TCS to partner with TPG for $7B AI and data centre JV: report

Tata Consultancy Services (TCS), India’s largest software services company, is preparing for one of the most consequential strategic shifts in its history as it moves into the capital-intensive data-center and AI infrastructure business. The company is set to form a multi-billion-dollar joint venture with global private equity firm TPG to build large-scale AI and Sovereign Data Centers across India, reported Economic Times, citing sources familiar with the matter.The move marks a major deviation from TCS’s decades-long capex-light, organic-growth model, reflecting the pressures and opportunities created by the AI boom.$2 Billion equity commitment and a new joint venture structureTCS and TPG plan to jointly invest around $2 billion in equity into HyperVault AI Data Centre Ltd, a wholly owned TCS subsidiary established in October. TCS will hold a 51% majority stake in the joint venture, while the remaining $4.5–$5 billion in funding is expected to be raised through debt over time, officials said.A formal agreement between TCS and TPG is expected as early as Thursday, the report said. This marks TPG’s third partnership with the Tata Group, following collaborations in Tata Motors’ EV business and Tata Technologies.For TCS, the deal represents its first-ever acceptance of external private equity capital and external debt. The venture is central to TCS’s ambition to become “the world’s largest AI-led technology services firm.”Last month, TCS announced plans to build 1.2 gigawatts of data-center capacity, equivalent to India’s entire current capacity, in phases over the next 5–7 years. Every 150MW of capacity is estimated to require $1 billion in investment. The company expects revenues from the venture to begin within 18–24 months.Investor concerns emerge over capex-heavy strategyThe scale of TCS’s data-center ambition has polarized investors. While the move positions TCS in one of the fastest-growing digital infrastructure markets, some analysts warn of weakening returns for a company long valued for high capital efficiency.TCS posted a return on equity (ROE) of 51% and a return on invested capital (ROIC) above 80% in FY25. A shift toward long-gestation, high-capex projects could dilute these metrics. The company’s shares fell 1.5% after the initial announcement of its data-center push.The transformation comes as TCS undergoes a broader operational shift to adapt to AI-driven disruption. The company reduced its workforce by 6,000 employees last quarter—the largest quarterly decline in its history—and plans to cut its headcount by 2% this year.A growing battle for India’s data-center boomTCS enters a rapidly expanding and highly competitive market. India’s data-center capacity is expected to grow from 1.2GW today to nearly 9GW in the next 5–7 years, attracting $50–$95 billion in investments, according to market estimates.The Tata Group will now compete with major players such as Reliance Industries, AdaniConnex, NTT Global, Nxtra Data, Sify, and CtrlS. Recently Adani Enterprises and Google announced a $15 billion commitment for a 1GW data-center hub in Andhra Pradesh. Reliance Industries also partnered with Meta and Google to build AI platforms and gigawatt-scale centers in Gujarat and Andhra Pradesh.Still, these efforts are modest compared to global tech giants. Meta, Microsoft, Amazon, and Google are collectively expected to exceed $400 billion in annual capex by 2026.The post TCS to partner with TPG for $7B AI and data centre JV: report appeared first on Invezz