The Big Data Centre rush: Adani fast-tracks $4 billion investment, others follow suit

The Adani Group has put on fast-forward a $4-billion plan to expand its data centre business, according to two persons with direct knowledge of the matter.

The objective is to capitalize on a surge in demand for data centre services from technology giants, and also give its power business a boost by capturing the immense power demand for these services.

Adani ConneX Pvt. Ltd, a joint venture between Adani Enterprises Ltd. and Virginia-based EdgeConneX, currently has 17 MW operational and 210 MW under-construction projects. With demand for its services skyrocketing, the group plans to achieve data-centre scale of 1-1.5 GW within one to two years, from the earlier target of five years, the two people cited above said on condition of anonymity.

“Adani will invest another $4 billion to reach this 1 GW. Based on present economics, investment per MW is around ₹40 crore,” the first person said.

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According to the people cited above, the data centre demand is growing so quickly that the group may slow down investments for some other businesses and use the funds to invest more in the data centre business as a part of the strategy shift.

“The orders or requirement (for data centre services) that used to be on average 5-10 MW two years ago, are now 50-100 MW,” said the first person, adding that Adani Group today has only 2.5% share of India’s data centre market, which is currently 700 MW and is expected to become 4 GW by FY30.

“AdaniConneX has an order visibility of 1.5-2 GW. This means our share, which with 1 GW could have been 25%, is expected to go up significantly,” the first person added.

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The move will also benefit the group’s power generation business that is run by Adani Power Ltd. and Adani Green Energy Ltd. Typically, artificial intelligence-driven services offered by WhatsApp, Google and Facebook, among others, require intense computational abilities that consume 8X-12X more power than non-AI computational needs.

An email sent to Adani Group remained unanswered till press time.

Not just Adani

Along with Adani, the boom in demand for data centre services has also pushed other major Indian players such as Nxtra by Airtel, Brookfield-RIL and Hiranandani's Yotta Data centres into expansion mode.

“We are continuing a strong expansion drive and are increasing our capacity exponentially to meet the growing digital demand in India,” said Ashish Arora, CEO of Nxtra by Airtel.

According to Arora, Nxtra by Airtel, which currently has the largest data centre network in India with more than 200MW capacity, will invest $660 million by 2026 to double its capacity to 400MW across Mumbai, Pune, Kolkata, Chennai, Hyderabad, Delhi-NCR and Bengaluru.

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Then, Digital Connexion, a three-way joint venture between real estate investment trust Digital Realty, private equity firm Brookfield Asset Management, and India’s oil and gas giant Reliance Industries Ltd (RIL), opened its first data centre campus near Chennai in January 2024. The campus covers cloud- and carrier-neutral data centre, co-location and interconnection solutions.

The company sees its scale going up from 20MW to 160 MW (in Chennai and Mumbai) in the next two to three years as demand rises. “There's a lot that's required,” said Arpit Agrawal, managing partner and head of India and Middle East for Brookfield's Infrastructure Group.

“The overall Indian data centre capacity today is less than a gigawatt,” said Agrawal, adding that while there are different estimates, he expects it to grow five times by 2030. Agrawal said the company is open to acquiring new data centres to be able to deliver capacity at a compelling price point to customers.

Meanwhile, Hiranandani Group-led data centre company Yotta Data Services Pvt Ltd, too, has significant expansion and investment plans lined up for the coming months.

Darshan Hiranandani, chairman and co-founder, Yotta, said under the data centre venture, the company plans to launch its own public cloud, similar to what Google, Amazon, and Microsoft, provide.

Also read | Yotta to unveil new Greater Noida, Guwahati data centres in 2024

“We are providing AI capacity. On that space, we are continuing to expand. And as our first, we'll put space in our Mumbai data centre, then in our Delhi data centres,” Hiranandani said, adding that demand for India is coming from local cloudification.

