Mega Networks, a leading computer hardware company, has announced plans to set up a factory in Maharashtra by the third quarter of the fiscal year 2024-2025 to manufacture AI servers locally, according to CEO Amrish Pipada.

The company intends to invest Rs 350-400 crore in FY25, with initial funding from internal accruals and debt of Rs 100-120 crore. The remaining funds will be raised through long-term debt and private equity.

Mega Networks is one of two Indian companies selected for the production-linked incentive (PLI) scheme 2.0 for IT hardware. This scheme provides a 5% incentive on net incremental sales of goods manufactured in India.

Pipada stated that the company has identified potential orders of close to Rs 1,000 crore for the AI servers, with confirmed order bookings of Rs 150-200 crore currently.

The servers, launched in February, are optimised by Intel’s Habana Gaudi 1 and 2 series and 4th and 5th generation scalable processors and can be used for generative AI, high-performance computing, and in data centres.

Mega Networks plans to increase its employee count from 110 to around 400 over the coming year to support growth.

The company recorded revenue of Rs 300 crore in FY24, growing 30% year-on-year, and expects AI server manufacturing to significantly boost revenue, with a target of Rs 1,000 crore in two to three years.

The growing AI ecosystem in India presents a significant opportunity for server manufacturers. However, supply chain constraints and the need for government support to develop the domestic ecosystem of parts and design capabilities remain challenges