Tata Consultancy Services (TCS), India’s largest software exporter, is set to launch a multi-billion dollar joint venture with private equity firm TPG to create AI and sovereign data centres, sources close to the matter said. The move marks a strategic shift for TCS, which has historically favoured a capex-light, organic growth model, as it aims to become “the world’s largest AI-led technology services firm,” according to sources cited by ET.HyperVault AI Data Centre LtdTata Consultancy Services (TCS) is set to invest TPG in a multi-billion dollar venture to create HyperVault AI Data Centre Ltd, a wholly owned subsidiary incorporated by TCS in late October. Sources familiar with the matter said TCS will hold a 51% majority stake in the joint venture, while the remaining $4.5-$5 billion will be raised through debt over time. Both sides are expected to sign a formal agreement by this weekend, possibly as early as Thursday, according to ET report. This will be the third time TPG has partnered with the Tata Group, following earlier collaborations with Tata Motors’ EV division and Tata Technologies. The deal also marks the first instance of cash-rich TCS accepting external equity from a private equity firm, alongside debt funding.TCS had earlier announced plans to build up to 1.2 gigawatts (GW) of data centre capacity, requiring $6.5-$7 billion in total investments. The new business unit will operate independently and provide co-location services to hyperscalers, Indian enterprises, government bodies, and Tata group companies.According to company management, the project will be funded through a combination of partial equity from financial investors and debt. “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 during an investor call. The company estimates that every 150 MW will cost $1 billion. Chief financial officer Samir Sekhsaria added that revenues from the data centre business will begin accruing in 18-24 months. The announcement sparked mixed reactions, with some analysts questioning the strategic fit with TCS’ core IT services and potential impact on returns. TCS posted a return on equity (ROE) of 51% and a return on invested capital (ROIC) above 80% in FY25. Following the announcement, TCS shares fell 1.5%. The venture comes amid significant workforce changes at TCS. The company laid off 1%, or 6,000 employees, last quarter as part of plans to reduce headcount by 2% this fiscal year. Including attrition, net headcount declined by 19,755 between July and September, marking the largest quarterly reduction in the company’s history. TCS’ entry positions it against major Indian players such as Reliance Industries, AdaniConnex, Bharti Airtel’s Nxtra Data, NTT Global, Sify Technologies, and CtrlS Datacenters. Last month, Adani Enterprises and Alphabet’s Google announced a $15 billion investment to build a gigawatt-scale data centre hub in Andhra Pradesh. Reliance Industries has also partnered with Meta and Google for gigawatt-scale facilities in Gujarat and Andhra Pradesh. Even with these ambitious investments, India’s initiatives remain small compared with global tech giants, whose combined capital expenditure is expected to exceed $400 billion in 2026.