India’s National Investment and Infrastructure Fund (NIIF) has teamed up with Digital Edge and AGP to create an India portfolio of hyperscale data centers – starting with a US$2 billion investment in one of the country’s biggest facilities, a greenfield 300MW hyperscale facility in Navi Mumbai.

Digital Edge brings its experience as a leading Asia-focused digital infrastructure company, while AGP focuses on sustainable solutions; both are headquartered in Singapore. Navi Mumbai is India’s biggest data center hub and the new facility will occupy a 47 acre site with construction commencing in early 2023. Upon completion the data center will be fully operated by and marketed by Digital Edge DC.

NIIF’s role will involve leveraging its local and operational expertise in developing platforms as well as its infrastructure investment experience, while AGP will assist with sustainability objectives with the goal of powering the hyperscale facility with renewable energy.

Vinod Giri, Managing Partner of the NIIF’s infrastructure fund, said, “The platform resonates with NIIF’s investment philosophy of developing infrastructure at scale and partnering with large, credible, well-governed companies that want to expand into India.”

The NIIF-backed platform is expected to provide a competitive advantage to India’s economy in the long run. Moving forward, Digital Edge DC will continue to capture the demand of the market via investing heavily in more data centers, as aligned with its strategy to further build its cloud standing.

Data center platforms form the infrastructure backbone of the digital economy and are an increasing focus of SOIs, particularly in Developed Asian markets which represent around half the capital deployed by SOIs from 2016, but also in Asia’s emerging markets, such as India and Indonesia.

Abu Dhabi sovereign wealth fund Mubadala is backing Princeton Digital Group’s (PDG) expansion and in February 2022 made a US$350 million equity investment in the Singapore-based pan-Asia data center operator. PDG's existing shareholders –Pincus and OTPP – made follow-on investments as well, lifting the combined investments for the funding round to more than US$500 million. PDG’s MU1 facility is located within the Navi Mumbai campus and offers a capacity of 48 MW for critical IT power. It comprises of two data center buildings offering what it claims are “globally standardized, scalable and sustainable services to customers at home and abroad.”

The company currently has 600MW of capacity in operation or under development, with 20 data centers in 14 cities across five countries in the Asia-Pacific region. With backing from Mubadala and OTPP, PDG plans to add at least another 200MW of capacity by 2024 and by 2027 aims to have an additional 10-20 data centers and double its current capacity.

The data center market in Mumbai is estimated to reach a CAGR of 22% for the period 2017-2023, housing 31% of India’s colocation footprint, according to PDG.

Given the scale of the Indian market and its potential, state-owned investors are increasingly likely to feature in capital deployment in the data center sector. Interest is growing after the government sought to incentivize investment in positioning India as a global data center hub and doubling down on its digitalization efforts, namely Digital India which includes the creation of the Aadhaar digital IDs. Consumer preferences are increasingly pivoting towards convenience through digital services, creating demand for digital payments and video communication which would need to be supported by data centers.

The investment environment is improving, which should further bolster sovereign investment in the sector. From April 2022, it began classifying data centers as infrastructure assets which reduced the barriers to accessing cheaper and long-term institutional funds. This comes on top of the deployment of more robust fiber backbones and sustained investment into energy networks. The October 2022 launch of 5G mobile broadband services, following the conclusion of India’s 5G spectrum auction will drive demand for consumer-led cloud applications such as video streaming and gaming.

While this marked some progress, there are still downsides that could be obstacles to sovereign investment in India’s data centers. In the Asia Cloud Computing Association’s 2020 Cloud Readiness Index, India ranked 10th out of 14 markets and in terms of infrastructure metrics it scored relatively poorly due to the unreliability of its power grid as well as its poor progress in terms of green energy. Tax as well as legal risks were also highlighted as factors that could affect data centers situated in the country.

Related funds Mubadala NIIF OTPP