Rs 6-Lakh-Crore Opportunity: This Indian Power Stock Powering Global AI Data Centres

The rapid scale-up of artificial intelligence is quietly reshaping global power infrastructure. Training and deploying AI models now require vast data centres that operate continuously, without disruption. These facilities are among the most power-intensive industrial assets today. As server density rises and workloads become more compute-intensive, the reliance on reliable, uninterrupted electricity has moved to the centre of the AI investment story.

That dependence is becoming visible in energy consumption trends. According to the International Energy Agency, electricity usage by data centres has grown at a 12% CAGR over the past five years to about 415 terawatt-hours. This figure is projected to more than double to roughly 945 TWh by 2030, with data centre demand growing over 4X faster than overall electricity consumption across other sectors between 2024 and 2030.

This acceleration is geographically concentrated. China and the US are expected to account for nearly 80% of incremental global data centre power demand by 2030. These data centres rely on supporting infrastructure to operate continuously. This has increased the demand for power generators, which ensure continuity during grid outages.

The global generator market is estimated to reach $73 billion (over Rs 6 lakh crore) by 2029, up from $52 billion (over Rs 4.5 lakh crore) in 2025, per TD Power Systems, supported by data centres, gas-based power generation, and clean energy applications. This is where TDPS comes into the picture, with its share price rising 75% over the last year.

TDPS manufactures AC generators and electric motors for power applications. It operates across power generation, thermal systems, and renewable technologies, and provides customised engineering solutions for data centres, oil fields, and hydroelectric plants. It manufactures generators ranging from 1 to 250 MVA, positioning itself as a global leader in this space.

These generators are suitable for steam turbines and gas turbines (up to 250 MVA), hydro turbines (up to 75 MVA), and diesel engines (up to 25 MVA). Beyond generators, TDPS is also present in electric motors, including induction motors (up to 20 MW), synchronous motors (up to 50 MW), and traction motors (up to 1,250 kW) for railway and industrial applications. 

This diversification enables TDPS to participate across multiple end markets. The company also serves niche segments, including geothermal and solar thermal power plants, marine and naval power systems, and specialised testing facilities. TDPS also has a global after-sales network of 57 service centers that provide diagnostics, overhaul, and spare parts support.

For TD Power, data centers and AI servers have emerged as one of the most significant global growth drivers, particularly in the US and Europe. This acceleration of AI adoption has turned generators into key enablers of digital expansion. It's because power systems have become mission-critical, with uninterrupted electricity non-negotiable.

As hyperscale AI infrastructure expands, the corresponding demand for power and generators is anticipated to increase. Meta, Alphabet, Microsoft, and Amazon have indicated they will continue to increase their spending on AI infrastructure through 2026. In the US alone, growing data centre demand is expected to add 100 GW to electricity demand by 2030.

Every data centre requires backup systems to prevent outages, given the need for continuous, uninterrupted operations. And diesel engines are often unsuitable due to power-hungry servers, which require 100-150 MW per site. Only gas turbines and engines provide the clean, consistent power that AI infrastructure requires.

Gas turbines also support the clean energy transition, which is driving the growing demand. Notably, TDPS has a large presence in both the US and Europe, where demand for generators is growing faster than in India. Exports accounted for 64% (FY25) and 66% (H1FY26) of revenue. To capture the growing demand, TDPS is evolving its technology to meet the higher power requirements of modern server farms.

The company is moving into the 40–45 MW generator space. These are 2-pole generators designed for larger gas turbines and gas engines. These larger machines are scheduled for delivery beginning in FY26, with a massive scale-up expected from FY27. Beyond the 40–50 MW range, TDPS is also targeting the 60–70 MW space for even larger gas turbine applications.

While the global demand is strong, the Indian market presents different challenges. Despite the potential, management notes that there has not yet been significant investment at the ground level in large-scale AI server farms in India. Large-scale sites cannot realistically be powered by diesel engines, making gas the only viable solution for the high-power density required by data centers. But India lacks the scale of gas infrastructure.

The company is currently experiencing a "turbocharged" demand environment, particularly within the international gas engine and gas turbine segments. Management estimates revenue at Rs 1,800 crore in FY26 and Rs 2,000 crore in FY27, up from Rs 1,279 crore in FY25. This growth is expected to be driven by a strong order book and order booking.

As of Sept. 30 2025, the total order book stood at Rs 1,587 crore, with 39% growth in order inflow in the first half of FY26. Of this, generators and motors account for Rs 1,235 crore. Additionally, TDPS is currently booking orders at a run rate of around Rs 550 crore per quarter, a pace TDPS expects to sustain into the next financial year.

The hydro segment of TDPS is a cornerstone of the company's renewable energy portfolio. The company designs and manufactures hydro turbine generators with capacities up to 75 MVA (approximately 50 MW). TDPS's primary growth in this segment is driven by international markets, particularly Nepal and Vietnam.

TDPS anticipates that FY27 will be one of its highest years in history for hydro, primarily driven by exports to both regions. Other active regions include Southeast Asia, Africa, and Europe. The Indian market is also seeing signs of revival, but its current contribution to TDPS's total turnover is less than 10%. 

It is also vertically expanding into the motors and railways sectors. Motors are viewed internally as a major growth engine, given their larger addressable market compared to generators. TDPS has set up a dedicated team to scale this business toward a long-term revenue target of Rs 500 crore. Within the motor vertical, railways are seen as a growth engine.

In railways, the company is expanding traction motor production for the US, European, and Russian markets. Volume productions are expected to commence in Q1 FY27. The railway business order book stood at Rs 316 crore, up from just Rs 42 crore at the start of FY25. TDPS is also working on orders for the e-loco project in India.

To support rising demand, TDPS is expanding its manufacturing footprint. A third manufacturing facility in Tumkur is being commissioned in phases and is fully operational from December 2025. The plant is designed to support larger generators, motors, and critical sub-assemblies. The existing plant includes a 25% buffer, enabling short-term capacity growth without the need for new buildings.

With this addition and ongoing debottlenecking, management estimates the total revenue potential of Rs 2,500–2,600 crore. TDPS is establishing a design and engineering centre in the United Kingdom. The centre aims to bring the company closer to its key global clients, while also promoting innovation, localization, and advanced design compliance.

This centre will focus on developing generators in the 50–150 MW range. A prototype machine is expected to be offered to customers for testing and qualification by early January 2026. Management is calling this a "multiple hundred crore" opportunity. Large order volumes from these qualifications are expected in the second half of FY27.

The company also delivered a strong financial performance. Revenue increased 42% year-on-year to Rs 824 crore in the first half of FY26. The Ebitda increased 47% to Rs 157 crore, while margin expanded 50 basis points to 18.9%. Net profit rose 46% to Rs 111 crore. It aims to achieve 20% margins once the third plant reaches full capacity and recovers costs.

At Rs 674 per share, TDPS trades at a price-to-earnings multiple of 50 times, which is a premium to its historical 5Y median multiple (35). However, it trades at a discount to larger competitors such as CG Power (88), Hitachi Energy (111), and GE Vernova T&D (81). Trade-related risks remain a concern.

To address this, management has developed a "Plan B." TDPS is prepared to shift US-bound production to its Turkish facility to mitigate the impact of higher import duties if a trade deal is not reached by the end of FY25. The cyclicality of the capital goods sector and the dependence on steam turbine engines remain another concern.