India’s growing AI data center sector is creating new revenue opportunities for electrical equipment makers like Kirloskar Oil Engines, ABB, and Siemens. Analysts estimate that 10-15% of total data center infrastructure costs relate to power and equipment, driving potential demand for high-capacity engines and electrical systems.
The rapid expansion of artificial intelligence data centers in India is expected to drive substantial demand for electrical equipment manufacturers. While servers and cooling systems often dominate headlines, the underlying power infrastructure required to support these facilities represents a critical and growing market. Industry analysts estimate that setting up a data center involves costs of approximately ₹60 crore to ₹70 crore per megawatt, with a meaningful portion of this expenditure directed toward electrical components and power backup systems.
Companies such as Kirloskar Oil Engines, ABB, Siemens, Honeywell, and Cummins are currently viewed as key players that could benefit from this industrial shift. Unlike public infrastructure projects often tied to government spending, data center investments are primarily driven by private technology firms and global operators, which may provide a different cycle of demand. For investors, the ability of these companies to supply reliable power solutions remains a central factor.
Kirloskar Oil Engines has recently focused on scaling its high-horsepower segment, which is essential for the power needs of large-scale data centers. The company has secured certifications for power capacity reaching 2,750 kVA. Its recent order in the 65-litre engine category is a notable development for its product portfolio, signaling an attempt to capture a larger share of the high-capacity backup power market.
While the growth outlook for the sector is supported by significant capacity expansion, investors should consider the current valuation landscape. Many companies in the industrial equipment space are trading at high price-to-earnings multiples compared to their historical averages, reflecting market optimism regarding this trend. Furthermore, while India is currently expanding its capacity, global experiences in countries like Singapore and Ireland have shown that data centers can eventually face resource constraints, such as power or water availability, which may lead to regulatory restrictions in the future.
Beyond valuation and potential regulatory risks, the sustainability of this growth will depend on the actual speed of project execution and whether these companies can maintain their profit margins amidst intense competition in the electrical equipment sector. Investors may track future order book disclosures, project commissioning timelines, and management commentary on margin sustainability to gauge how effectively these firms are converting the AI data center opportunity into long-term financial performance.