a higher risk appetite may find opportunities in emerging data centre ventures, while those seeking stability might prefer established players with proven operational capacity and steady cash flows.

Happy Investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from equitymaster.com.