TCS data centre RoE to lag IT

Tata Consultancy Services says robust balance sheet, staggered investments would cushion impact on returns

- Jas Bardia

Tata Consultancy Services Ltd’s (TCS's) management has admitted that the profitability of its $6.5-billion pivot towards data centres will be lower than that of its mainstay information technology (IT) services business.

“Yes, it (data centre business) won't get the same RoEs (return on equity) as you would expect from the TCS business, but we are confident we'll be able to maintain industry-leading return ratios,” said chief financial officer Samir Seksaria in a fireside chat between the company’s management and Kotak Institutional Equities.

RoE shows how effectively a company uses shareholder investments to generate earnings.

On 9 October, the country’s largest IT services company announced plans to establish a 1GW AI data centre in India through a new business unit, which it later named HyperVault AI Data Centre Ltd. The company plans to spend about $6.5 billion over seven years to setting up these data centres. These large servers are stacked on top of each other to store data, providing companies with computing power.