Shunyak Data Centres has 100 MW operating and 150 MW under construction. How would you value the operating and development portfolios, and what risk sits in each?

About Rs 8,400 crore for the operating portfolio and Rs 5,123 crore for the development, Rs 13,523 crore in all. Leased megawatts take the market price of Rs 90 crore and vacant ones their Rs 60 crore cost to build. The development is worth its finished value of Rs 12,150 crore, discounted two years, less the Rs 5,400 crore still to spend. Operating risk is renewals and leasing; development risk is delay, overruns and the 45 MW still unlet.

Think of a builder who owns a finished, rented block of flats and a half-built tower next door. Nobody would value the half-built tower at the rent the finished block earns: it still needs money, time and tenants. An operating data centre is a cash-producing asset priced on its leases; a development is a project worth its finished value less everything still standing between today and that value. Mixing them hides the risk in the development and makes the whole company look cheaper or dearer than it is.

Operating first. 80 leased MW at Rs 90 crore is Rs 7,200 crore. The 20 vacant MW have no tenant, so take them at their Rs 60 crore cost to build, Rs 1,200 crore: a buyer would pay roughly what it saves by not building, no more. Operating value is Rs 8,400 crore, 17.5x EBITDA of Rs 480 crore. Check the multiple: it is high because each MW earns only Rs 6 crore of EBITDA and leases run for many years, which is what buyers of these assets pay for.

Value it as if finished, then take off what is still in the way. Finished, 105 pre-leased MW are worth Rs 90 crore each and the 45 open MW Rs 60 crore, Rs 12,150 crore. That arrives in two years, so at 12% it is worth Rs 9,686 crore today. Rs 5,400 crore of capex is still to spend, half a year, worth Rs 4,563 crore today. The development is worth about Rs 5,123 crore, Rs 34 crore per MW against Rs 84 crore for a built MW.

Note what the Rs 3,600 crore already spent does: nothing. Sunk cost is not value; only the cash still to come in and go out counts. The development is worth Rs 1,523 crore more than has been spent on it, which is the profit Shunyak expects for taking construction and leasing risk.

Size the development risks, because they are the larger ones. A one-year delay costs about Rs 807 crore of value; a 15% overrun on the remaining capex costs about Rs 684 crore; and if the 45 open MW were worth Rs 20 crore less each, about Rs 717 crore. Delay usually comes from the power connection, not the building. The operating risks are slower: tenants not renewing, power costs that leases do not pass through, and how long the 20 vacant MW take to fill.

Close with the view. The company is worth about Rs 13,523 crore, not the Rs 22,500 crore that a single price per MW suggests, and the answer to where the opportunity sits is in the development: it creates value only if it lands on time and fills. Say which number you would ask for next, the date of the power connection, and the limit, that Rs 90 crore per MW is a market price that moves with interest rates and demand, so confirm it against recent transactions.