Data centres are the hidden factories of the digital age. They are the places where servers store and process the information that keeps our digital lives running. Demand for data centres has been rising sharply in recent years, driven by the growth of cloud computing, the rapid expansion of artificial intelligence, and the vast amount of data generated by businesses and consumers every day.
Colliers India reported that India’s data centre capacity had grown to 1.26 gigawatts (GW) in April 2025, up from 0.3 GW in 2018. A 30-fold increase in data traffic since FY17, combined with rising smartphone penetration, over-the-top (OTT) platforms, digital payments, and e-commerce, has driven growth. But this is just scratching the surface.
Jefferies estimates that the capacity will quintuple to 8 GW over the next five years, driven by rising internet traffic. This expansion is estimated to require an investment of $30 billion (about ₹2.6 trillion). This will open up a range of downstream opportunities for Real estate ($6 billion), Electrical and power systems ($10 billion), Racks ($7 billion), cooling systems ($4 billion), and Network Infrastructure ($1 billion).
Now, when it comes to data centres, the stock that typically draws interest is Anant Raj. Or then one thinks of the giants – Reliance/Jio, Bharti Airtel, or Adani Enterprises. But today we will take a different approach. So, let’s take a look at three ‘hidden’ stocks that also stand to benefit from this boom in data centre capacity.
#1 Kirloskar Oil Engines: Powering uptime for data centres
Kirloskar Oil Engines is one of the key companies of the Kirloskar Group. The company manufactures and services diesel engines (ranging from 2.5 horsepower (HP) to 1,650 HP) and diesel generator sets (ranging from 3 kVA to 12,000 kVA). It also makes diesel and electric pump sets.
Expanding role in critical infrastructure
The company has a strong presence in various sectors, including power generation, agriculture, and industry. Apart from this, Kirloskar also supplies generators and firefighting pumps to data centres that require uninterrupted power backup. Management views the data centre sector as an emerging area that will contribute to sustained demand in the domestic market.
Its offerings for this sector include Generators, Backup solutions, Generator electrical systems, retrofit emission-control devices, and dual-fuel kits. Its product strategy for this high-demand area consists of the Optiprime series of Gensets.
This series offers a unique, space-efficient design that integrates multiple engines under a single canopy. This is ideally suited for sectors such as data centres, where space is limited and uninterrupted performance is crucial.
The company is actively engaged in the sector, stating that it works with numerous data centres. Kirloskar is currently executing several orders for its data centre business and is also expanding more aggressively to capture demand.
Subdued half one performance
The company operates in the B2B and B2C segments. B2B sales accounted for 73.6% of its revenue of ₹37.1 billion in the first half of FY26. The balance (14.8%) came from B2C sales, while the rest came from non-core financial services. The company’s revenue in H1FY26 increased 18.3% year-over-year to ₹37.1 billion, primarily driven by B2B growth of 21% to ₹27.3 billion.
The B2B growth was driven by a revival in demand for the power generation business and the defence segment. The B2C segment revenue also grew 9% to ₹5.5 billion. Profit after tax (PAT) from continuing operations fell 4% to ₹2.9 billion. The company boasts average return ratios, with Return on Equity (RoE) of 15.4% and Return on Capital Employed (RoCE) of 13.7%.
Strengthening the core power generation business
Looking ahead, beyond the data centre opportunity, management sees sustained demand in the domestic market across key emerging segments, including QSR, retail, hospitality, and infrastructure, noting they are not seeing any cyclicality in these areas. It is also seeing strong demand from the defence indigenisation program.
The management also plans to launch products in Q3 FY26 to further strengthen its competitive position in the domestic power generation business. To focus on its core B2B business, Kirloskar has also restructured its B2C business and transferred it to its subsidiary through a slump sale, effective Q3 FY26. This is expected to lead to greater efficiency and improved performance, driving business growth and margins.
#2 Bajel Projects: Plugging data centres into the grid
Bajel Projects operates within India’s power infrastructure sector and is a part of the Bajaj Group. It specialises in engineering, procurement, and construction (EPC) services domestically and internationally. The company has over two decades of experience in power infrastructure.
It delivers Extra-High-Voltage (EHV) transmission lines, substations, and underground cabling. It has successfully built over 8,686 circuit kilometres (ckm) of transmission lines and executed over 43 AIS/GIS substation projects across 19+ states.
Within power distribution, it delivers last-mile power infrastructure through EPC solutions for rural electrification, urban grid upgrades, and specialised projects. It has expertise in executing projects under schemes such as Saubhagya across geographies. This includes the states of Uttar Pradesh, Bihar, Odisha, Jammu & Kashmir, and West Bengal.
Key distribution achievements include installing over 26 lakh service connections, completing 1,100+ km of underground cabling, electrifying over 50,000 villages, and installing over 76,000 distribution transformers.
From power transmission to data centre electrification
Bajel Projects leverages its core EPC expertise to offer Total Electrification Solutions for data centres.
- Substations: Providing Gas Insulated Substation (GIS) and Air Insulated Substation (AIS) infrastructure.
- Transmission and Cabling: Supplying transmission lines and Monopoles.
- Electrical Distribution: Handling electrical distribution, cabling, and diesel generator (DG) set supply and installation (S&I).
- Ancillary Systems: Implementing security systems, Data Centre Infrastructure Management (DCIM), fire protection, Civil interiors, and Mechanical, Electrical, and Plumbing (MEP) services.
