Dealmakers: Nandish Vyas and Nilanjana Singh of AZB and Iqbal Khan of CAM

Bar & Bench recognizes AZB's Nandish Vyas and Nilanjana Singh and Cyril Amarchand Mangaldas' Iqbal Khan as Dealmakers for their role in the Tata Consultancy Services (TCS) and TPG 18,000 crore investment in AI Data Centre Play.

This deal is important not just for TCS and TPG, but for India’s emerging position as a global AI-infrastructure hub. And as always, behind every mega-transaction is a complex legal matrix — and some of the country’s top law firms guiding it.

The Deal Structure

• The total commitment by TCS + TPG is up to ₹18,000 crore 

• Out of that, TPG’s contribution is up to ₹8,820 crore

• In exchange, TPG’s final shareholding in HyperVault is envisaged between 27.5% and 49%. 

• The business will be funded through a mix of equity from TCS + TPG and debt financing. 

• TCS remains the majority owner (given TPG capped at 49%), meaning governance stronghold remains with TCS in the subsidiary.

• The investment is facilitated through TPG’s platforms including TPG Rise Climate (Global South Initiative).

Dealmakers

Lawyers & Law Firms:

• For TCS, legal counsel was AZB & Partners, led by Partners Nandish Vyas and Nilanjana Singh

• For TPG, legal counsel was Cyril Amarchand Mangaldas, led by Partner Iqbal Khan and Latham & Watkins

From the legal-structural perspective, the main instruments likely include:

• Subscription agreement for equity/CCPS (compulsory convertible preference shares)

• Shareholders’ agreement defining governance, rights, lock-in, exit mechanics

• Inter-creditor arrangements or debt finance documentation for the debt tranche

• Regulatory filings (under FEMA, CCI, RBI) given a foreign investment and infrastructure nature

Key Legal Issues at Play

Here are the main legal-framework issues the teams had to address:

• Foreign direct investment (FDI) compliance & cross-border structuring: With TPG investing via a Singapore entity (TPG Terabyte Bidco Pte Ltd), the structuring must comply with India’s foreign investment regulations, pricing guidelines, shareholding limitations, and reporting requirements under the Foreign Exchange Management Act (FEMA).

• Regulatory approvals and conditions precedent: Given the infrastructure/data-centre business, approvals from states for land, power, environmental clearances, as well as central approvals for infrastructure (if any) and competition approval if thresholds are triggered.

• Corporate Governance & Control Mechanics: Since TCS wants to hold majority control, and TPG seeks investor protections, the SHA will have to define director‐nomination rights, reserved matters, lock-in for both parties, exit rights (ROFO/ROFR, drag along/tag along), conversion mechanics of CCPS.

• Technology & IP allocation: Because HyperVault will be built by TCS using its tech, standardising the license/transfer of TCS’s know-how, ensuring commoditisation of infrastructure, and protecting TCS’s underlying services business from competitive cannibalisation.

• Debt financing and security package: With a large debt component, lawyers will draw up security trusts, expect investment floor for TPG, cash-flow waterfalls and inter-lender arrangement between equity and debt.

• Exit mechanics, valuation resets and lock-in: Given a private equity investor, the deal will build in visibility on exit — likely via IPO or buy-out; lawyers must craft funding rounds, conversion rights, valuation resets/caps on dilution.

• Data centre / sovereign cloud regulatory compliance: Because of “sovereign data centre” references, compliance with data-localisation laws, national security provisions, infrastructure access rules, alliances with hyperscalers — these add regulatory risk and legal complexity.

Here are the main legal frameworks that the law firms had to address:

Pallavi Saluja: How early were you involved, and what were the first strategic discussions around stake size, governance, and capital structure?

Iqbal Khan (for TPG): We were involved fairly early on and provided strategic inputs and comments on the negotiation of key commercials. From the outset, the intent and commitment of both parties to making the deal happen came through to us very definitively. Having previously collaborated strategically, it was clear to both Tata and TPG that they were the right partners for this venture.

The specific discussions around stake, governance, capital structure (as well as all other matters) were guided by this joint vision and trust. The objective, at all times, was to leverage the key strengths of both parties for the benefit of the venture – TCS’s standing as a market leader in IT/ IT enabled services and its deep, unique understanding of the business opportunity, complemented perfectly by TPG’s ability to put together a tailored, sector and partner conscious investment strategy and approach.

