L&T bets $1 bn on inhouse forte to face Tata, Adani, Reliance in AI data centres
Larsen and Toubro Ltd believes end-to-end ownership will allow it to offer some of the cheapest services to clients, even as demand for data centres accelerates alongside the global push into artificial intelligence.
MUMBAI/NEW DELHI : Larsen and Toubro Ltd expects its billion-dollar bet on data centres to pay off, banking on its ability to control costs by owning land, physical infrastructure and servers. India’s largest engineering and construction company believes this end-to-end ownership will allow it to offer some of the cheapest services to clients, even as demand for data centres accelerates alongside the global push into artificial intelligence.
In an interview with Mint, Prashant Jain, head of corporate centre at L&T, reiterated the advantage of the L&T Group, which expects to scale up its data centre capacity from the current 32 megawatt (MW) to 200MW by 2030.
“We have the full stack to be a digital infrastructure provider, which helps in reaching out to large enterprises. Clients, after all, like L&T’s sovereign platform offerings," Jain said.
He said the company will look to rope in its own clients under Vyoma, the data centre business, and also leverage the existing enterprise relations that its two technology outsourcing companies—LTIMindtree and L&T Technology Services (LTTS)—have built over the years.
Analysts largely concurred, stating that most conglomerates venturing into data centres will likely look at strategic acquisitions to control cost of operations, given the capital-intensive nature of data centres.
Tighter inhouse control of all stages of a data centre’s operation will bring cost advantage to its offering over other conglomerates in the space—the Adani, Reliance and Tata groups. These conglomerates have ventured into the cutting edge of technology, driven by global clamour for AI and an anticipated demand for local technology infrastructure, as every nation hopes to build its own data centres.
On Wednesday, L&T announced it has started building a new, 40MW data centre in Navi Mumbai, Maharashtra. This is part of the company’s plan for over 200MW in data centre capacity with a net capital outlay of ₹10,000 crore ($1.2 billion), president and chief financial officer R. Shankar Raman said while laying the groundstone of the data centre in Navi Mumbai.
On 26 November, L&T renamed its cloud and data centre business as Vyoma from L&T-Cloudfiniti. At the time, Seema Ambastha, chief executive of the entity, told Mint the company may have a net outlay of $2.5-3 billion to build a 300MW data centre capacity over the next five years.
A year ago, L&T had bought a 21% stake in homegrown IT infrastructure firm E2E Networks, which offers servers for both general purpose and AI-focused data centres. Jain affirmed that the latter will be a primary contributor of L&T’s data centre hardware, giving it better cost of acquiring servers for its own data centres.
The company is also considering whether to develop its own renewable energy plants, or if it wants to outsource it to third-party power production companies, Jain said.
The company is targeting 75% use of renewable energy at its data centres.
L&T’s $1.2 billion data centre bet appears conservative in comparison with its peers.
On 9 October, Tata Consultancy Services, the biggest cash cow of India’s largest conglomerate Tata Sons, said it will build a 1GW data centre at an overall outlay of $6.5 billion. On 20 November, it raised $1 billion from US asset manager TPG for its data centre that is expected to run on a “high mix of green energy".
On 14 October, Adani announced partnering Google in the latter’s $15-billion AI data centre with a co-investment of $5 billion. In its FY25 annual report, Adani said it will run its data centre operations completely on green energy.
On 26 November, Reliance’s joint-venture with US-based Brookfield Asset Management and Singapore's Digital Realty also said its 1GW, $11-billion data centre, slated to be operational by 2030, would fully run on green energy.
Analysts said L&T’s approach is in line with what’s expected of conglomerates.
“Data centres represent a massive opportunity today, and require vast investments in land, power and other key resources—with the knowhow and comfort of working with government bodies," said Naresh Singh, senior director analyst at consultancy firm Gartner. "For the top conglomerates, this is their familiar ground. To consolidate businesses better, most of them will look to acquire ventures and have full control of every part of a data centre business."
Jayanth Kolla, partner at technology consultancy firm Convergence Catalyst, said the cost advantage will be key for companies such as L&T. “These top conglomerates have all worked on the ability to control every part of a business. Technology is a nascent field, but owning stakes in strategic companies will allow India’s top conglomerates to have better grip on the technology infrastructure supply chain," he said. "But, much will depend upon how efficient a conventional conglomerate is in executing a digital-native business that requires vision. In the recent past, only Reliance's bet on 5G internet through Jio has paid off due to the vision of investing in infrastructure for the future. For L&T, execution will be key."
Gartner’s Singh added that while experience in technology services is difficult for the likes of Adani to attain, Tata and L&T already hold large companies specializing in outsourced technology contracts—aligning them favourably for betting big on data centres. Reliance, with its holding in Reliance Intelligence, may also find leverage in its AI pivot.
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