5 Smallcap Stocks Set to Benefit from India's US$ 25 Billion Data Centre Boom

India's data centre space is heating up in a big way, fast becoming a global hotspot for digital infrastructure.

A recent report by Colliers reveals that the country's data centre capacity could cross 4,500 MW by 2030, backed by massive investments worth US$ 20-25 billion (bn) over the next 5-6 years.

The physical footprint of these centres is also set to grow more than threefold-from 15.9 m sq. ft. today to a massive 55 m sq. ft.

What's fuelling this rapid expansion?

A surge in digital services, rising use of AI and IoT, greater internet access, and a strong policy push from the government.

In the middle of this exciting transformation, here are five smallcap stocks that could ride the data centre boom.

These stocks have been selected using Equitymaster's stock screener - Best Smallcap Data Center Stocks.

#1 Bajel Projects

First on the list is Bajel Projects.

Bajel Projects is a leading company in the business of power infrastructure, with a strong presence in the power transmission and power distribution sectors. It was formerly a part of Bajaj Electricals Limited under the EPC segment.

In September 2024, Bajel Projects made a successful foray into the nascent data centre segment by securing its first order for an upcoming data centre service provider.

The order covers the design and construction of a 220/33kV gas-insulated switchgear (GIS) substation and transmission line extension for a colocation data centre in Navi Mumbai, Maharashtra.

Bajel Projects' Financial Snapshot (FY24-25)

(Rs m, Consolidated)	FY24	FY25
Revenue	11,692	25,982.40
Revenue Growth (%)	-	122.2
Net Profit	43.0	154.6
Net Profit Margin (%)	0.4	0.6
Return on Equity (%)	0.8	2.7
Return on Capital Employed (%)	5.2	9.8

Source: Equitymaster

For more details, see the Bajel Projects company fact sheet and quarterly results.

#2 Aurionpro Solutions

Next on the list is Aurionpro Solutions.

The company is a leading technology products and solutions provider.

Aurionpro offers a wide range of solutions for the implementation of advanced digital urban infrastructures, supporting both citizens and civic authorities in smart city governance and digital twin city platforms.

The company also accelerates mobility and transit solutions, while providing expertise in the design, engineering, consultancy, and construction of data centers and hybrid cloud services.

Given its diverse offerings aligned with digital infrastructure, Aurionpro is well-positioned to benefit from the expected surge in data centre capacity.

Aurionpro Solutions Financial Snapshot (FY20-24)

(Rs m, Consolidated)	FY20	FY21	FY22	FY23	FY24
Revenue	4,698	3,740	5,050	6,593	8,875
Revenue Growth (%)	(-10)	(-20.4)	35	30.6	34.6
Net Profit	313	(-1,176)	756	1,019	1,429
Net Profit Margin (%)	6.7	(-31.4)	15.0	15.5	16.1
Return on Equity (%)	6.0	(-34.9)	19.0	20.5	15.6
Return on Capital Employed (%)	9.0	(-25.6)	23.9	25.3	19.7

Source: Equitymaster

Its revenue and net profit have grown at a 5-year CAGR of 11.2% and 18.9%, respectively. This growth has led to a strong RoCE and RoE averaging 12.2% and 10.4%.

While the company avoids giving long-term revenue forecasts, the CEO indicated that revenue of over Rs 20 bn and profit after tax (PAT) of Rs 3.8- 4 bn is achievable by FY28.

For more details, see the Aurionpro Solution company fact sheet and quarterly results.

#3 RailTel Corporation of India

Next on the list is RailTel Corporation of India.

RailTel is a government-owned "Mini Ratna (Category-I)" and Navratna PSU.

The company currently operates two data centres-one in Secunderabad and the other in Gurugram-both of which are Tier-III certified by the Uptime Institute, USA, for design and facilities.

RailTel offers a full suite of data centre services, including transformation and systems management, hosting, and co-location, while focusing on secure and energy-efficient infrastructure.

Its in-house cloud service, RailCloud, is also empanelled with the Ministry of Electronics and Information Technology (MeitY).

With its government backing, established assets, and domain expertise, the company is likely to see good growth.

RailTel Financial Snapshot (FY20-24)

(Rs m, Consolidated)	FY20	FY21	FY22	FY23	FY24
Revenue	11,281	13,778	15,485	19,635	25,678
Revenue Growth (%)	12.4	22.1	12.4	26.8	30.8
Net Profit	1,411	1,425	2,089	1,891	2,462
Net Profit Margin (%)	12.5	10.3	13.5	9.6	9.6
Return on Equity (%)	10.3	10.1	13.7	11.5	13.5
Return on Capital Employed (%)	14.2	14.4	19.0	16.2	18.7

Source: Equitymaster

RailTel's revenue grew at a CAGR of 20.7% from FY20 to FY24, while net profit grew 17.2%.

