The rise of Artificial Intelligence workloads, driven by NVIDIA and hyperscalers such as Amazon Web Services, Microsoft Azure, and Google Cloud, has fundamentally altered how data centers consume power and, more importantly, how they generate heat.
Thermal bottlenecks: The shift from power to cooling
This, in turn, shifts the bottleneck from electricity supply to thermal management. This makes cooling no longer a support function, but a necessity. S&P Global Ratings projects that data center capacity in India will expand to 3-3.5 gigawatts (GW) over the next 4-5 years, up from 1.5 GW currently.
This is expected to increase demand for cooling and thermal management. As a result, India’s cooling and thermal management market is projected to see $2-2.5 billion (around ₹23,500 crore) in investments over the coming years, as higher computing loads increase heat intensity, according to S&P Global Ratings.
Against this backdrop, this article examines three stocks positioned to benefit from this investment landscape.
#1 KRN heat exchanger: Targeting 50% market share with 6X capacity growth
KRN Heat Exchanger supplies Chillers, Dry Air Coolers, large-scale heat exchangers, and Precision Air-Conditioning Components for data center cooling. KRN supplies these vital cooling components to nearly every major data center HVAC equipment supplier operating in India.
Global Supply Chains: Integrating with Schneider and Climaventa
Its parts are integrated into systems built by major global and domestic manufacturers, with clients including Schneider Electric and Climaventa (Mitsubishi Electric brand). Through these partnerships, KRN’s cooling supplies are not only meeting growing domestic demand but also receiving inquiries and orders for data centers in the United States and Europe.
The Vendor Breakthrough: Decoding the 90-SKU NDA and L1 Bid
KRN recently signed a Non-Disclosure Agreement (NDA) with a major prospective client and was subsequently invited to participate in their bidding process. This bid encompasses more than 80 to 90 individual SKUs (Stock Keeping Units). KRN successfully secured the lowest bidder position for this contract.
With this, KRN has proven its competitive edge and will now enter this major client’s supply chain as a new vendor. KRN is not the sole supplier for all of its clients, as buyers typically distribute a small portion of their orders to competitors. However, KRN often meets up to 80% of a client’s needs.
Before commercial supply officially begins, KRN must provide the client with two product samples. Management expects that once these samples are approved, supplies to this large data center client will begin smoothly. Winning this prospective client is a critical milestone.
The 50% Market Share Roadmap
By successfully onboarding this final major holdout, KRN further solidifies its dominant market position. This win directly supports the company’s highly ambitious target of capturing at least 50% market share in the Indian data center heat exchanger market. As of Q3FY26, the segment revenue contribution stood at 15%, up from 7% in the prior year.
Operational Leverage: Why 6X capacity expansion is the growth engine
To meet large-scale demand, KRN recently expanded its capacity. The capacity after expansion is about 6X what it was when the company’s turnover was around ₹300 crore.
Management expects capacity utilisation to be around 20% in FY26, and aims to reach 50% by next year. The expansion is already yielding results. In the last quarter alone, KRN added over 40 new customers specifically from this new facility.
#2 Voltas: Tata’s MEP giant disrupting global cooling incumbents.
Voltas, a Tata Group Company, is expanding into the data center segment through its mechanical, electrical, and plumbing (MEP) vertical.
The 9-Month Fast-Track Advantage
It sees the data center as highly attractive because they are fast-track projects that typically turn around in 9 to 12 months, carry low risk, and offer quick profitability.
The Tech Alliance: Breaking the Efficiency Ceiling in Industrial Cooling
Data centers require specialized, robust cooling equipment, primarily Screw Chillers and Centrifugal Chillers. Voltas offers two distinct variants of the latter: regular Centrifugal Chillers and Oil-free Chillers. Thanks to a recent alliance with a new technology partner, Voltas has made big advancements.
