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India’s largest software exporter, Tata Consultancy Services (TCS), is joining forces with private equity group TPG in a multi-billion dollar joint venture to create gigawatt-scale, AI-ready data centres. The Tata company is looking to accelerate its efforts toward becoming the world’s largest AI-led technology services firm.
This also marks a strategic pivot for the IT firm, which has historically pursued a capex-light, organic growth business model.
It will be the third equity partnership between TPG and Tata group after the Tata Motors lectric vehicles arm and Tata Technologies. Both partners have agreed to cumulatively invest up to Rs 18,000 crore ($2.1 billion) as equity in HyperVault AI Data Centre Ltd — incorporated as a wholly owned subsidiary of the technology company late in October — over the next few years, TCS said in an official statement on Thursday.
TCS will own a controlling 51% of HyperVault. TPG will deploy Rs 8,820 crore ($1.1 billion) for a stake of up to 49%.
ET was the first to break the story online on Thursday afternoon, hours before the formal announcement.
Also Read: AI ready data centres in India can not only service local customers but also service the world: TPG's Jim Coulter
The new data centre arm will be led by a separate management and will operate as a colocation data centre provider offering services to hyperscalers, Indian enterprises and government entities, along with Tata companies, said the company’s management.
TPG can appoint up to two board members. The project will complete buildout in five to seven years and revenue could start kicking in over the next 18-24 months.
“HyperVault will give options to our customers to establish active or passive facilities (data centres), create private cloud, or give them ability to do model-as-a-service as well as work with hyperscalers and AI companies,” TCS chief executive K Krithivasan told ET in an exclusive interaction, moments after the deal announcement. “We are creating a passive data centre. Then someone has to put the GPUs, CPUs and all the hardware, software required. That additional money will come from the users of the data centre, as and when contracts get signed.”
Tata Sons chairman N Chandrasekaran said, “With this capability, TCS is uniquely positioned to deliver complete AI solutions for its customers and partners.”
TPG’s investment will be through TPG Rise Climate and its Global South Initiative, a private equity strategy launched in partnership with Altérra, along with its credit and real estate platform Angelo Gordon, which will also be making its India debut.
TPG executive chairman Jim Coulter pointed out India’s advantages. “India is currently short on data centre capacity, though it is expected to ramp up to 10 GW relatively fast. The national grid provides low-cost electricity that is 40% cheaper than (in) the US,” he said. “Construction costs are also among the lowest, which will have a bearing on lease pricing. Additionally, one of the things that is hugely underestimated in this market is the quality of human capital. If you add it all up, this is an interesting market not only for servicing India, but for servicing the world.”
This is the first time that cash-rich TCS will be taking equity from a PE firm as well as external debt to fund a project.
Last month, TCS announced its plan to enter the data centre space with an aim of building up to 1.2 GW of capacity, entailing $6.5-7 billion in investments to be funded via debt and equity.
Mega Project
To put the scale of the project in context, 1.2 GW is the entire combined capacity of India’s existing data centres. However, this is expected to grow manifold, reaching 9 GW in the next five to seven years, attracting capex investments of $50-95 billion as competition heats up in the space, market forecasts suggest.
Some investors and analysts had expressed concern over the diversification plan, which they saw as having limited overlap with core IT services and putting pressure on returns.
TCS’ return on equity stood at 51% and return on invested capital at over 80% in FY25, but the shift to a capex-heavy model may weigh on these metrics. The TCS stock had reacted negatively, dropping 1.5% following the October announcement.
The company had Rs 47,000 crore in free cash flows as of FY25.
Strategic Shift
Traditional IT services companies such as TCS are facing a tough transition, shifting from a human-led model to stay relevant amid AI disruption. The Tata firm laid off 1%, or 6,000 people, of its 600,000-strong workforce in the last quarter as part of plans to reduce headcount by 2% in this financial year. This, combined with voluntary and involuntary attrition, saw the workforce down by 19,755 on a net basis in July-September, its largest quarterly decline ever.
However, the management said the data centre project will help TCS become an “end-to-end solutions provider,” offering both infrastructure and IT services.
“We believe this is the best way to ensure that our investors’ money is well spent,” said Krithivasan. “Together, we invest $2 billion. And then we go to the market for the rest of the money. We are currently looking at three or four major segments. As cloud usage increases, this market is expected to grow significantly. The second is AI training and inferencing. And finally, secure and sovereign cloud or private data centres.”
TCS uniquely provides comprehensive solutions to clients, Coulter said. “Together, we see it as a missed opportunity if those solutions didn’t include data centres,” he said. “So, developing the ability for TCS to serve its clients more holistically, through pairing physical and virtual solutions together, is just a natural extension.”
Tata group is the latest among deep-pocketed Indian business houses to make a big entry into the space and will be pitted against leading colocation providers such as Reliance Industries, AdaniConnex, Bharti Airtel’s Nxtra Data, NTT Global, Sify Technologies and CtrlS Datacenters.
According to industry estimates, India’s data centre market has attracted nearly $94 billion in investments since 2019. That’s dwarfed by what the tech titans — Meta, Microsoft, Amazon and Google — are spending globally, with their combined annual capex projected to exceed $400 billion in 2026 alone.
