Anant Raj plans a data center transition

India’s booming data center market is seeing several old school infrastructure players make a bid.

Why it matters: Anant Raj has been a veteran in India's real estate sector since 1985, owning IT parks, hospitality projects, and residential developments. The firm is making a bold transition from traditional urban development to hyper scale computing, with the pivot expected to drive growth and financial strength.

By the numbers:

• Anand Raj's sales surged from ₹250 crore in FY2021 to ₹1,483 crore in FY2024, showcasing explosive growth of 493% setting a solid operating foundation for the company's future plans.
• The 3-year sales CAGR stands at 81%, potentially driven by the high-value data centre projects.
• Net profit incereased from ₹9 crore in FY2021 to ₹271 crore in FY2024, a 2911% increase.

Between the lines: Anant Raj has announced plans to invest nearly $1.2 billion in developing up to 300MW of data center capacity in the county in the coming years. Additionally, the company will retro-fit three of its existing data center facilities across Haryana with new capabilities.

Budding partnerships: as investments scale, Anant Raj has been able to win key partnerships. Most recently, the company has signed an MOU with Google to provide data center infrastructure and managed services for Google's Cloud customers.

Anant Raj has significantly improved its bottom line.

• The company boasts a 5-year profit CAGR of 45%, demonstrating the lucrative nature of the data centre business.
• Operating profit margins have strengthened from 14% in FY2021 to 23% in FY2024
• Return on Capital Employed (ROCE) improved from 1% in FY2021 to 9% in FY2024.

Zoom out: Market's have been loving the stocks story so far. Anant Raj's stock price has seen a remarkable 1-year return of 172%, likely driven by investor enthusiasm for its data centre strategy. Current market cap sits at ₹17,771 crore.

Challenges remain: the stock's high price-to-book ratio of 4.86 may reflect high growth expectations from the data centre business. Improving the Return on Equity (ROE) from its 3-year average of 5.42% will be crucial as the company scales its data centre operations.

Big picture: Anant Raj's experience in developing over 20 million square feet of real estate projects provides a strong foundation for data centre development. The company's presence in key markets like Delhi, Haryana, and NCR positions it well to serve the growing data needs of India's tech hubs.

Bottom Line: while the opportunity in front of Anant Raj remains solid, valuations may be a bit stretched which is keeping some investors at bay.