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Realty stocks have been breaking records for two consecutive years. Among them is Delhi-based real estate developer Anant Raj. Since July 1, 2022, its stock has surged by an astounding 1,581 per cent until January 20, 2025.
With a market capitalisation of around Rs 20,000 crore, the company became a multibagger, driven by rising demand for residential and commercial properties in Delhi and its strategic foray into data centres, offering Infrastructure-as-a-Service (IaaS). Anant Raj is now exploring Platform-as-a-Service (PaaS) and Software-as-a-Service (SaaS), blending real estate and technology to boost growth.
However, a development from China shook its momentum — the emergence of DeepSeek, a generative AI model requiring only a fraction of the cost and computing power typical for such technologies, shaking the core valuation of data centre operators like Anant Raj.
The impact was immediate — Anant Raj’s shares hit a 20 per cent lower circuit on January 28, reducing its price-to-earnings (PE) ratio from 87.8x to 51.8x. Even its strong third-quarter revenue and net profit growth of 36 per cent and 54.9 per cent year-over-year could not revive the stock price.
Anant Raj’s stock price momentum from July 2022 to January 2025 (Source: Trading View)
It must be noted that the stock price correction has nothing to do with the company’s earnings or real estate business. The correction is solely related to investors’ reaction to the future need for data centres.
Primarily a real estate developer, Anant Raj’s portfolio spans residential townships, commercial and IT infrastructure, including IT parks, hotels, shopping malls, and offices.
The company benefitted from India’s real estate boom as demand and prices of residential properties surged. Riding this wave, its revenue and profits grew at a compounded annual growth rate (CAGR) of 81 per cent and 213 per cent, respectively, over the last three years. The realtor used the sales proceeds to reduce its net debt to Rs 290 crore in FY24 from Rs 1,146 crore in FY22 and improve its cash reserves.
Despite the slowdown in house sales growth rate in FY25, the recovery seems promising as the Union Budget 2025 has introduced several incentives that encourage property ownership:
No tax on income up to Rs 12 lakh will leave more money in the hands of the middle class.
Increasing the tax-deducted at-source (TDS) threshold on rental income from Rs 2.4 lakh to Rs 6 lakh could encourage people to buy properties for investment purposes.
Allowing homeowners to claim two self-occupied properties as tax-free could encourage people to buy a second home.
Additionally, a 25-basis-point repo rate cut by the Reserve Bank of India (RBI) is likely to make EMIs on home loans more affordable, further supporting demand.
Data centre opportunity: The math behind it
While the real estate business could only grow realty share prices by 100-200 per cent, it was the AI boom and India’s AI-first approach that triggered Anant Raj’s 1,500 per cent multibagger momentum.
In August 2023, Parliament approved the Digital Personal Data Protection Bill that encouraged local storage of the data gathered within India. The Digital India movement, connecting the world’s largest population, is generating ample amounts of data, driving demand for data centres.
India’s Data Centre Outreach (Source: CBRE Research)
India’s data centre outreach is under-penetrated with only 1 megawatt (MW) of data centre available for every 1 million users, compared to 4MW in China. Usually, it takes 3-5 years to get a licence and build a data centre. Anant Raj found an opportunity in 2020 and operationalised its first 3 MW facility in Manesar in September 2023. The timing couldn’t have been better as companies were pouring in money to build AI capabilities after the ChatGPT frenzy.
Anant Raj has now committed to develop 307 MW IT load data centres at Manesar, Rai, and Panchkula in the next five years, with a total investment outlay of Rs 10,000 crore. This investment will be gradual and depend on how the data centre business performs.
According to industry experts, a 1 MW data centre has a construction cost of Rs 55 crore, but it’s only Rs 24 crore for Anant Raj as it has a low-cost land bank which it has acquired over the 50 years of its operations.
In the second-quarter earnings call, Anant Raj CEO Ashim Sarin and Managing Director Amit Sarin elaborated on the numbers and the earnings potential of its subsidiary Anant Raj Cloud.
