Government intervention is crucial for growth of data centres: Nxtra by Airtel CEO

Ashish Arora, CEO of Nxtra by Airtel, on how the data centre company will double its capacity to 400 MW by 2027 and the government's role in fast-tracking the growth of the sector

By Naandika Tripathi Forbes India Staff

Published: Nov 12, 2024 09:24:31 AM IST

Updated: Nov 12, 2024 09:57:49 AM IST

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Ashish Arora, CEO of Nxtra by Airtel. Image: Amit Verma

Fifty km from Chennai's city centre, SIPCOT IT Park is home to a hyperscale data centre with a 38-megawatt capacity and 3,000 racks. A brief tour showcased Nxtra's new artificial intelligence deployment in predictive maintenance, energy efficiency, and optimised capital expenditure—a first for India. Telecom operator Bharti Airtel, anticipating growing demand, entered the data centre market in 2009 via subsidiary Nxtra Data Ltd.

In 2022, private equity firm Carlyle Group acquired a 24 percent stake for approximately Rs 1,780 crore in the company. Nxtra registered a compounded annual growth rate (CAGR) of around 15 percent over the last five years, from Rs 1,050 crore in FY20 to Rs 1,855 crore in FY24, with a y-o-y growth of 13.54 percent in FY24, according to Care Ratings.

Nxtra Data operates two hyperscale data centres, 12 enterprise-grade data centres in Mumbai, Pune, Bengaluru, Chennai, the NCR, and Bhubaneshwar, and has more than 120 edge data centres across India. There are seven more facilities in the making. The company serves a diverse client base, including telecom providers, tech multinationals, and SMEs, through medium- to long-term colocation agreements.

Adapting to India's data centre boom

The data centre industry has undergone significant transformation over the past five to six years, driven primarily by the shift towards cloud computing. Initially, data centres focused on providing high-resilience environments for critical IT infrastructure. However, with cloud adoption, the need for bespoke data centres diminished.

Cloud operators, being 'colo-native,' opted for third-party data centres from the outset. Until recently, India's cloud market was served primarily from outside the country. Around five to six years ago, global cloud players recognised India's vast market potential and began establishing local data centres to ensure quality service, comply with data residency rules, and cater to high data and compute demands.

“Nxtra has been building data centres for years, with our traditional market focus on enterprise clients. However, we're witnessing a significant shift towards hyperscale demand. Currently, our revenue split is 60:40 in favour of enterprise, but we anticipate a reversal in the next few years,” says Ashish Arora, CEO of Nxtra by Airtel.

Nxtra's cloud business plans

“Our primary focus remains on colocation. While cloud services are not a focus area for Nxtra, our parent company, Bharti Airtel, will likely play a significant role in the cloud space.” However, Airtel's cloud business will operate separately from Nxtra. As a specialised entity, Nxtra concentrates on the colocation aspect of the value chain. The cloud value chain encompasses colocation, compute, storage, and applications. Airtel operates across the entire value chain, but Nxtra's expertise lies in delivering colocation solutions.

Growth trajectory

Over the years, growth has been remarkable, driven by capacity-building initiatives. “We have launched several large hyperscaler facilities, including one in Chennai two years ago, a significant presence in Pune prior to that, and additional facilities in Mumbai and Pune this year. Our capacity has grown substantially, reaching approximately 200 megawatts (MW), representing a threefold increase over the past five years.”

Going forward, Nxtra will double this capacity to 400 MW by 2027 with an investment of Rs 5,000 crore. “This growth will occur within our existing campuses, leveraging already-established power infrastructure and land.”

Government support

To fast-track the growth of the data centre sector, government intervention is crucial in several areas. Firstly, as a major buyer of these services, government adoption of colocation and cloud services remains in its early stages. “However, I am confident that over time, the government will become one of the largest customers of cloud services in India, as is the case globally.”

From an infrastructure perspective, three critical components require attention: Land, power, and approvals. While India has ample land, the approval process and state-level rules governing data centre construction need clarification. Defining data centres as a separate asset class with streamlined single-window approvals would greatly facilitate investment.

Regarding power, India's generation capacity is sufficient, but data centres' high consumption in small footprints strains local grids. Proactive investment in upgrading grid capacities in designated data centre zones would prevent shortages.

Lastly, while India's framework for green energy is supportive, seamless settlement processes across states would facilitate further growth. “As we aim to be net-zero by 2031, relying heavily on green energy, government support and interventions are vital for our sector’s scalability.”

Collaborating with renewable energy players

“We source 70 percent of our data centres' electricity from renewable energy. Our approach leverages the government's net metering policy, allowing us to invest in green energy joint ventures and offset our brown energy consumption.”

Nxtra has partnered with top industry players through 10 joint ventures in the green energy space. These collaborations are tailored to specific states and locations, enabling them to access the necessary infrastructure. “Our partnerships are focused on group captive projects, exclusively meeting Nxtra and Airtel's energy requirements.”

Data localisation

As data localisation gains momentum in India, it's essential to assess the country's capacity requirements to meet the escalating demand for data consumption. Notably, most data generated and consumed in India originates within the country, primarily from tech, fintech, and digital companies. These enterprises rely heavily on data storage, and their data is already stored domestically.

Cloud players serving Indian enterprises also utilise local data. However, data stored by OTT players in social media, search, and content spaces remains an exception, as India's data localisation framework allows storage in friendly sovereign countries, not exclusively within India.

Despite this, India is experiencing rapid data growth, driven by increasing individual and enterprise consumption. “The integration of AI will further accelerate data generation and consumption, fuelling demand for compute, storage, and data centres. This trend is deeply ingrained in our society and economy, ensuring sustained growth in the data centre sector,” says Arora.

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