TCS: 1-GW Data Center Plan with $6.5B Investment

Mumbai, Oct 9 (PTI) IT services company TCS on Thursday announced a massive plan to enter the data centre space with an aim to build up to 1 GW of capacity, which will entail over USD 6.5 billion in investments.

The Tata group firm will see partial equity investments from financial investors and also funding through debt, according to the company management.

"We have set a target of 1 GW. We will be doing it in phases. We expect to do 1 GW in 5-7 years," TCS' chief executive K Krithivasan said at an investor call after the company announced its September quarter earnings.

As per the company's calculations, every 150 MW will entail an investment of USD 1 billion, which translates into over USD 6.5 billion for the overall capacity building.

"This would be a combination of equity and debt, and we will also bring in finance partners for the equity," the CEO said.

The entire data and compute capacity will be hosted in India, and the company hopes to sell it to pure-play artificial intelligence providers, deeptech companies, hyperscalers, and to "a great extent" to the government entities in India and the Indian enterprises, Krithivasan said.

The company will invest in the "passive components" in building the capacity, while the clients will take care of the compute and storage, he said.

TCS sees a huge amount of unmet demand in this segment, which made the company look at the space, he said, stressing that it will also deliver more stable annuity-based revenues.

The Tata group's announcement to jump into the segment comes amid increasing calls for data localisation. TCS has also called it "sovereign data centres".

The overall data centre industry stood at less than 1 GW last year, but is expected to grow rapidly.

Earlier, Mukesh Ambani-led Reliance Group had announced a 3-GW data centre in Gujarat's Jamnagar, which will be the world's largest such facility, while the Adani group has announced putting up 1 GW capacity in partnership with EdgeConneX.

TCS' chief financial officer Samir Sekhsaria said revenues from the data centre business will start accruing in 18-24 months' time.

He admitted that the high investments will decrease the overall return ratios delivered by the service sector company, but added that this company will not dent the TCS-level return on equity.