AZB & Partners, Cyril Amarchand Mangaldas and Latham & Watkins LLP were the legal advisers involved in the TCS-TPG partnership, while Deloitte Touche Tohmatsu India and Price Waterhouse & Co were tax advisers.
This also marks a strategic pivot for the IT firm, which has historically pursued a capex-light, organic growth business model.
It will be the third equity partnership between TPG and Tata group after the Tata Motors lectric vehicles arm and Tata Technologies. Both partners have agreed to cumulatively invest up to Rs 18,000 crore ($2.1 billion) as equity in HyperVault AI Data Centre Ltd — incorporated as a wholly owned subsidiary of the technology company late in October — over the next few years, TCS said in an official statement on Thursday.
TCS will own a controlling 51% of HyperVault. TPG will deploy Rs 8,820 crore ($1.1 billion) for a stake of up to 49%.
Also Read: AI ready data centres in India can not only service local customers but also service the world: TPG's Jim Coulter
The new data centre arm will be led by a separate management and will operate as a colocation data centre provider offering services to hyperscalers, Indian enterprises and government entities, along with Tata companies, said the company’s management.
TPG can appoint up to two board members. The project will complete buildout in five to seven years and revenue could start kicking in over the next 18-24 months.
“HyperVault will give options to our customers to establish active or passive facilities (data centres), create private cloud, or give them ability to do model-as-a-service as well as work with hyperscalers and AI companies,” TCS chief executive K Krithivasan told ET in an exclusive interaction, moments after the deal announcement. “We are creating a passive data centre. Then someone has to put the GPUs, CPUs and all the hardware, software required. That additional money will come from the users of the data centre, as and when contracts get signed.”
Tata Sons chairman N Chandrasekaran said, “With this capability, TCS is uniquely positioned to deliver complete AI solutions for its customers and partners.”
TPG’s investment will be through TPG Rise Climate and its Global South Initiative, a private equity strategy launched in partnership with Altérra, along with its credit and real estate platform Angelo Gordon, which will also be making its India debut.
TPG executive chairman Jim Coulter pointed out India’s advantages. “India is currently short on data centre capacity, though it is expected to ramp up to 10 GW relatively fast. The national grid provides low-cost electricity that is 40% cheaper than (in) the US,” he said. “Construction costs are also among the lowest, which will have a bearing on lease pricing. Additionally, one of the things that is hugely underestimated in this market is the quality of human capital. If you add it all up, this is an interesting market not only for servicing India, but for servicing the world.”
This is the first time that cash-rich TCS will be taking equity from a PE firm as well as external debt to fund a project.
Last month, TCS announced its plan to enter the data centre space with an aim of building up to 1.2 GW of capacity, entailing $6.5-7 billion in investments to be funded via debt and equity.
Mega Project
To put the scale of the project in context, 1.2 GW is the entire combined capacity of India’s existing data centres. However, this is expected to grow manifold, reaching 9 GW in the next five to seven years, attracting capex investments of $50-95 billion as competition heats up in the space, market forecasts suggest.
Some investors and analysts had expressed concern over the diversification plan, which they saw as having limited overlap with core IT services and putting pressure on returns.
TCS’ return on equity stood at 51% and return on invested capital at over 80% in FY25, but the shift to a capex-heavy model may weigh on these metrics. The TCS stock had reacted negatively, dropping 1.5% following the October announcement.
The company had Rs 47,000 crore in free cash flows as of FY25.
Strategic Shift
Traditional IT services companies such as TCS are facing a tough transition, shifting from a human-led model to stay relevant amid AI disruption. The Tata firm laid off 1%, or 6,000 people, of its 600,000-strong workforce in the last quarter as part of plans to reduce headcount by 2% in this financial year. This, combined with voluntary and involuntary attrition, saw the workforce down by 19,755 on a net basis in July-September, its largest quarterly decline ever.
However, the management said the data centre project will help TCS become an “end-to-end solutions provider,” offering both infrastructure and IT services.
“We believe this is the best way to ensure that our investors’ money is well spent,” said Krithivasan. “Together, we invest $2 billion. And then we go to the market for the rest of the money. We are currently looking at three or four major segments. As cloud usage increases, this market is expected to grow significantly. The second is AI training and inferencing. And finally, secure and sovereign cloud or private data centres.”
TCS uniquely provides comprehensive solutions to clients, Coulter said. “Together, we see it as a missed opportunity if those solutions didn’t include data centres,” he said. “So, developing the ability for TCS to serve its clients more holistically, through pairing physical and virtual solutions together, is just a natural extension.”
Tata group is the latest among deep-pocketed Indian business houses to make a big entry into the space and will be pitted against leading colocation providers such as Reliance Industries, AdaniConnex, Bharti Airtel’s Nxtra Data, NTT Global, Sify Technologies and CtrlS Datacenters.
According to industry estimates, India’s data centre market has attracted nearly $94 billion in investments since 2019. That’s dwarfed by what the tech titans — Meta, Microsoft, Amazon and Google — are spending globally, with their combined annual capex projected to exceed $400 billion in 2026 alone.
AZB & Partners, Cyril Amarchand Mangaldas and Latham & Watkins LLP were the legal advisers involved in the TCS-TPG partnership, while Deloitte Touche Tohmatsu India and Price Waterhouse & Co were tax advisers.