India Market Outlook

[Bowie Maur]

Trucks are key enablers of global economic activity and play an essential role across every point of the economic value chain. In order to tackle greenhouse gas emissions and climate change, we must fast-track the evolution of trucks. Globally we're witnessing zero emission medium & heavy-duty vehicles gaining a big push, and India isn't far behind. The country's rapidly growing economy also presents an opportunity for technological advancements in transportation.

Our early market outlook report outlines the landscape of the Indian trucking industry, focusing on the electrification of medium and heavy-duty trucks (MHDTs), and examines use cases with the potential for transition. Further, it makes a case for targeted action from corporates along with a robust policy environment to further propel the growth of MHDTs.

Against the backdrop of the transition to electric vehicles (EVs) in the passenger & light-duty vehicles segment, this report discusses the principal elements of the MHDT sector that will play a vital part in decarbonising freight transport in India, underscoring the need for a time-bound transition.

India is one of Asia's most diversified equity markets, and it is poised for healthy growth in the medium to long term due to its strong economic outlook. The LionGlobal India Fund aims for medium to long-term capital appreciation by investing in India equities and equity-related instruments. We are overweight (OW) in Consumer Discretionary, Media and Autos and underweight (UW) in IT Services, Industrials and Financials.

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The travel metasearch engine has seen substantial growth in the India market over the last few years, with the country moving up among its top five markets. Since 2019, international searches in India have increased by 121% on Skyscanner, while domestic searches have surged 639%.

India and Asia Pacific in general have a shorter booking window than elsewhere. For long-haul flights, about 28% of Asia Pacific travelers plan three months ahead, while this is 40% in the U.S, according to Skyscanner data.

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India is ranked the 13th largest data center market in the world with 138 data centers. Additionally, 45 new data centers with a combined 13 million square feet and 1,015 MW of capacity are scheduled to be developed by the end of 2025.

Data center businesses in India are positioned for consistent annual expansion, with an expected compound annual growth rate (CAGR) of 5.84 percent, propelling the market size to an estimated US$9.27 billion by 2027.

According to the Ericsson Mobility Report published June 2023, India is projected to lead global data consumption, reaching 62GB per user per month by 2028. This surpasses even developed markets like the U.S., Western Europe, South Korea, and China.

A data center refers to a designated space within a building or a set of architectural configurations designed to accommodate computer systems and their associated components, including networking and storage systems.

Data center segments in IndiaThe Indian data center market is categorized into two main segments: captive and outsourced (including colocation and hosting), and further divided by IT infrastructure type, which includes servers, storage, and enterprise networking.

Singapore-headquartered ST Telemedia (STT) presently oversee the largest raised floor space and essential IT capacity in India, boasting 27 facilities spanning nine cities and a total IT load exceeding 300MW. Google has an operational data center in Mumbai, while in 2021, Microsoft erected a data center in Maharashtra.

AWS, in addition to its existing data center in Mumbai, is in the process of setting up a second one in Hyderabad. Also, AWS manages a total of 17 CloudFront edge locations across India. These include four in Hyderabad, four in New Delhi, three in Bangalore, three in Mumbai, two in Chennai, and one in Kolkata.

India has over 132 data centers distributed across the country, with Mumbai accounting for 45 percent of them. Chennai, while ranking a distant second per an IBEF report, is rapidly emerging as the next prominent data center hub.

Other prominent data center hubs in India are Bengaluru, Hyderabad, Noida (Delhi-NCR), Pune, and Kolkata. Since the majority of data centers in India are situated in Tier 1 cities, there are huge untapped prospects for Tier 2 and Tier 3 cities. Tier 2 cities are also expected to increase investments in edge data centers to ensure seamless customer digital experience in these rapidly growing markets.

Mumbai is the prime hub for data centers in India, attracting demand from BFSI (banking, financial services, and insurance), media, and IT/ITeS sectors. To support this, the Maharashtra government offers incentives for integrated data center parks and includes data centers under the purview of the Essential Services Maintenance Act, 1968. According to Mordor Intelligence, the Mumbai data center market was 411.9 MW in 2022. It is projected to grow at a CAGR of 13.44 percent from 2023 to 2029, reaching a substantial capacity of 1,491.38 MW.

Foreign investmentAccording to an industry stakeholder, the Indian data center sector has witnessed an influx of US$14 billion in investments over the past five years. This figure is projected to surpass US$23 billion by 2025, according to analysis by investment banking firm Avendus Capital. The firm predicts that data centers will be the largest segment of real assets investments in India with an expected 40 percent CAGR to reach 1,700 MW capacity by 2025. Developers in India expect demand to exceed 3,000 MW by then.

The colocation model is prevalent globally, with over 75 percent of data center service providers operating in this space. In India, most new entrants in the data center sector are adopting the colocation business model or offer carrier-neutral colocation solutions. The colocation model is where data center providers offer the physical infrastructure, including building, power, cooling, racks, and security, while customers (enterprises) bring their own IT hardware and expertise. Under this model, data centers charge customers based on the space they occupy and the power they consume, similar to renting an apartment and paying monthly rent and electricity bills.

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