The idea was to provide co-location services, wherein the realtor provides empty space and the tenant bears the cost of electricity, servers and other equipment. This service earned Anant Raj Rs 8 crore in quarterly revenue for 6MW capacity. After deducting operating expenses of 18%, earnings before interest, taxes, depreciation and amortisation (Ebitda) margin comes to 82 per cent in a 100 per cent occupancy scenario, stated Anant Raj CFO Pankaj Gupta in the earnings call.
However, it kept getting clients for cloud services, which encouraged the management to invest in servers, routers, firewalls, switches and more. It partnered with Orange Business and launched a sovereign cloud platform, ‘Ashok Cloud,’ on 0.5 MW IT load.
It costs Rs 100 crore to build a 1MW IaaS offering over and above the Rs 24 crore cost for building the data centre. An investment of Rs 124 crore can generate Rs 150 crore in annual revenue and Rs 126 crore, or 84 per cent, in Ebitda on 100 per cent occupancy, explained Amit Sarin. However, IaaS equipment needs an upgrade every four to five years.
Such high Ebitda could be a game-changer for Anant Raj, which reported Rs 371 crore in Ebitda from its realty business in FY24.
What should investors expect from Anant Raj’s Cloud business?
Anant Raj is also looking to provide Cloud Services, Managed Services and Security Services in collaboration with Telecommunication Consultants India Limited (TCIL). The Ebitda and revenue numbers have not yet been released, but these additional services are expected to increase the return on data centre investment.
The management aims to build 28MW Data Centre IT load by the end of FY25 and another 35 MW by FY26. By the end of FY26, it aims to have 63MW of data centre capacity, of which 25 per cent will be allocated to cloud services and the remaining to co-location services.
Taking the above calculations as the base, Anant Raj Cloud could earn Rs 146.6 crore in co-location Ebitda on 33.25 MW capacity and Rs 1,667 crore in IaaS Ebitda on 15.75 MW capacity. From Rs 371 crore in FY24 to an ambitious target of Rs 1,813 crore in FY27 (a full-year Ebitda on 63MW capacity), it represents a 69 per cent CAGR in Ebitda. These are just rough estimates of the best-case scenario of 100 per cent occupancy. The high Ebitda will also come with high depreciation which could widen the gap between Ebitda and profit after tax (PAT).
Anant Raj’s Cloud Business Roadmap (Source: Anant Raj Q3FY25 Investor Presentation)
Emkay Global expects Anant Raj’s data centre Ebitda and PAT to reach Rs 650 crore and Rs 310 crore, respectively, by FY27.
While the management has a clear road map on the data centre opportunity, robust implementation is necessary to achieve these numbers. Moreover, competitive offerings could pose a risk. Anant Raj is a new entrant in the field of data centres, where market leaders like Yotta Data Services, Sify, and AdaniConneX are already providing advanced cloud services.
Is this multibagger stock a buy after its 1,581 per cent rally?
The steep correction of 40 per cent in Anant Raj’s share price has brought its valuation closer to other realtors. Its stock is trading at a PE ratio of 51.8x, which is higher than its 3-year median of 42.4x. However, the high PE is justified by its 3-year profit CAGR of 213 per cent. And if we compare the 51.8x with the 56x PE of rival Phoenix Mills, which generated a 3-year profit CAGR of 178.8 per cent, Anant Raj’s share price has a better valuation.
Note that we are considering the 3-year median as the company demerged in 2021, which significantly changed its fundamentals.
Anant Raj’s data centre earnings are still at early stages and could accelerate its future earnings growth if the opportunity pans out as expected. Emkay Global has reiterated a “Buy” on Anant Raj with a target price of Rs 975, representing a 63 per cent upside from the current trading price of Rs 596.5.
The valuations might look expensive amid the data centre uncertainty triggered by DeepSeek. However, India’s AI-first approach and under-penetrated data centre market could drive demand in the medium and long term.
It would be interesting to see how Anant Raj optimises its resources and builds its cloud business to pin its name on India’s data centre map.
Note: We have relied on data from http://www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
Puja Tayal is a financial writer with over 17 years of experience in the field of fundamental research.
Disclosure: The writer and her dependents do not hold the stocks discussed in this article.
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