India's diesel generator (DG) market is experiencing significant growth momentum, with the market valued at ₹10,521 crore in FY23 and projected to more than double to ₹23,803 crore by FY30. According to the Frost & Sullivan report, this expansion is primarily driven by the rapid growth of data centers and increasing demand for reliable backup power across multiple sectors. The need for diesel generators remains non-negotiable for industries where even a few minutes of downtime can result in substantial losses. As per the latest reports, India's data center capacity is tripling by FY30, creating massive demand for high-capacity DG sets that ensure nearly 100% uptime. Simultaneously, the need for reliable standby power is rising due to the expansion of electric vehicle charging networks, infrastructure development, manufacturing activities, and commercial real estate projects.
Powerica has established itself as a key player in the data center segment, supplying anywhere from 10 to 90 generator sets per facility to major hyperscalers and colocation operators. The company manufactures diesel generator sets ranging from 7.5 kVA to 10,000 kVA in partnership with Cummins India since 1984. In FY26, data centers accounted for 12% of the company's Cummins-powered business, with the DG set business contributing approximately 83% of total earnings. The company reported record revenue of ₹3,011.5 crore in FY26, representing a 13.5% year-on-year growth and the highest annual revenue in Powerica's history. EBITDA grew by 11.8% to ₹386 crore with margins at 12.8%, while net profit surged by 61% to ₹277 crore, driven by lower tax expenses. The company's wind power business contributes the remaining 17% of revenue but accounts for 41.2% of Powerica EBITDA due to higher margins of 31.1% compared to the generator business's 9.1% margin.
Kirloskar Oil Engines currently manufactures single-engine units for data centers with capacities reaching up to 1,650 kVA and is actively expanding into hyperscaler operations. The company recently secured a significant order from HyperNext for 96 units of 2,500 kVA Optiprime Dual Core power systems, representing one of the largest deployments of high-capacity power systems for data centers in India. KOEL's revenue grew 25% year-on-year to ₹5,646.8 crore in FY26, with EBITDA increasing by 33% to ₹737 crore and margins expanding by 90 basis points to 13.1%. Net profit grew by 35% to ₹464 crore, while the company maintained a net cash position of ₹552 crore and efficient working capital management with 29 working capital days. The company is undertaking significant expansion with ₹700 crore capex to increase current capacity by 50,000 engines, expected to become operational by April next year. Additionally, KOEL recently announced an additional ₹1,400 crore capex over the next 2 years to fund a completely new building at the existing Kagal site, adding capacity for 20,000 engines.
Both companies demonstrate strong financial fundamentals with Powerica achieving record revenue of ₹3,011.5 crore in FY26 and Kirloskar Oil reporting revenue growth of 25% to ₹5,646.8 crore. Powerica's net profit grew by 61% to ₹277 crore while maintaining a net cash-positive position. Kirloskar Oil's EBITDA margin expanded by 90 basis points to 13.1%, with the company targeting an ambitious ₹2,100 crore capex roadmap to achieve its goal of becoming a $2 billion company by FY30. From a valuation perspective, following a sharp 107% gain so far in 2026, Kirloskar is currently trading at a significant premium to the industry median and approximately 3x its own 5-year median. Powerica is a new listing but currently trades at a discount to the industry multiple. Powerica's balance sheet remains robust with consistent profit generation, while Kirloskar's net cash from operating activities rose from ₹252 crore in FY23 to ₹453 crore in FY26, indicating strong operational cash flow.
The expansion of data center capacity in India is creating substantial opportunities for both companies, with Powerica supplying up to 90 generators per data center and Kirloskar Oil targeting double-digit revenue share from data centers. According to the Frost & Sullivan report, the DG market growth is supported by data centers, manufacturing, EV infrastructure, and rising power reliability needs. While Powerica offers growth at relatively lower valuations, Kirloskar's premium pricing leaves limited room for execution hiccups. However, both companies are well-positioned to benefit from this trend, with Powerica projecting to outpace the industry's average growth of 10.5% driven by high-value, high-horsepower orders. The inquiry pipeline for data centers remains consistently robust, with Powerica having a visible order book for the next 9-12 months. These names could be kept in your watchlist to track their execution, though investors should consider the risks including Powerica's high dependence on Cummins (contributing approximately 66% of total revenue) and Kirloskar's premium valuation after the sharp rally.
