In a landmark deal that signals a strategic shift for India's IT giant, American private-equity firm TPG has committed to invest $1 billion (₹8,820 crore) in Tata Consultancy Services' newly formed data centre business. This massive investment will give TPG a 49% stake in HyperVault AI Data Centre, the specialized subsidiary established by TCS last month.
Strategic Partnership and Leadership
San Francisco-based TPG, which manages $286 billion in assets, is making its second major investment in a Tata Group company after its 2021 billion-dollar commitment to Tata Motors' electric vehicle unit. TCS will retain majority control with 51% ownership in the data centre venture.
The new business is expected to be headed by Deepesh Nanda, who currently leads Tata Power Renewable Energy Limited. This appointment signals the strategic importance Tata Group places on this new venture, bringing in experienced leadership from within the conglomerate.
TPG and TCS have jointly committed to invest up to ₹18,000 crore over the coming years, marking TCS's first concrete step into the data centre business arena. This move positions TCS as the first among India's major IT outsourcing companies to establish its own data centre infrastructure.
Building AI Infrastructure for the Future
Tata Group Chairman N Chandrasekaran emphasized the strategic importance of this venture, stating: "With this capability, TCS is uniquely positioned to deliver complete AI solutions for its customers and partners. We are excited and committed to play a leading role in creating world-class AI infrastructure and solutions for the industry."
The company's immediate plans include building a 120 MW data centre facility in Navi Mumbai, which is expected to become operational within 18 months. This facility represents just the beginning of TCS's ambitious plan to develop 1 GW of data centre capacity by 2031, with total investments potentially reaching $6.5 billion over six years.
Market Context and Strategic Shift
This investment represents a significant departure from TCS's traditional business model as an IT services outsourcer. For decades, the company has focused on providing coding, customer support, application development, and cloud services to international clients. The data centre venture marks a strategic pivot toward building owned infrastructure capabilities.
According to company executives, this approach mitigates risk by bringing external investors into a capital-intensive business. The data centre market in India is experiencing rapid growth, driven by multiple factors including the transition to 5G networks, increased cloud adoption, data localization requirements, and the emergence of data-intensive applications.
TCS's Chief Operating Officer Aarthi Subramanian highlighted the comprehensive nature of this strategy during a recent analyst call: "If you look at the entire AI stack, starting from infrastructure as the starting layer, all the way up to the apps and the agentic apps at the top most layer, this gives us the coverage across the AI technology stack."
The company plans to offer these AI infrastructure solutions to pure-play AI providers, deep tech firms, hyperscalers like Amazon Web Services and Microsoft Azure, the Indian government, and local enterprises.
Financial Implications and Market Position
While this represents a significant growth opportunity, TCS management has acknowledged that the asset-heavy data centre business will be less profitable than its core IT services operations. This comes as the company, which generated $30.18 billion in revenue last year, increasingly focuses on the domestic market that currently accounts for only about 6% of its total business.
The data centre market in India is poised for substantial expansion, with current capacity expected to grow from 1.03 GW at the end of 2023 to 3 GW by 2030. Mumbai and Chennai currently host approximately 65% of the country's data centre capacity, with 536 megawatts and 113 megawatts respectively.
Since TCS first announced its data centre plans on October 9, the company's shares have gained 2.74%, closing at ₹3,145.75 on November 20, reflecting positive market sentiment toward this strategic initiative.
The legal advisors for this landmark transaction included AZB & Partners and Deloitte Touche Tohmatsu India LLP for TCS, while TPG was represented by Cyril Amarchand Mangaldas and Latham & Watkins LLP, with Price Waterhouse & Co. LLP serving as tax advisors.
