Computer Hardware Company Mega Networks is planning to set up a factory by the third quarter of the ongoing fiscal 2024-2025 to locally manufacture artificial intelligence servers, according to reports.

The factory will be in Maharashtra and the company plans to invest Rs 350-400 crore in FY25, Amrish Pipada says.

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

Mega Networks is one of two Indian companies to be selected for the production-linked incentive (PLI) scheme 2.0 for IT hardware. Under this scheme, the government provides an incentive of around five percent on net incremental sales of goods manufactured in India.

A technology alliance exists with the US chipmaker. Pipada explained that Intel's Habana Gaudi 1 and 2 series and 4th and 5th generation scalable processors optimize the AI servers, which were launched in February. The modular servers are suitable for generative AI, high-performance computing, and data centres.

Mega Networks has identified potential orders of close to Rs 1,000 crore for the servers, with confirmed order bookings of Rs 150-200 crore at this time.

Getting allocations from major global manufacturers that supply AI chips, microprocessors and other mission-critical parts requires government support, he said. Domestic design capabilities need to be improved.

“The funnel we have right now for AI servers are huge. If we are able to convert even 20 percent, our business will grow by 100-200 percent,” Pipada says.