The company maintained strong financial health, with an average RoE of 11.8% and RoCE of 16.5%.

RailTel plans to expand its portfolio by adding more services so as to offer a complete range of enterprise solutions.

For more details, see the RailTel Corporation of India company fact sheet and quarterly results.

#4 Kirloskar Oil Engines

Next on the list is Kirloskar Oil Engines.

It's a diversified manufacturer specialising in power generation solutions.

The company produces internal combustion engines, gensets, industrial solutions, pump sets, and farm mechanisation equipment.

The company's expertise in gensets positions it as a crucial supplier of reliable emergency power backup systems essential requirement for data centers.

The data centre segment is also emerging as the fastest-growing vertical, according to Managing Director Gauri Kirloskar.

Kirloskar Oil Financial Snapshot (FY20-24)

(Rs m, Consolidated)	FY20	FY21	FY22	FY23	FY24
Revenue	33,795	32,961	40,177	50,238	58,983
Revenue Growth (%)	(-6.8)	(-2.5)	21.9	25.0	17.4
Net Profit	1,879	1,974	1,709	3,317	4,397
Net Profit Margin (%)	5.6	6.0	4.3	6.6	7.5
Return on Equity (%)	10.8	10.3	8.3	14.5	16.5
Return on Capital Employed (%)	14.3	13.7	10.8	16.1	19.9

Source: Equitymaster

From FY20 to FY24, the company achieved a CAGR growth of 10.2% in sales, while its net profit saw a growth by 14.9%. It has a 5-year average RoE of 12.1% and a RoCE of 15%.

The company recently bagged a Rs 2.7 bn defence ministry order to design and develop in-house, speed engines scalable from 3 MW to 10 MW.

For more details, see the Kirloskar Oil Engines company fact sheet and quarterly results.

#5 Anant Raj

It's primarily engaged in the development and construction of IT parks, hospitality projects, SEZs, office complexes, shopping malls and residential projects.

The real estate firm is capitalising on the increasing demand for data centres, using its early-mover advantage with lower capital expenditure due to land ownership and existing infrastructure.

As of December 2024, the company has 6 MW of operational data centre capacity and a proposed 307 MW capacity. It's transforming 5.66 m sq. ft. of commercial space into a 157 MW data centre, with projected rentals of Rs 33 bn once fully operational.

In July 2024, Anant Raj Cloud Pvt. Ltd, a wholly owned subsidiary of the company, entered into an agreement with Google. The company will be responsible for providing data centre infrastructure, managed services, and cloud platforms to various public and private enterprises.

Anant Raj's Financial Snapshot (FY20-24)

(Rs m, Consolidated)	FY20	FY21	FY22	FY23	FY24
Revenue	2,762	2,497	4,619	9,569	14,833
Revenue Growth (%)	(-21)	(-9.6)	85	107.2	55
Net Profit	168	2.0	485	1,444	2,645
Net Profit Margin (%)	6.1	0.1	10.5	15.1	17.8
Return on Equity (%)	0.7	0.0	1.9	5.1	7.2
Return on Capital Employed (%)	1.2	1.0	2.9	6.2	8.6

Source: Equitymaster

Anant Raj's revenue grew at a CAGR of 33.5% from FY20 to FY24, while net profit grew at 55.3%.

The company average RoE was 3% and average RoCE was 4%.

Going forward, the company is investing Rs 100 bn in developing a 300 MW facility.

For more details, see the Anant Raj company fact sheet and quarterly results.

Conclusion

India's data centre boom is creating big opportunities for small players and it's difficult to ignore the momentum.

This growth is being driven by internet usage, push for data localisation, AI adoption, and strong government support.

For small companies that provide building blocks - whether it is construction, cooling systems, energy solutions, or digital infrastructure - this is a chance to grow with the industry.

Many of these agile, focused businesses are already exploiting demand and can see a significant increase in their revenue and visibility in the coming years.

That said, investors should keep in mind that smallcaps are highly volatile and have limited liquidity. This can increase risks for investors.

Nevertheless, for investors with a long-term view and a high-risk appetite, the smallcap data centre stocks might be worth a close look.

However, it's important to conduct thorough research on financials and corporate governance before making investment decisions, ensuring they align with your financial goals and risk tolerance.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...