“Our data centres—for the quantum of internet usage, population, even of GDP as a simple mathematics—are still low. So, based on our current income levels, we should be having around two to three times the amount of data centres,” said Hiranandani, adding that over the next 12-18 months, Indian capacity will be focused more on Indian consumers before the country caters to demand from other jurisdictions.

Yotta has ordered 16,000 GPUs for its data centres this year, which involves $500 million investment just for chips, according to Hiranandani.

A 19 August report by The Economic Times cited Yotta Data Services chief executive Sunil Gupta stating that about 75% of the H100 graphic processing units (GPUs) procured by Yotta from US chip-maker Nvidia are used by companies abroad and only the rest are used by Indian companies.

Adani’s plans

The two people cited earlier said Adani’s renewed data centre investment strategy is driven by an acute power constraint faced by tech majors, with demand especially shooting up in the past six months.

“Hyperscalers and colocation demand has suddenly intensified as top global hyperscalers are looking for the first-mover advantage,” said the first person. A hyperscaler offers massive computing resources through large-scale data centres, typically in the form of an elastic cloud platform.

In its latest annual report, Adani Enterprises mentioned that its major hyperscale customers included Microsoft, Google, and AWS, among others.

Power sector is the central force for the emerging AI revolution. “Apart from other AI services by WhatsApp or Google or Facebook, on an average, a ChatGPT query needs nearly 10 times as much electricity to process as a Google search,” said the first person.

The amount of energy burned by Nvidia’s H100 GPUs sold in 2023 is enough to power 4 million people—more than 1% of the US’s population, this person said.

According to a McKinsey report last week, data centres account for 3-4% of US power demand, which is expected to grow to 12% by FY30. In May, Goldman Sachs made a similar prediction—globally data centres account for 1% of power consumption and could rise to 4% by FY30.

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This power demand is rising steeply at a time when companies globally are racing to detach themselves from fossil-fuel related activities and become net-zero in terms of emissions as early as possible.

“That’s why the demand in India could be even higher since many of the western countries do not have enough resources to provide clean energy,” said the first person.

“Adani Green Energy Ltd. can generate, evacuate, and supply (via Adani Energy Solutions Ltd.) green power,” said this person, adding that this factor is crucial for the data centre strategy since power alone accounts for 60% of the data centre’s operational cost.

Even though Nxtra itself doesn’t own a green energy power generation plant, the company, with an ambition to reach net-zero by 2031, is adopting new types of green energy, water and waste management technologies within its data centre ecosystem, according to Arora.

“We are integrating energy-efficient cooling systems and harnessing new-age renewable energy sources, including hydrogen ready fuel-cell technology,” said Arora, adding that Nxtra is the only Indian data centre firm to have pledged to RE100 initiative. RE100 is the global corporate renewable energy initiative bringing together hundreds of large and ambitious businesses committed to 100% renewable electricity.

“We are ensuring all our new hyperscale data centres are designed to handle complex AI workloads through next-gen cooling technologies, scalable power infrastructure and high structural floor loading, thus providing hyperscalers and enterprises a future-ready infrastructure to implement AI and other next-gen applications,” said Arora.

Adani data centres are engaged in managing the core infrastructure that hyperscalers need for their AI and cloud-computing based services. This includes power solutions, renewable energy, land banks, engineering and so on.

Adani is constructing data centres in Noida and Hyderabad and expect their first phase to be completed by FY25.

In FY2024, AdaniConneX sealed the largest data centre financing deal in India with a $213 million construction financing facility from ING Bank NV, Mizuho Bank, MUFG Bank, Natixis, Standard Chartered Bank, and Sumitomo Mitsui Banking Corporation.

AdaniConnex, last year, also acquired 100% stake in Innovant Buildwell Pvt Ltd and Aviceda Infra Park Ltd.

According to the two persons cited earlier, the rapid demand for data centres may not only help AEL and AGEL in terms of revenues but also help the group diversify its client base that may turn out to be customers for Adani’s other group businesses going forward.

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