Japan's NTT to invest estimated $1.5 billion in data centres in India

Japanese tech major NTT on Wednesday said a significant part of its USD 7 billion global commitment for data centres business would be spent in India over the next four years.

The company also feels that there will be margin compression issues for the data centres business in India as capacity supply goes up along with an increase in competition, NTT's country chief executive for global data centres and cloud infrastructure, Sharad Sanghi, told PTI.

In the last few months, a string of corporates, including the Adani Group, Hiranandanis and Reliance Industries have announced investments in data centres, on the back of regulatory moves like data sovereignity which makes it incumbent upon financial institutions to house their data locally.

"India is the fastest growing region for NTT and a substantial amount of the USD 7 billion commitment will be invested here," Sanghi said.

When asked if the money will be equally split between the four regions the company operates in, Sanghi said the overall investments are bound to be shared proportionately, hinting that over USD 1.5 billion or nearly Rs 11,000 crore will come into India.

The company, whose revenues have been growing at 30 per cent every year, is targeting to more than double its capacity in the next three years through the investments, Sanghi said.

Its overall capacity, which stands at 1.2 million sq ft at present spread across Mumbai, Noida, Chennai and Bengaluru, will go up by 1.5 million sq ft, he said.

The company is looking at going to newer locations as well and also adding to its land bank to house the facilities, he said.

Demand is coming from global hyperscalers like the cloud service providers, data localisation requirements and as a greater number of enterprises move to the cloud, Sanghi said.

The Adanis have committed Rs 70,000 crore for data centres in Andhra Pradesh, Hiranandanis have committed Rs 14,000 crore and RIL has announced a partnership with Microsoft for the same.

Sanghi said the high quantum of investments in the business will change the characteristic of the market, which has so far been dictated by suppliers, from 2021 onward once the capacities come on board.

While the revenues will keep growing because of the market opportunity, the supply increase can cause a short term blip in profitability by narrowing operating margins, he said, stressing that this will not last for long time.

NTT is confident of guarding its business and growing in the face of competition, he asserted, adding data centres is its core business and clients, who sign long-term contracts, partner with companies which are not into different businesses like power and realty.

There will be a consolidation in the industry due to the dynamics and the smaller entities may find it difficult to survive, Sanghi said, making it clear that NTT does not look at mergers and acquisition as a strategy but may move in opportunistically for the buys.

He also made it clear that aggressive pricing may not work for companies, pointing out to two incidents of companies who tried getting business using this strategy going bust.

Sangi pitched for an improvement in power supply in Noida, Chennai and Bengaluru, saying two hours of power down time per week is a worry.

NTT on Wednesday announced the launch of an integrated division to look over the global data centre opportunity.