TCS-TPG AI data centre deal draws upbeat calls but JPMorgan cites concerns of muted 5-6 year impact

Shares of Tata Consultancy Services (TCS) Ltd. will be in focus on Friday, November 21, after the Tata Group giant signed an agreement with TPG Terabyte Bidco to invest up to ₹18,000 crore in HyperVault.

HyperVault, a wholly owned subsidiary of the company, will build AI-ready data centres with a capacity of over 1 GW.

TPG, one of the world's leading alternative asset managers, will invest up to ₹8,820 crore as part of the deal.

Under the structure, TCS and TPG will invest in a 51:49 ratio, with TPG expected to hold between 27.5% and 49% in HyperVault.

The investment will be infused through CCPS in multiple tranches over the next few years. Both sides will be subject to a three-year lock-in.

TCS will retain board control, while TPG will be allowed up to two board seats.

Brokerage firm JPMorgan has maintained its 'Overweight' rating on TCS with a price target of ₹4,050.

The brokerage said that TPG's commitment of up to $1 billion reduces TCS's equity burden and that the company expects synergies from global partnerships with hyperscalers and AI firms.

JPMorgan, however, remains cautious on the synergy narrative and believes the investment is unlikely to materially alter shareholder returns over the next five to six years.

Morgan Stanley has also kept its 'Overweight' call with a price target of ₹3,430.

The brokerage said the participation of a private equity investor at this scale reinforces the long-term potential of the HyperVault business.

Of the 51 analysts that have coverage on TCS, 36 have a 'Buy' rating on the stock, 10 say 'Hold', while five have a 'Sell' rating.

It sees room for further announcements tied to this vertical, adding that investors may gradually begin valuing this business using a sum-of-the-parts approach.