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Kickstarting DC build-out with USD1bn investment from TPG

Following TCS’s call, outlining its multi-year USD6-7bn investment plan to build AI-focused data centers (DC) and accelerate its journey toward becoming the largest AI-led technology services enterprise, the company has now secured a USD1bn investment from TPG, for scaling up its AI DC platform HyperVault. This venture will be funded via a mix of equity from TCS and TPG and through debt, with total commitment of up to Rs180bn. Both TCS and TPG will invest in a 51%:49% proportion, with TPG’s contribution capped at Rs88.2bn and translating into a final 27.5-49% stake in HyperVault for TPG. The build-out was expected to add 100-200MW over the next 18-24M, backed by an initial investment of USD600mn-1bn. Leveraging hyperscaler partnerships and a fullstack AI capability across DCs, cloud, platforms, and AI-led services, TCS is building optimized AI infra to deliver end-to-end digital solutions, combining cloud, compute, and connectivity beyond traditional colocation services. We retain ADD on the stock with TP of Rs3,250, at 21x Sep-27E EPS.

Deal contours

TCS has entered into a Securities Subscription Agreement (SSA) and a Shareholders’ Agreement (SHA) with TPG Terabyte Bidco Pte Ltd and its wholly-owned subsidiary HyperVault AI Data Center Limited. TPG’s investment in HyperVault is being routed through TPG Rise Climate and its Global South Initiative, with additional support from its Asia Real Estate business. Key terms: 1) HyperVault becomes the exclusive vehicle for TCS’s AI and non-AI DC business in India. 2) HyperVault will be funded through a mix of equity from TCS and TPG and via debt. Both partners collectively will commit to invest up to Rs180bn over the next few years. 3) TCS and TPG will invest in a 51:49% ratio, with TPG contributing up to Rs88.2bn for a stake between 27.5% and 49%. 4) Funding will be via equity and multiple tranches of CCPS. 5) Both parties face a 3-year lock-in. 6) TCS will hold Board majority, with TPG allowed up to two seats.

Addressing DC demand via HyperVault

The purpose of the agreement is to accelerate HyperVault’s GW-scale AI-ready infra build, aligning with TCS’s plan of creating AI-ready DCs with capacity in excess of 1GW over the next few years. This capability is expected to position TCS for delivering the complete set of AI solutions for its customers and partners. With AI demand surging, these AI-DCs are crucial for providing necessary infra – including computer hardware, high-speed storage, and low-latency networks – to hyperscalers, AI companies, private enterprises, and the public sector. HyperVault is expected to deliver secure, reliable, large-scale AIready infra, offering purpose-built, liquid-cooled data centers with high rack densities and energy efficiency. This investment taps into India’s rapidly-expanding DC market, currently at ~1.5?GW capacity and projected to surpass 10?GW by 2030. Since 2019, the sector has attracted ~USD94?bn in investments, highlighting significant growth potential.

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