The company entered the data centre segment with a landmark GIS substation order in Navi Mumbai. This initial data centre order involved the award of a contract for the design and construction of a 220/33 KV GIS Substation and transmission line extension for a colocation data centre facility.
Strong revenue growth, but interest weighed on profitability
From a financial perspective, revenue from operations in H1 FY26 rose 4% year-on-year to ₹12.2 billion. This growth was driven by strong execution and increased efficiency. EBITDA (earnings before interest, tax, depreciation, and amortisation) rose 34% to ₹550 million, while margin expanded by 100 basis points (bps) to 4.4%.
However, PAT declined 14.3% to ₹120 million, due to a sharp increase in finance costs. As of 30 September 2025, the company’s unexecuted order book stood at ₹33.8 billion. The order book provides revenue visibility of about 1.3 years, based on the FY25 revenue of ₹25.9 billion.
RAASTA 2030: A 6-year strategic roadmap
It has also identified the data centre as a key long-term strategy in its “RAASTA 2030,” a 6-year strategic roadmap to FY30. The aim is to position Bajel as a leader in the energy infrastructure sector. The company aims to expand into several high-growth industries over the coming 2 years. The latter phase aims to achieve double-digit revenue growth and 15% of RoCE.
#3 KRN heat exchanger: Cooling the data centre opportunity
KRN Heat Exchanger specialises in the manufacturing of customised heat exchangers and related products for the Heating, Ventilation, Air Conditioning, and Refrigeration (HVAC&R) industry. It operates on a 100% B2B business model, supplying primarily to original equipment manufacturers (OEMs).
A market leader in heat exchangers
The company’s clientele includes Daikin Air Conditioning, Schneider Electric, Blue Star, and Kirloskar Chillers. KRN’s key products are fin- and tube-type heat exchangers, including condenser, evaporator, and fluid and steam coils, used in various applications, including data centre cooling.
KRN also counts the Schneider Electric IT business as a key customer since 2019. Schneider is a well-known provider of IT and data centre solutions, indicating KRN’s established presence in the relevant supply chain.
Management estimates that Google’s ₹500 bn investment in the data centre in India will create an opportunity of ₹15 bn for the HVAC segment. KRN is well-positioned to tap into this growth due to its expertise in commercial/bigger heat exchangers, where its market share is estimated to be high (60-70%).
KRN anticipates securing at least 50% of the order for this project. It’s because it possesses the unique capability, capacity, and infrastructure (like overhead cranes and space) necessary to manufacture the required large heat exchangers.
Strong revenue growth with healthy margins
KRN’s revenue in H1 FY26 rose 73% year-on-year to ₹3.4 billion. This growth was driven by robust demand across both domestic and international markets. EBITDA increased by 42.6% to ₹493.8 million, while margins fell 301 bps to 14.6%. PAT increased 65.7% to ₹393.3 million.
The company has an average RoCE and RoE of 12.4% and 10.6%, respectively. Such is the demand for KRN products that its current capacity is running at peak utilisation. To capitalise on strong demand, it’s expanding its capacity by 6X of its current capacity. The company also expects a sustained EBITDA margin of around 20%, despite new capacity additions.
Capacity expansion to capture rising demand
Looking ahead, KRN plans to successfully commission its new manufacturing facility. The company aims to ramp up production and expects strong numbers from the third quarter of FY26 onwards. This new capacity is expected to reach 20% to 25% utilisation in FY26. Utilisation is expected to reach about 50% in FY27 and 80% within three years.
KRN has acquired Sphere Refrigeration Systems’ Bus Air-Conditioning division. This acquisition strengthens KRN’s transport cooling portfolio, adds new technological capabilities, and supports future growth, particularly in the automotive HVAC segment. KRN expects Sphere to add ₹1.6 billion in revenue in FY27.
KRN Heat Exchanger Share Price
Bottomline
India’s data centre boom is creating structural opportunities in supporting industries. This is also reflected in their valuations. Kirloskar, which has a long-term historical track record, is trading at a premium to its median multiple and close to its industry P/E. Meanwhile, one should take note that both Bajel and KRN are trading at very high P/E multiples. Even though both these stocks trade near their respective 2-year median multiples, they are priced at a high premium relative to the industry.
Valuation Assessment (X)
| Company | P/E Multiple | 3-Year Median | Industry P/E |
| Kirloskar Oil | 34.8 | 26.8 | 38.9 |
| Bajel Projects | 163 | 158.1 (2-Year) | 47.5 |
| KRN Heat | 87.5 | 89.7 (2-Year) | 28.7 |
That said, India’s data centre expansion is opening opportunities across supporting industries, and these three companies are steadily positioning themselves within that shift.
Kirloskar is strengthening its power solutions portfolio, Bajel Projects is building on its EPC capabilities, and KRN Heat Exchanger is expanding capacity to meet rising cooling demand. Each business is seeing early benefits through stronger order visibility and sector-linked demand. Their premium valuations, though leaving limited room for error, especially in the case of KRN and Bajel, already reflect much of that optimism.
Disclaimer
Note: Throughout this article, we have relied on data from http://www.Screener.in and the company’s investor presentation. Only in cases where the data was not available have we used an alternate but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points, and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educational purposes only.
About the Author: Madhvendra has been deeply immersed in the equity markets for over seven years, combining his passion for investing with his expertise in financial writing. With a knack for simplifying complex concepts, he enjoys sharing his honest perspectives on startups, listed Indian companies, and macroeconomic trends.
A dedicated reader and storyteller, Madhvendra thrives on uncovering insights that inspire his audience to deepen their understanding of the financial world.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article.
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