Mega Networks Mulls Up To INR 400 Cr Investment To Make AI Servers In Maharashtra

Computer hardware company Mega Networks is planning to set up a factory for local manufacturing of artificial intelligence servers by the third quarter of the ongoing fiscal year 2024-2025.

Mega Networks is among the two Indian firms chosen to participate in the production-linked incentive (PLI) scheme 2.0 for IT hardware. This scheme, initiated by the government, offers an incentive of approximately 5% on net incremental sales of goods produced in India.

As per ET’s report, citing the company’s chief executive, Amrish Pipada, the factory will be built in Maharashtra and Mega Networks plans to invest INR 350-400 Cr in FY25.

“The initial investment for setting up the factory will be funded through internal accruals and debt of INR 100-120 Cr, with the remainder raised from long-term debt and private equity,” Pipada told ET.

Mega Networks has forged a technology collaboration with US chipmaker Intel. 

According to Pipada, the AI servers, introduced in February, are enhanced by Intel’s Habana Gaudi 1 and 2 series, along with 4th and 5th generation scalable processors. These modular servers are versatile, catering to applications such as generative AI, high-performance computing, and data centre operations.

Mega Networks has identified potential orders totalling close to INR 1,000 Cr for the servers, with confirmed bookings currently standing at INR 150-200 Cr.

To bolster its growth trajectory, Mega Networks aims to ramp up its employee count from 110 to approximately 400 over the next year, across various functions such as R&D, finance, marketing, and sales.

As per ET, the company posted revenue of INR 300 Cr in FY24, marking a 30% year-on-year growth. With AI server manufacturing poised to be a significant revenue driver, the company aims to achieve INR 1,000 Cr in revenue within two to three years.

“The AI ecosystem in India is a growing market,” Pipada said, pointing to the government’s investment with the India AI Mission, state governments investing in data centres, as well as demand from major data centre players and conglomerates like Reliance and Tata that are looking to build large language models.

Last year in November the Indian government gave its nod to 27 global IT firms, including Dell, HP India and Lenovo, to manufacture hardware components in the country.

The approval has been granted under the new IT hardware production linked incentive (PLI) scheme which covers laptops, tablets, servers and ultra small form factor devices. 

Under this scheme, the IT ministry shall offer incentives in the range of 1% to 4% on net incremental sales (over base year) of goods manufactured in India, and covered under the target segment for a period of four years. 

As per a report by Market Research Future, the market value of IT hardware in India in FY22 stood at about $44.5 Bn, which is expected to reach almost $74 Bn by 2032.