Home ／ Insights on entering the Indian market
2026.03.24
Hyderabad is the capital of Telangana state in southern India and one of India's leading megacities, with a population of about 10 million. It continues to grow rapidly on the twin pillars of the IT and pharmaceutical industries, and is a rare city with two faces: India's "second IT city" after Bengaluru, and the "pharma capital of India" supporting the world's generic drug supply. For Japanese companies, since there are not yet many precedents of entering this market, it is also a market where room remains to build a foothold as a first mover.
This article organizes, from the perspective of local support experience, everything from the basics of what kind of city Hyderabad is, to why it is India's second IT city, the strengths of its pharmaceutical industry, Telangana's support programs for market entry, how to use it alongside Bengaluru, and the practicalities of setting up an entity. For an overall India entry strategy, the Complete Guide to Entering India as well.
Hyderabad is called the "next Bengaluru" because of its rapid development. The depth of its IT talent pool, the concentration of foreign tech companies, and the state government's proactive stance on attracting investment overlap with Bengaluru's own early growth period. The area where IT hubs cluster is also called "Cyberabad," and the city itself has been branded as a technology city.
Hyderabad is a major city with one of the largest populations in India, drawing a young, well-educated workforce. Historically known as the old capital of the Nizam dynasty, it is also characterized by the coexistence of the old city's cultural heritage with a cutting-edge IT district. Rajiv Gandhi International Airport, the city's gateway, is connected to the city by metro and expressway, and the convenience of business travel keeps improving year by year.
Hyderabad is regarded as the IT city ranked just behind Bengaluru because it has both a concentration of global tech companies and the talent and infrastructure to support them. At its core is HITEC City, where IT companies are concentrated.
HITEC City (Hyderabad Information Technology and Engineering Consultancy City) hosts large offices for global tech companies such as Microsoft, Google, Amazon, and Meta, along with a concentration of numerous IT/ITES companies. With Microsoft basing one of its largest development centers in India here, Hyderabad has built a solid position as a service development hub for foreign companies. The IT-related workforce has reached about 900,000 and continues to grow year by year. Around HITEC City, foreign-company GCCs, contract development firms, and startups are packed within walking distance of each other, forming a dense ecosystem where talent, business partners, and information are all close at hand. This depth of clustering, where everything needed is available in the same area, helps companies get a development base up and running.
One area that has grown especially fast in recent years is the establishment of Global Capability Centers (GCCs). A GCC is a strategic base where a global company consolidates and internalizes IT development, R&D, and operations, and unlike outsourced BPO, it allows the company to accumulate know-how in-house. Telangana has pursued an active policy of attracting GCCs, and is growing in prominence as an option for companies that want to set up a GCC while keeping costs down.
Hyderabad is also drawing attention for cultivating AI talent and clustering startups. It is regarded as a tech hub with easy access to high-quality STEM talent, combined with robust infrastructure and a cost advantage. GCCs accelerating their adoption of AI is also boosting the city's technical depth. Research institutions such as IIIT Hyderabad continue to produce talent in AI and data science, and the hiring base keeps deepening year by year for companies setting up a development center for advanced technology.
In particular, as competition for talent intensifies in Bengaluru, more companies are positioning Hyderabad as a "second option" where it is easier to secure technical talent of comparable caliber. Even in advanced fields such as AI/machine learning, cloud, and cybersecurity, the city is valued for combining cost efficiency with ease of hiring.
Hyderabad's other face is the pharmaceutical and life sciences industry. Its reputation as an IT city tends to get more attention, but its global presence in pharmaceuticals is a strength unique to Hyderabad that Bengaluru does not have.
Hyderabad is also called the "Pharma Capital of India," and is said to account for about a third of the country’s active pharmaceutical ingredient (API) production. India as a whole supplies about 20% of the world’s generic drug exports, and this city is at the center of it. Genome Valley, the biotech research hub, holds more than 200 biotech companies, and major pharmaceutical firms such as Dr. Reddy’s Laboratories, Bharat Biotech, and Hetero Drugs are headquartered there. A larger pharmaceutical cluster is also in the works, thickening the concentration of life sciences further.
