Energizing India's Digital Future: UBS Spotlights Power Supply Chain in Data Center Growth

UBS has recognized the power supply chain as a key investment theme in India's fast-growing data center market. In today's report, the global brokerage pointed out that as data centers—one of the most power-hungry types of property—spreads throughout India, the consequent spike in power demand could place tremendous pressure on India's local power grids. UBS estimates that India's reserve margin, which is the buffer between peak power demand and supply capability, is likely to drop below the 30% buffer zone as data center buildouts gain pace. India's pipeline capacity for data centers is 2.2 times existing capacity.

 

UBS views this scenario as its top investment theme, not only in data center operators but more so along the power supply chain. The company specifically identified markets such as liquid cooling and stable system providers as more enticing than traditional data center operators or developers, HOLT valuations added. In India, UBS favored Bharti Airtel, Tata Power, and CG Power & Industrial Solutions as top stock ideas on this theme of growth. Bharti Airtel is one of the favored plays in regional data center operators, while the likes of Tata Power and CG Power are favored because of their positioning along the power supply chain.

 

The report also states that although data centers today account for only 2% of overall power usage in the Asia-Pacific, this is doubled to 4% when pipeline capacity is reached. Spatial agglomeration of data centers is also warned against by UBS as it strains local grids. Going forward, UBS puts a relatively conservative 3% chance of supply overhang in Indian data centers, versus greater risks in Japan and China, but stresses the importance of careful watching as capital expenditure accelerates.

 

Source: Moneycontrol