PS: Which internal practice groups—regulatory, infra, tech, ESG, competition, FDI—played key roles, and how were they integrated?

Nilanjana Singh (for TCS): Multiple internal practice groups work closely together to ensure the deal’s success and each was, in that sense, very critical to different aspects of the transaction. The key, of course, was our regulatory practice group, which was obviously very important in ensuring compliance with all the relevant laws and regulations, in particular data privacy, cross-border data flow, environmental compliance, as well as approvals from various regulatory bodies as the JV continues its business.

In addition, the infrastructure practice group becomes increasingly important as the JV grows its business. For example, in relation to real estate and zoning, several land parcels may be required for the data centres' physical locations, including real estate negotiations, zoning approvals, and environmental assessments. In addition, energy supply and sustainability are key, as AI data centres, in particular, are highly energy-intensive. Also, in relation to this will be the construction and operation contracts. So, infrastructure becomes a very important part of the overall transaction.

Linked to that is the technology practice group as well – IP being a very key area in this business because AI data centres are often built on proprietary algorithms and software. The tech team will help structure where the IP rights will lie versus where the physical ownership of the data centres may lie. In addition to that, very importantly, is our ESG practice group because the push towards this joint venture is towards green energy data centres. Hence, a very multi-disciplinary approach was adopted towards the deal with various practice groups being quite highly integrated throughout the transaction, together with the corporate team.

Iqbal Khan: The mandate was primarily executed by the General Corporate team led by me. However, as is customary for such complicated, high value transactions, key contributions were also provided by other practice areas. The competition team led by Avaantika Kakkar, who provided anti-trust advice and Sairam Subramanian and team advised on disputes aspects. Cyril Shroff provided strategic inputs while L. Viswanathan provided inputs on the structure. All the internal coordination and integration was led and managed by my team.

PS: What makes AI data centre deals different from conventional PE or infrastructure transactions from a legal perspective?

Nandish Vyas (for TCS): The deal was different from a conventional private equity deal or a venture capital deal. Unlike most of those deals, for AI Data Centres, because of the sudden scale of growth and the scale of growth required, a very high amount of capital is needed at a relatively nascent stage. In that sense, one has to take in learnings from growth deals as well as from deals where a large amount of capital is invested, and combine these together specifically for a scenario like this.

As far as infrastructure deals are concerned, again, a lot of those are very project-specific; whereas, in this case, the business plan is a far more fluid, which may keep evolving based on the contracts that are signed or the locations at which the data centres are to be opened. Essentially, the deal documents have to factor in a lot of scenarios for the various possibilities and outcomes. The main thing, therefore, keeping all of these factors in mind for these deals, is to think out the legal strategy from a scenario-building perspective and make sure that the parties are covered for the intended commercial arrangement across the several years over which the venture would continue to exist.

Iqbal Khan: The fundamental difference here arises from the nature of the asset itself – AI-enabled data centres are not passive assets, as is sometimes the case with other infrastructure asset classes. The business is extremely dynamic, with layered interplay of fast-evolving technology, customer demand as well as an evolving regulatory landscape. This meant that the governance structure and the contractual mechanisms had to deal with various potential business exigencies while being permissive, solution oriented and flexible. This was a problem that was as challenging as it was exciting for us to solve.   

[Watch Video]

PS: Biggest regulatory touchpoints you had to navigate—FEMA, infrastructure norms, or sustainability-linked guidelines? How did you navigate cross-border investment rules, FEMA compliance, and sector-specific nuances?

Iqbal Khan: Both parties have consistently prioritised full compliance with applicable law and regulatory requirements in all their past dealings, and reaffirmed their commitment to maintaining the same high standards in respect of this joint venture. Therefore, the key regulatory challenge was to implement the agreed commercial understanding in a fully compliant manner. Several potential business / commercial scenarios which could arise over the life of the venture had to be carefully evaluated and accounted for, to ensure that the intended economic and governance balance of the venture was maintained at all times. 

PS: How were ESG commitments—energy efficiency, cooling technology, carbon-intensity benchmarks—embedded into the transaction documents? Considering the funding is coming from TPG’s Climate Fund.

Iqbal Khan: Sustainability-related guidelines were also critical since this was one of the primary investment objectives from TPG’s end, since the investment came from TPG’s climate fund. We had to marry the joint venture governance and contractual mechanisms with the fairly elaborate, highly technical and layered sustainability-related internal requirements and protocols of TPG. It would be remiss to again not mention the exceptional understanding and cooperation that TCS extended on these aspects, which helped us get to viable and mutually workable positions on these issues.

