India’s data centre capacity is expected to nearly triple over the next five years, driven by rising artificial intelligence (AI) adoption and cloud demand, creating a $23 billion investment opportunity, according to a report by Avendus Capital released on May 27.
The investment bank, in the third edition of its annual data centres report, said India could see deployment of 650,000-700,000 graphics processing units (GPUs) across data centres over the next five years as enterprises ramp up AI consumption.
According to the report, India’s built data centre capacity is projected to grow from 1.6 GW in 2025 to around 5 GW by 2030, implying a compound annual growth rate (CAGR) of 26 percent.
Developers currently have an active pipeline of more than 3 GW, including nearly 1 GW of AI-focused data centre capacity. This expansion will a require capital investments of nearly $23 billion over the next five years.
The report highlighted GPU infrastructure as an emerging high-return segment within the broader data centre ecosystem. According to the report, large-scale GPU deployments can generate equity internal rates of return (IRRs) of more than 28 percent at current capex and pricing levels.
Vaibhav Garg, Director, Infrastructure & Real Assets Investment Banking, Avendus Capital and chief author of the report said, “AI adoption is emerging as a significant catalyst for next-generation infrastructure investments in data centers, alongside sustained demand from cloud and digital workloads. This dual demand trajectory has already translated into $ 5 billion of transaction activity over the last three years, with backing from global institutional investors, infrastructure funds, and strategic operators.”
Garg added public markets and strategic transactions are also expected to play a larger role in funding the sector’s growth, with 3-4 data centre IPOs likely over the next three years.
The report noted that private market activity in the sector is also increasing globally, with data centre transactions currently taking place at EBITDA multiples of 20-30x. Structures such as REITs and InvITs are also being explored for capital recycling due to the sector’s long-term contracts and predictable cash flow.
India’s AI market is expected to grow from $13 billion in 2025 to $131 billion by 2032 at a CAGR of around 39 percent, supported by enterprise adoption and investments in domestic AI capabilities, including indigenous large language models (LLMs).
The report further said more than 38,000 GPUs have already been committed under the IndiaAI Mission, of which over 22,000 are expected to be allocated for AI workloads in the near term. This is expected to drive demand for high-density, liquid-cooled and AI-ready data centre infrastructure across the country.
Mumbai leads data centre capacity
Mumbai emerged as the country’s largest data centre hub, accounting for nearly half of India’s installed capacity. The city will continue to see around 47 percent of the additional data centre capacity being built over the next five years coming to India.
As of now, Mumbai has a capacity of about 801 MW, followed by Chennai with 268 MW, Delhi NCR with 161 MW and Hyderabad 138 MW.