For Japanese pharmaceutical and healthcare companies, partnering with Genome Valley and the pharmaceutical cluster carries strategic significance. Using Hyderabad's ecosystem as a CDMO (contract development and manufacturing organization), a source for API (active pharmaceutical ingredient) procurement, or a clinical trial outsourcing partner is a realistic option. The trend of incorporating an India base into the global generics supply network is likely to keep spreading.
The strength of Hyderabad's pharmaceutical cluster lies in having, all within one region, companies that cover everything from active ingredients to formulation, R&D, and regulatory affairs. By using this vertically integrated ecosystem, Japanese companies can more easily complete everything from procurement to development within a closely connected set of locations. Cities with both IT talent and pharmaceutical strength together are rare worldwide, and Hyderabad shows a unique strength in the IT-plus-pharma space as well, in areas such as digital health and AI drug discovery.
Backing entry into Hyderabad is the generous set of incentive programs from the Telangana state government. The state's stance of drawing in foreign investment as a whole is a practical tailwind that lowers the hurdle to entry.
These programs are especially valuable for companies setting up in India for the first time. Proceeding while checking the latest requirements through the state's agency as a starting point makes permits and site selection go more smoothly.
If you are considering Hyderabad, Bengaluru inevitably becomes the point of comparison. Both are leading IT cities in India, but they differ in maturity, cost, and industry mix, so the best answer depends on your own objectives.
| Aspect | Bengaluru | Hyderabad |
|---|---|---|
| Maturity of IT and GCCs | India's largest and most mature | The rapidly growing second city |
| Labor costs | Higher (rising trend) | Tends to be 15-20% lower than Bengaluru |
| Competition for talent | Very intense | Relatively easier to secure |
| Pharma and life sciences | Limited | One of the world's leading pharmaceutical clusters |
| State support programs for market entry | IT policy and various incentives | TS-iPASS (integrated permitting), IT Policy, T-Hub |
If depth of innovation and the sheer size of the talent pool are the top priority, Bengaluru is the strong choice; if you want to set up a GCC at lower cost, or to partner in pharma and life sciences, Hyderabad is the strong choice. Rather than treating the two cities as an either-or decision, it is also useful to think in terms of using each for different functions.
Even within "entering Hyderabad," the character of the office differs by area. The rule of thumb is to choose a location based on where the talent you want to hire lives and their commuting route.
On urban infrastructure, the roughly 69 km Hyderabad Metro links the city. That puts it behind Delhi (about 416 km), Bengaluru, and Mumbai in scale, and among the larger networks in South India. Airport access and expressways are improving too, and the foundations for a business base — including living conditions for expatriates — are coming into place. Making metro access a priority condition when choosing an office keeps the commute manageable.
Given Hyderabad's characteristics, the ways Japanese companies can use the city can be organized into three broad scenarios. Clarifying what function your company will place there is the starting point for a location strategy.
Labor costs in Hyderabad are lower than in Bengaluru, giving it a cost advantage as a location for a GCC. Tax breaks and subsidies under the state's IT policy can also be used, making it well suited for companies that want to internalize development and operations functions while keeping costs down. How to approach hiring is covered Hiring Talent in India as well.
For pharmaceutical and healthcare companies, partnering with Genome Valley and the pharmaceutical cluster is a strategic option. The move to incorporate Hyderabad's ecosystem into the supply chain, as a CDMO, a source of API procurement, or a clinical trial outsourcing partner, is spreading.
To handle India's distinctive regulatory environment and business customs, collaborating with a trustworthy local partner is key to success. Gathering information through the state's industrial promotion agency, and choosing a partner by carefully assessing their track record, finances, and fit, determines success or failure. How to assess this is covered How to find a local partner in the article referenced there.
Following the flow below when entering Hyderabad keeps the overall plan from falling apart. Defining the function you want to place there first, and using the state agency, is especially important for preventing rework later on.
First, decide on a single function your company is targeting. Once the function is set, the necessary area (HITEC City for an IT focus, Genome Valley for pharma, and so on) and the profile of talent needed narrow down naturally. Setting up a base with an unclear purpose leads to wavering on both location and hiring.
