Brokerage Retains ‘Buy’ Rating; Data Centre Expansion and Premium Realty Projects Continue to Drive Long-Term Growth Story

Anant Raj Ltd continues to attract investor attention as it builds a unique business model that combines premium real estate development with high-growth digital infrastructure assets. Global brokerage Nomura has reaffirmed its ‘Buy’ rating on the stock, although it has trimmed its target price from ₹700 to ₹650 due to slower-than-expected monetisation of cloud infrastructure and delays in certain residential project launches.

Despite the reduction in target price, the brokerage still sees an upside potential of nearly 24% from current market levels, highlighting confidence in the company's long-term earnings growth and strategic positioning in two rapidly expanding sectors.

The revised outlook reflects temporary execution challenges rather than any deterioration in the company's core business fundamentals.

Cloud Business Growth Delayed but Not Derailed

One of the primary reasons for the target price revision is the slower ramp-up of cloud infrastructure revenue.

Anant Raj has been aggressively investing in data centres and cloud infrastructure to capitalize on India's rapidly growing digital economy. However, customer onboarding and infrastructure testing have taken longer than initially expected, delaying revenue recognition from newly installed capacity.

Why Revenue Recognition Is Taking Longer

Management has indicated that cloud infrastructure projects require extensive:

• Technical testing

• Security validation

• Client approvals

• System integration

• Performance verification

Typically, newly installed cloud capacity takes four to six months before it starts generating recurring rental income.

As a result, revenue contributions from recently commissioned infrastructure have shifted to later quarters.

India's Digital Infrastructure Boom Remains Intact

While the timing of revenue generation has been pushed back, the broader demand outlook remains highly favorable.

India's digital transformation continues to accelerate due to increasing adoption of:

• Artificial Intelligence (AI)

• Cloud computing

• Data analytics

• Enterprise digitization

• E-commerce platforms

• Financial technology services

These trends are driving substantial demand for data storage, computing power, and cloud infrastructure across industries.

Data Centres Emerging as Critical Infrastructure

As businesses increasingly migrate operations to digital platforms, data centres have become a vital component of modern economic infrastructure.

Industry experts expect India's data centre market to witness strong double-digit growth over the coming decade, supported by:

• Data localization regulations

• Rising internet usage

• Expansion of digital services

• Growth of AI workloads

• Enterprise cloud adoption

Anant Raj is strategically positioned to benefit from these long-term trends.

Nomura Revises Earnings Estimates

Reflecting the slower pace of cloud monetisation, Nomura has lowered its earnings estimates for FY27 and FY28.

The brokerage now assumes annual cloud capacity additions of approximately 3 MW compared to its earlier projection of 4 MW.

Revised Cloud Contribution

Nomura now expects:

• Cloud business contribution: 10–11% of revenue mix

• Earlier estimate: 13–14%

• Management's long-term target: 25%

Although lower than previous forecasts, the revised estimates still indicate significant growth potential over the medium term.

The brokerage believes the cloud segment will continue to become an increasingly important earnings contributor.

Data Centre Rental Income Continues to Accelerate

Despite temporary delays, Anant Raj's data centre business is already demonstrating meaningful revenue growth.

The company has reported a steady increase in rental income from operational facilities, indicating strong underlying demand.

Strong Growth in Recurring Revenue

Data centre rental income has increased significantly over the past year:

• Q4 FY25: ₹0.17 billion

• Q3 FY26: ₹0.44 billion

• Q4 FY26: ₹0.74 billion

This growth highlights the scalability of the business model and the potential for future earnings expansion as additional capacity becomes operational.

Cloud Infrastructure Could Become a Major Profit Driver

According to Nomura, every 1 MW of operational cloud capacity can generate approximately ₹1.5 billion in annual rental income.

This creates a highly attractive recurring revenue stream with strong operating leverage.

Future Rental Potential

The brokerage expects:

• Additional 1.5 MW capacity to begin generating income from Q2 FY27

• Data centre rental income to reach ₹5.8–6 billion in FY27

• Continued expansion of recurring revenue streams

As utilization rates improve, profitability within the segment is also expected to strengthen.

Real Estate Business Provides Strong Cash Flow Support

While data centres represent the future growth engine, Anant Raj's real estate operations continue to provide significant financial stability.

The company remains active in the premium residential segment, particularly in high-demand markets within the National Capital Region (NCR).

Upcoming Residential Projects

Nomura expects progress on key developments including:

• Group Housing-2 (GH2)

• Group Housing-3 (GH3)

Both projects are expected to contribute meaningfully to bookings and future cash flows once approvals are secured and launches commence.

NCR Housing Market Remains Robust

India's premium housing market has shown remarkable resilience over the past few years.

Strong demand from affluent buyers, rising household incomes, and increasing preference for larger homes continue to support the luxury housing segment.

Key Demand Drivers

The NCR market is benefiting from:

• Corporate employment growth

• Infrastructure improvements

• Wealth creation

• Urban migration

• Premium lifestyle demand

These trends provide a favorable backdrop for Anant Raj's residential portfolio.

Significant Free Cash Flow Potential

One of the strongest aspects of Nomura's investment thesis is the company's expected free cash flow generation.

The brokerage estimates that ongoing residential projects alone could generate approximately ₹25 billion in free cash flow over time.

Strategic Importance of Cash Flows

Strong free cash flows provide flexibility to:

• Fund data centre expansion

• Reduce debt

• Pursue acquisitions

• Invest in new projects

• Enhance shareholder value

This financial strength differentiates Anant Raj from many traditional developers.

EBITDA Growth Expected to Remain Strong

Although earnings growth is expected to moderate from previous years, Nomura still forecasts impressive profitability expansion.

Long-Term Earnings Outlook

The brokerage projects:

• EBITDA CAGR of 30–35% between FY26 and FY29

While lower than the approximately 50% CAGR achieved during FY23–FY26, the forecast remains among the strongest in the sector.

The moderation reflects the higher base effect and delayed monetisation of cloud assets rather than weakening business fundamentals.

Unique Positioning Sets Anant Raj Apart

Anant Raj occupies a unique position in the listed market due to its exposure to two distinct growth themes.

Unlike conventional real estate companies, it offers investors participation in:

• Premium residential real estate

• Data centre infrastructure

• Cloud computing growth

• Digital economy expansion

This diversification creates multiple growth engines and reduces dependence on a single business segment.

Why Investors Continue to Watch the Stock

Key investment attractions include:

• High-growth data centre business

• Recurring rental income potential

• Strong NCR real estate exposure

• Healthy balance sheet

• Significant free cash flow generation

• Long-term digital infrastructure opportunity

Outlook: Near-Term Delays, Long-Term Opportunity

Nomura's revised target price reflects a more conservative timeline for cloud infrastructure monetisation rather than a change in the underlying growth story.

As India's demand for data centres and cloud services continues to rise, Anant Raj remains well-positioned to capitalize on one of the country's most promising infrastructure opportunities.

At the same time, its premium real estate projects provide a stable source of cash flows and earnings support.