Financial services firm Nomura has highlighted two 'multibagger' stocks, CG Power and Industrial Solutions Ltd and GE Vernova T&D, as prime beneficiaries of India's burgeoning data center industry. With limited direct investment avenues in co-location data center operators, Nomura advises focusing on equipment and component manufacturers, which account for 60-75 percent of total data center capital expenditure.
India's data center sector is experiencing one of the fastest growth rates globally. The country's data center IT load surged from 350MW in 2019 to an estimated 1.5-1.6GW by 2025, representing an impressive 29 percent annual growth, outperforming the 20 percent global average. This expansion has seen India's share in global data center capacity rise from 1.5 percent to 2-3 percent over the same period. Nomura projects that India's data center capacity could reach 7GW by 2030, reflecting a 30 percent Compound Annual Growth Rate (CAGR).
The attractive growth is further bolstered by India's cost-efficiency in construction, with costs estimated at $6-7 million per MW, significantly lower than the $10-18 million per MW seen in developed APAC and Western markets. Nomura's analysis indicates that five key product categories absorb a substantial portion of a data center's capex budget:
- Medium- and low-voltage switchgear and transformers
- UPS and battery systems
- Backup diesel and gas gensets
- Precision cooling and liquid-cooling distribution units
- Rack, busway, and structured cabling infrastructure
CG Power and Industrial Solutions has seen remarkable growth, with its stock up 33 percent over the past year and a staggering 971.56 percent over the last five years. Nomura has set a target price of Rs 1,050 for CG Power, suggesting an upside potential of 19 percent.
Similarly, GE Vernova T&D has more than doubled investor money in the last year and recorded an astounding 3,313.98 percent increase over five years. Nomura's target for GE Vernova T&D is Rs 5,675, indicating a 17 percent upside potential.
Nomura notes that players in this supply chain, including CG Power and GE Vernova, operate in an 'oligopolistic' market. The significant delivery lead times, often two to four years, have created a seller's market with multi-year backlogs, translating today's bookings into revenue for 2027-2029. Furthermore, data center projects command premium pricing due to stringent requirements for higher reliability, tighter customization, accelerated lead times, specific certifications, and robust on-site engineering support, differentiating them from traditional commercial or industrial projects.