Thanks for you inputs! Below is what I tired with its results:
I tried to move the Template from Datastore using the 'Move to..' feature in Browse Datastore view. While the Template files got moved the actual VMDK files in the templates have enlarged.
My initial template folder size in Browse Datastore view was < 10GB and now after moving template folder to the new Datastore its size has grown to > 30 GB.. The VMDK file has actually enlarged.
Any idea why the VMDK file size has increased?