Larsen & Toubro to Expand Data Center Capacity Sixfold, Investing Billions

Engineering and construction giant Larsen & Toubro (L&T) is set to significantly expand its data center footprint, planning to grow capacity from the current 32 MW to 200 MW. This ambitious expansion is a direct response to the booming demand for digital infrastructure in India. L&T currently operates data centers in Panvel and Chennai, with plans for an additional 30 MW in Mahape, Mumbai.

Industry experts estimate that building 1 MW of data center capacity requires an investment of Rs 50 crore to Rs 70 crore, suggesting that the 200 MW target could necessitate a minimum investment of Rs 10,000 crore. L&T's Whole-Time Director and Chief Financial Officer, R Shankar Raman, highlighted that while L&T is a leading EPC contractor for data centers, the business of simply leasing space is not highly remunerative and offers real estate-like returns. Therefore, L&T aims to provide value additions such as cloud services to enhance profitability.

This move aligns with the broader growth trajectory of India's data center market. A Macquarie Equity Research report projects that India's data center capacity could double by 2027 and potentially increase fivefold by 2030 if planned projects are fast-tracked. The report indicates India currently has 1.4 GW of operational capacity, with another 1.4 GW under construction and about 5 GW in the planning stages.

Impact This news is highly impactful for Larsen & Toubro, signaling a strategic pivot towards capital-intensive digital infrastructure development. It could boost the company's revenue streams beyond traditional EPC contracts and lead to significant future earnings growth. The expansion also strengthens India's digital backbone, potentially attracting more foreign investment into the sector. The rating for the impact on Larsen & Toubro and the Indian digital infrastructure sector is 8/10.

Difficult terms EPC (Engineering, Procurement, and Construction): A type of contract where a company is responsible for the design, procurement, and construction of a project. MW (Megawatt): A unit of power equal to one million watts, used here to measure data center capacity. GW (Gigawatt): A unit of power equal to one billion watts, used for larger scale capacity measurement. Cloud Services: Services such as computing power, storage, and software delivered over the internet, often referred to as the 'cloud'.