It claims to offer the most energy-efficient products available in both the Screw and Centrifugal categories. This provides Voltas strategic market advantages. Energy consumption accounts for a large portion of a data center’s operational expenditure. By providing energy-efficient chillers, it addresses a primary cost concern for data center operators.
The MEP Synergies: Voltas’ “Single-Source” Vendor Dominance
This makes the company highly confident in securing these orders. In fact, Voltas is already executing a couple of projects and reports a very healthy funnel of inquiries for future bids. Voltas also utilizes a cross-divisional strategy by bidding for chiller equipment alongside its MEP division.
Challenging the American Trio: The New Frontier of District Cooling
This allows Voltas to serve as a comprehensive, single-source vendor for data center projects. The company’s efficient centrifugal chillers also give Voltas a strong competitive edge in District Cooling. This space is traditionally dominated by three major American brands: York, Trane, and Johnson Controls.
In district cooling, chilled water is distributed through underground pipes to cool buildings, campuses, and other facilities.
#3 Blue Star: The execution leader pivoting to high-margin liquid cooling.
Blue Star is actively expanding its portfolio and capabilities to address the robust demand in the data center segment. Data center cooling represents a significant and strategic growth area for Blue Star’s Electro-Mechanical Projects and Engineering, Procurement, and Construction (EPC) divisions.
The High-Margin Moat
Blue Star sees data centers, alongside factories and buildings, as “good-margin projects.” These segments offer higher profitability than traditional infrastructure projects, which often face cost overruns as they near completion. During 9MFY26, Blue Star saw strong enquiry and steady demand in the data center vertical, which is helping support their overall order book.
As data center technology evolves, so too do cooling needs. To better adapt, Blue Star is actively adopting advanced cooling technologies, particularly liquid cooling and cooling distribution units. In addition, Blue Star is exploring multiple partnerships across geographies to develop these advanced liquid-cooling solutions.
The Race to Commercialize India’s In-House Liquid Coolers
These partnerships are currently classified under a non-disclosure agreement. Management stated that several in-house liquid-cooling models are in advanced stages and should be commercially ready in about 12 months. Beyond just manufacturing cooling products, Blue Star aims to dominate the execution side of these projects.
The company considers itself a market leader in the MEP (Mechanical, Electrical, and Plumbing) and EPC execution for data centers. It is also building leadership in the related space of semiconductor air conditioning, which similarly requires highly sophisticated electromechanical project execution.
The Competitive Landscape: Valuation vs. Fundamentals
Blue Star’s return ratios, including Return on Capital Employed (RoCE) and Return on Equity (RoE), are the strongest amongst the three, followed by KRN and Voltas. Valuations, however, reflect a mixed picture.
KRN’s valuation is a premium to the industry median, and even on a standalone basis, it remains quite high. The other two (Blue Star and Voltas) are also trading at a premium to their historical and industry median multiples.
| Peer Comparison (X) | |||||
| Company | Price-to-Earnings Multiple | Return Ratios | |||
| Company | 5Y Median | Industry | ROCE (%) | ROE (%) | |
| KRN | 122.0 | 87.6 (1.5Y) | 25.0 | 20.8 | 16.8 |
| Blue Star | 73.0 | 65.0 | 47.5 | 26.2 | 20.6 |
| Voltas | 95.9 | 76.9 | 47.5 | 17.6 | 13.5 |
| Source: Screener.in (As of 28th April, 2026) | |||||
As AI-led workloads scale, heat (not power) is emerging as the defining constraint in data center expansion. With India’s capacity set to rise from 1.5 GW to 3-3.5 GW, backed by $2-2.5 billion in cooling investments, thermal management is becoming central to infrastructure design.
The opportunity now sits with companies that can enable efficient heat dissipation at scale, as cooling shifts from a support layer to a core driver of capacity and returns. Keep them on your watchlist to track how the opportunity unfolds.
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 were unavailable have we used an alternative, widely accepted, and widely used 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.
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