PS: Legal trends you foresee for similar AI-infrastructure investments in India over the next 3–5 years

Nilanjana Singh: We definitely expect increase of AI infrastructure investments over the next few years. We do expect quite a few new legal developments and trends to come up with regard to stronger data protection and privacy regulations. We now have the DPDP Act, which is already coming into place, and there will be more regulations around the manner of data protections and privacy, especially given the volume of data that would go through AI data centres.

We also expect greater regulatory oversight on the general use of AI. Given the amount of power that is required for such data centres, we expect a push towards sustainability and ESG compliance, with the government likely incentivising green data centres in the coming years. We expect an increased focus on digital infrastructure and 5G given the amount of network connectivity and high speed that will be required.

Nandish Vyas: The space is likely to get a fair amount of Private Equity investments. We will see both Private Equity transactions and, potentially, Private Credit transactions. What we really need to watch out for is how these transactions develop with respect to the FEMA aspects. That’s where the structuring of the instruments will develop and play out – whether it is CCPS or other instruments; or the manner in which the returns of the parties are achieved in all types of scenarios, viz., in a good case scenario, in a bad case scenario, etc.

From the perspective of other regulations that may play into the commercial contract, particularly the shareholders' agreement, there is considerable scope for changes in the law in this space.

Iqbal Khan: We anticipate strong deal activity in the AI infra space over the next 3-5 years. Having already advised on some of the largest, strategically critical deals in this space, we believe that the team will be uniquely placed to guide and advise clients on such transactions.

PS: Will this deal set any precedents for governance, structuring, or sustainability standards in future AI-compute projects?

Nilanjana Singh: While at the heart, this is a PE investment into an area which is pretty nascent, one of the areas where it certainly sets a precedent is in relation to the fact that this is a great partnership where technology is brought in by one of the parties, which certainly sets a roadmap for the future. Given the capital-intensive nature of this business, we do expect that there will be more Private Equity investments in this area, likely through a joint partnership, because technology is key to this business.

Iqbal Khan: It is fair to say that this deal involved cracking some very unique, first-in-the-market, commercial, strategic and operational challenges, and also the number of critical, high value management and governance decisions the business will be required to take fairly early on, given that this is a fully greenfield venture. We took a very commercial and relationship driven approach to solving these challenges, while ensuring of course that the necessary contractual protections were put in place. Therefore, it may be natural for others to look at this deal for guidance on related or similar matters. However, each deal is different and any precedential value or standing will of course also be subject to the strictest standards of confidentiality and privilege, which will cover many of the unique aspects of this transaction.

PS: How has this deal reshaped the legal framework for PE investing in India’s digital-infrastructure sector? What legal standards or precedents do you think this deal sets for future AI infrastructure transactions?

Nandish Vyas: To start with, there are the energy and sustainability aspects. From a legal perspective, whether it’s for a listed company or part of a listed company group, growing ESG requirements around energy and sustainability will come into play. We already discussed data privacy, but with the new law in force and data localisation requirements, that’s going to play a very important role. AI Governance is not yet very well established in terms of legal rules - this may appear lesser to the AI data centre’s service providers or infrastructure providers, as compared to AI companies themselves.

The next thing, which is fairly important, is the manner and the entire process for regulatory approvals. The reason why this is important is that India, as a country, needs to be able to move fast when it comes to the development of AI data centres, given the speed at which the sector is growing internationally. To the extent that a law is enacted in the near future that allows for, at most, a single-window clearance at the national level, that will play a significant role. As of today, there are some states that have certain levels of single window clearances, which can be used, but these are not applicable to all states. Hence, if each of the states takes this aspect up at a faster level - and at a national level, and potentially we have a single clearance or a single framework - that’s going to be very critical from a timing perspective.

Iqbal Khan: This venture will be a marquee, standard-setting transaction for private institutional capital participation in India’s digital infrastructure story. Rather than any reinterpretation of a specific provision of law or application of a particular statute, we believe this deal can spark a novel approach in navigating the legal and regulatory landscape around digital infrastructure transactions – one that accommodates complicated commercials, nuanced governance models and comprehensive policies and protocols around data sensitivity and sustainability, all within the existing legal framework.