Gather the latest information on permits, incentives, and site options starting from state agencies such as Invest Telangana and TS-iPASS. Because the state is proactive about attracting foreign investment, one advantage of Hyderabad is that the cost of initial information-gathering can be kept low.
Choose an entity type, such as a local subsidiary or a GCC, and decide on a location based on where the talent you want to hire lives and their commuting route. In the early stage, when keeping costs down matters, starting small with coworking space is also a valid option. For entity types across India as a whole, the Complete Guide to Entering India.
Set up hiring and retention mechanisms at the same time, and start operating on a small scale to confirm results. The standard approach for keeping fixed-cost risk in check is a staged design that increases investment only after gaining traction.
Given these characteristics, Hyderabad is a city that fits particularly well with the following kinds of companies and functions. Conversely, if a sales office for the North Indian market or the depth of a Japanese business network is the top priority, another city such as Gurugram may be more suitable.
In any of these cases, a realistic approach is to identify the function, start small, and expand while confirming results. With few first movers so far, now is also a good opportunity to build a foothold while validating along the way.
Rising competition for talent: While not as intense as in Bengaluru, competition for top IT talent is intensifying year by year. Designing retention mechanisms from the start, not just hiring power, is essential.
Few Japanese precedents so far: The number of Japanese companies that have entered Hyderabad is limited compared with Bengaluru or Delhi NCR. While there is a first-mover advantage, the local Japanese network and Japanese-language-capable infrastructure are thinner than in those cities, so preparation for getting daily life set up needs some margin of time.
A business continuity (BCP) perspective: Avoiding the risk of concentrating all operations in a single city, and designing for functional distribution across other cities such as Bengaluru, makes for a more stable setup from a business continuity standpoint. Chennai Combining this with manufacturing bases in Gurugram and business offices in is also an effective wide-area strategy.
It is the capital of Telangana state in southern India, with a population of about 10 million. It has grown on the twin pillars of the IT and pharmaceutical industries, making it India's "second IT city" after Bengaluru and the "pharma capital of India" on the world stage. Its rapid growth has also earned it the nickname "next Bengaluru."
Because the depth of its IT talent pool, the concentration of foreign tech companies, and the state government's proactive stance on attracting investment overlap with Bengaluru's own early growth period. The area where IT hubs cluster is also called "Cyberabad."
Bengaluru is the strong choice for depth of innovation and the sheer size of the talent pool, while Hyderabad is the strong choice for a lower-cost GCC or pharma partnerships. Labor costs in Hyderabad tend to be 15-20% lower than in Bengaluru, and talent is also somewhat easier to secure.
Office rents in major IT districts such as HITEC City are generally cheaper than in Bengaluru's prime areas, and labor costs also tend to run about 15-20% lower than in Bengaluru. This suits companies wanting to set up a GCC or back office cost-efficiently (specific figures vary by timing, location, and scale, so an individual quote is a prerequisite).
The state government is proactive about attracting foreign investment, centered on a single-window system for processing permits (TS-iPASS), along with support for land, power, and workforce development. Incentives and infrastructure development for IT, pharma, and life sciences are progressing, making it easier to keep the administrative burden low in the early stages of entry.
Even though it is called the "next Bengaluru," the Japanese community and living infrastructure such as Japanese food and Japanese schools are thinner than in Bengaluru or Delhi NCR, so it takes more time to build a living base for expatriates. Also, since the talent profile needed for pharma and IT is clearly defined, it is important to align hiring requirements with local salary levels early on.
Hyderabad is a growth city that combines two strengths: its standing as India's second IT city and its position as one of the world's leading pharmaceutical clusters. Lower costs than Bengaluru, more easily secured talent, and Telangana's proactive investment attraction policies are all tailwinds for Japanese companies. What matters is not stopping at "enter Hyderabad," but identifying which function to place there, IT/GCC or pharma partnership, and getting specific about how to use it alongside other cities such as Bengaluru. For how to proceed across India as a whole, the Complete Guide to Entering India make sure to cover that as well.
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