L&T wagers on data centers with Rs.2,200 crore investment

L&T wagers on data centers with Rs.2,200 crore investment

It is also expanding defense and aerospace, while monitoring reforms in nuclear power

Indian multinational, Larsen & Toubro Limited (L&T), has deepened its presence in data centers. It has invested Rs.2,200 crore, with 32 megawatts already operational, including a 30 MW facility, one of the largest in India, in Kanchipuram, Tamil Nadu.

The company plans to scale this to 100 MW, tapping demand for third-party storage and cloud infrastructure.

Commenting on the move, S.N. Subrahmanyan, Chairman and Managing Director, Larsen & Toubro, said, “Most Indian companies have been storing data on premises. Now, the option is to store on third-party data centers and use cloud services from Amazon, Google or Microsoft.”

Meanwhile, L&T has also entered GPU-based cloud services through a stake in E2E, an Indian startup working with US chipmaker NVIDIA.

Subrahmanyan added, “We have two-three floors of a data center in Chennai with NVIDIA GPUs, providing cloud services to customers. It’s still a very nascent business, but we’ve put in close to Rs.2,200 crore, and are backing it with strong leadership.”

L&T is working to benefit from the boom in Global Capability Centres (GCCs), as international firms expand technology operations in India.

Subrahmanyan said that many companies were now opting to build their own GCCs rather than rely on IT service providers. He explained, “Sometimes we collaborate to help them set up a GCC, and over time, they may take it over or run it jointly with us. These are business models that are emerging, and we hope to capitalise on them.”

Defense and aerospace have always remained central to L&T’s growth strategy. The company has rebranded its defense arm as ‘precision engineering’ to reflect contributions to military and space programs.

The CEO continued, “We are in four broad areas. Land systems such as mobile bridges and the K9 Vajra gun, naval systems including submarines and surface ships, contributions to space, and indigenisation through R&D.”

The K9 Vajra artillery system, developed with South Korea’s Hanwha, has been a success. “We delivered about 100 units for the deserts of Punjab and then acclimatised them for Ladakh. The feedback is that it’s an excellent weapon system,” he said, adding that another 100 were being prepared for delivery.

On the naval front, L&T fabricates parts for strategic submarines and builds offshore patrol vessels and anti-submarine warfare ships.

However, Subrahmanyan acknowledged challenges in surface ships. “We invested over Rs.2,500 crore in the yard, but the client is only one, the Navy, and we have to compete with five public sector yards. We need to be very lucky to win orders. The yard should break even this year.”

Even as India has expressed interest in private participation in nuclear power, Subrahmanyan felt that current laws remained a barrier. He remarked, “At present, nuclear plants can only be set up by the Nuclear Power Corporation. The law includes a liability clause, which makes it impossible for any private balance sheet to bear the risk.”

Though reforms were discussed, matters remains uncertain. He said, “The only entity that can take on that liability is the government. We’ve given our suggestions like others. The government is working on it. Hopefully it happens, but as of now it hasn’t.”

Meanwhile, thermal power, once sidelined in favour of renewables, has been revived, as electricity demand grows.

L&T, which was preparing to exit the sector, is now scaling up. As Subrahmanyan put it, “We were persuaded to continue in this business. BHEL was overloaded, and we won projects at Gariyawal and Napanagar, and then another eight boilers and turbines for the Adani Group. Suddenly, the business that was supposed to be closed, is looking attractive again.”

The company’s earlier venture, the Rajpura power plant in Punjab, remains one of India’s most efficient. “It’s probably the best operating power plant in the country, with a plant load factor of over 90 percent. But it doesn’t quite fit our long-term vision, so we’re open to divesting it if there’s interest,” the CEO stated.

The multinational company’s diversified bets reflect its strategy to balance high-risk, low-margin engineering, procurement and construction (EPC) business with asset-light, higher-return services.

Subrahmanyan conveyed, “In EPC, 70 percent of costs are materials bought from others, so our value addition is only 30 percent. If we make a 5–6 percent margin, we celebrate. That’s why services and new businesses like data centers are important.”