ANANTRAJ

Bets on Data Centers for Future Growth 🚀

, a long-standing player in the NCR real estate market, is making a significant pivot into the data center business, a move it initiated in 2021. This new venture is seen as the primary driver for its next phase of growth, with the company aiming for a revenue of ₹1,200 crore by FY27 and a staggering ₹9,000 crore by FY32 from this segment. The market is optimistic about this transition, with Motilal Oswal Financial Services valuing the data center business at 54% of Anant Raj's total valuation. This optimism is fueled by several factors, including strong government support with potential tax incentives, and the company's plan to aggressively expand its data center capacity from 28 MW to 307 MW by FY32. The company is also leveraging its ready land bank, a partnership with Orange Business, and a strong balance sheet to drive this expansion. Evolving Risks: Despite the positive outlook, the data center business is fraught with risks. The sector is heavily influenced by the fast-evolving field of artificial intelligence (AI), which has seen the emergence of more capital-efficient models. This volatility was highlighted when Anant Raj's stock plunged 34% in two days following a report on a new, budget-friendly AI model from China. Additionally, competition is intensifying, and the company's decision to rely on internal accruals for expansion has caused delays in some cloud-service plans and may put stress on its cash flow in the short term. Financial and Operational Challenges: The company is expected to face cash outflows of ₹300 crore in FY26, and its profitability and cash flow could be strained by the launch of new real estate projects alongside the data center expansion. While the stock has seen a significant recovery from its 52-week lows, it remains down for the year, reflecting the market's cautious approach to the long-term execution risks.