Ambattur's evolution: Once a manufacturing hub, now a data centre hotspot

In 2024, the clang of metals colliding and the scent of welding fire and chemicals greet visitors to Ambattur - a 45-minute drive from Chennai city

Whether it is Mumbai’s choked-up streets or a scenic rural village in the Northeast, for every Indian, Hercules cycles are part of their nostalgia. But not too many know that it was part of the first joint venture agreement to be signed in South India after Independence and one of the first foreign investments too.

 

By 1951, the JV resulted in the birth of the TI Cycle factory in a mango grove in Ambattur that came out with the first Hercules, and sowed the seeds of the Ambattur Industrial Estate later in 1964. 

 

Come 2024, the clang of metals colliding and the scent of welding fire and chemicals greet visitors to the same Ambattur — a 45-minute drive from Chennai city. Touted as South Asia's largest industrial estate for decades, it is spread over an area of 1,430 acres. For long, it was a manufacturing zone, with the majority of around 1,800 companies in the region specialising in automobile components.

 

But the times have changed, which is evident from the new high-rise commercial buildings. Ambattur is undergoing a makeover and is becoming one of the most sought-after hubs for data centre companies.

 

Huge attraction

 

Data from Guidance Tamil Nadu indicates that as many as 12 data centre projects (including expansions) are either established or at various stages of implementation in Ambattur. Not just that, Chennai is seeing a huge attraction from data centre companies, with Siruseri, around 50 km from Ambattur, also seeing around eight data centres.

 

“The proximity to submarine cable landings makes Ambattur one of the most sought-after locations for data centre players, in addition to stable and high-quality power supply,” says V Vishnu, managing director and chief executive officer of Guidance Tamil Nadu, a state government agency that assists investors. Submarine cables are high-capacity optic fibre pairs laid on the ocean floor to provide global connectivity for high-speed data exchange.

 

Chennai’s distance from India’s regular earthquake-prone zones, as well as its distance from potential war zones with unfriendly neighbouring countries, makes the city a favourable location. It is estimated to account for 21 per cent of the upcoming 500 megawatts (Mw) supply by the end of 2024.

 

Data centre capacity is gauged in Mw due to its high power consumption. 

 

If someone looks at the availability of undersea cables, latest reports cite that Mumbai has an advantage, with as many as 12 cable landing stations (CLS), followed by Chennai with eight, with more CLS under construction.

 

Early this year, Digital Connexion, a joint venture between Mukesh Ambani’s Reliance Industries, Canada’s Brookfield, and US-based Digital Realty, launched its first data centre called MAA 10 at Sai Nagar area in Ambattur. The centre started with a processing capacity of 20 Mw and will expand to 100 Mw soon.

 

For an outsider, there is no board to identify that the facility belongs to Digital Connexion, but locals say the area is buzzing with activity with lots of employees. It is this same Reliance campus where Meta, the parent company of Facebook, Instagram, and WhatsApp, is setting up its first data centre in India to process data for Indian users locally instead of at its Singapore centre, which is expected to improve user experience and reduce costs.

 

Around 100 metres from Digital Connexion is the new campus of another data centre major, NTT Ltd, spread across 6 acres, which is a state-of-the-art project with a total planned capacity of 34.8 Mw critical IT load from two data centre buildings. Here too, there was no board to indicate that it is an NTT property, except one near the security gate.

 

The area is not just about these two players; within a radius of around 4 km, as many as 12 new centres are coming up, including expansions.

 

CtrlS Datacenters is building a new campus here with an investment of Rs 4,000 crore and a capacity of 72 Mw. The site will offer 1 million square feet across two buildings, along with an on-site substation.

 

Others include Colt Data Centre Services (min 70 Mw), Blackstone-backed Lumina CloudInfra, Microsoft DC (co-location at CtrlS), NTT Phase II, ST Telemedia Global Data Centres India ($228 million for expanding its facility by adding 80 MW to the existing 45 Mw), Web Werks JV with Iron Mountain (reportedly investing Rs 1,800 crore in two phases), and CapitaLand (Rs 1,150 crore).

 

“We have already started work on the second phase. We are looking to expand it to 100 Mw in the future. Ambattur is ideal, given the availability of the necessary power supply, high number of submarine cable landing stations in the local area, and the state government’s aspirations to make Chennai the top data centre hub in India,” C B Velayuthan, chief executive officer of Digital Connexion, told Business Standard during the launch of his Ambattur centre. 

 

According to real estate advisory firm Savills India, the total IT capacity in India, as of the first half of 2024, was around 942 Mw, growing at a compound annual growth rate of 22, out of which around 54.9 per cent was in Mumbai, followed by Chennai with 12.3 per cent, and the National Capital Region with 11.5 per cent. More importantly, the majority of the upcoming facilities are in Mumbai, Hyderabad, and Chennai. The current 115.5 Mw in Chennai is spread across Ambattur and Siruseri.

 

Hyper-scale cluster

 

Srihari Srinivasan, director and lead of data centre services, Savills India, believes the major driving point of Ambattur over Siruseri and other locations in South India is the presence of customers such as Microsoft, Meta, and others.

 

“This is a hyper-scale cluster. Once a hyper-scale customer is in, others feel the same comfort. In addition to this, land is available in freehold in Ambattur, compared to leasehold in other areas. Moreover, the Ambattur substation is nearby, with its capacity being enhanced,” says Srinivasan.

 

The land in the estate was sold to companies almost five decades ago, and hence freehold land is available here, with rights on the type of industry they want to get into. Srinivasan cites that real estate prices have gone up from Rs 13-14 crore in 2019 to Rs 25 crore on average now, owing to the data centre boom and the freehold advantage.

 

“Chennai is the natural destination for data centres. There are about four undersea cable lines that have been connected. One of the nodes is located in Ambattur and one in Siruseri. Data centres also need feed from at least two sub stations,” said Srinivas Anikipatti, Senior Director- Tamil Nadu and Kerala, Knight Frank India.

 

Based on a Savills India report, supply in excess of 2,000 Mw IT capacity is expected between 2024 to 2030 across the major cities in the country. Apart from colocation services, data centre operators are increasing their service offerings to other services such as networking, private and public cloud, GPU-powered solutions and other managed services. On the demand side, the market is witnessing majority of takers from BFSI, IT, ITeS and services sector.

 

The local IT market is also fast expanding in the region. Based on an estimate by the Ambattur Industrial Estate Manufacturing Association (AIEMA), as many as 200 IT-related companies have come up in the region in recent times.

 

“The government allowed the setting up of new IT and data centre units in the region only a few years ago. Infrastructure has improved since then. However, MSMEs like us are facing a manpower shortage as lower-grade employees, other than engineering staff, prefer a Microsoft or Reliance over a little-known MSME supplier,” says R S S Satish Babu, president of AIEMA.

 

Whether MSME players can reap the benefits of the data centre boom or not, South Asia’s largest industrial estate is in a transformative phase to become South India’s top data centre cluster.