Whalesbook
India's data center infrastructure is poised for exponential growth, with industry estimates projecting installed power capacity to more than double from just over 1 GW to 2 GW by 2026. Over the longer term, KPMG forecasts capacity could surge to over 8 GW by 2030, signaling a multi-year investment cycle exceeding $30 billion (₹270,000 crore).
Driving Forces Behind the Expansion
This build-out is propelled by fundamental shifts in digital consumption. India's vast, data-hungry mobile user base, the ongoing rollout of 5G services, stringent data localization regulations, and the escalating compute demands of artificial intelligence workloads are all contributing to the surge. These factors are creating substantial opportunities across the power and generator sectors.
Cummins India's Critical Role
Cummins India, a leader in the power sector, is a key beneficiary. The company supplies engines and generator sets essential for the robust power backup required by data centers. In the second quarter of FY26, its power generation segment, a primary revenue driver, saw a 49% year-on-year increase to ₹1,340 crore, with data centers accounting for approximately 40% of this segment's revenue. Strong project execution and demand for mission-critical backup power have been instrumental in this performance.
Management notes demand arises from two main customer types: hyperscalers like Microsoft, Amazon, and Google, whose orders are project-based and 'lumpy', and colocation players who offer more consistent, year-round demand. Cummins is strategically working to reduce lead times and improve logistics by manufacturing closer to end markets to counter global rivals and maintain its competitive edge.
Kirloskar Oil Engines Targets Data Centers
Kirloskar Oil Engines (KOEL), another significant player, is actively pursuing the data center market, particularly within its power generation business. While still building its reputation in this segment, KOEL has secured several large-scale orders for high-capacity generator units. The company acknowledges the stringent US-centric standards of the data center industry and is focusing on non-spec customers to establish its foothold. KOEL aims for a broader market penetration, moving beyond edge facilities to capture opportunities across multiple levels of the data center value chain.
Financial Performance and Outlook
Cummins India reported a 28% year-on-year increase in total revenue to ₹3,122 crore in Q2 FY26, with net profit surging 38.5% to ₹622 crore. Kirloskar Oil Engines also saw robust growth, with revenue rising 30% to ₹1,948 crore in the same period, and net profit up 27.2% to ₹159 crore.
Valuation and Investment Outlook
Cummins India trades at a higher valuation, reflecting its established market position and strong returns. Kirloskar Oil Engines, while earlier in its data center journey, offers a more moderate valuation. Both companies are positioned to capitalize on the sustained, multi-year demand cycle for reliable power infrastructure driven by India's burgeoning data center build-out.