IndiaAI backing could make government a minority shareholder in Sarvam
The central government could end up with a 1-2% stake in AI startup Sarvam, valued at $1.5 billion, as part of its $300 million funding round. This rare instance of equity holding arises from non-cash support provided under the IndiaAI Mission, wh...
As part of Sarvam's ongoing $300 million funding round, the central government could end up holding a 1-2% stake in the homegrown artificial intelligence startup, which is being valued at about $1.5 billion, according to people familiar with the matter.
The development marks a rare instance of the Indian government acquiring a direct equity holding in a private AI startup through non-cash support. The stake stems from compute infrastructure allocated to Sarvam under the IndiaAI Mission. In return, the government was issued compulsorily convertible debentures (CCDs), which are set to turn into equity as part of the current fundraising round, the people said.
“The Centre will be taking a small stake in Sarvam. The support provided to companies under the IndiaAI Mission needs to be accounted for in some form, if not cash,” a government official said.
Sarvam did not respond to ET’s queries. Emails sent to the Ministry of Electronics and Information Technology (MeitY), which oversees the IndiaAI Mission, weren’t answered.
On June 15, Sarvam announced the first part of the funding round, raising $234 million led by software services company HCLTech, with participation from Bessemer Venture Partners, Khosla Ventures and Peak XV Partners. The company is expected to raise the remaining capital as part of the broader round.
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Sarvam was among a dozen companies selected under the IndiaAI Mission to develop indigenous, multilingual and domain-specific foundation models. The government-backed initiative aims to strengthen India's AI capabilities by supporting domestic model development and providing access to large-scale computing infrastructure. Under the programme, selected companies were offered access to graphics processing unit (GPU) compute at a subsidised rate, with the government covering 40% of the cost.
ET had reported in January that several companies selected under the IndiaAI Mission to build foundational AI models had raised concerns about the government's decision to receive convertible equity instruments in exchange for compute support. Some participants had argued for a more flexible, grant-based mechanism to accelerate indigenous AI development without diluting ownership.
Founded in 2023 by Vivek Raghavan and Pratyush Kumar, Sarvam is positioning itself as an AI platform focused on sovereign use cases, with an emphasis on building India-first large language models (LLMs) and AI infrastructure tailored to the country’s languages and datasets. The Bengaluru-based startup is among a handful of domestic ventures attempting to build foundational AI models in India.
In February, the company unveiled its first homegrown foundation models, Sarvam-30B and Sarvam-105B, which support 22 Indian languages. The launch came amid growing efforts by policymakers and industry leaders to reduce dependence on foreign AI models and strengthen India's sovereign AI capabilities.
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In July last year, Raghavan had said that Sarvam planned to open-source the models developed under the IndiaAI Mission. The company had received the largest subsidy allocation under the IndiaAI Mission, amounting to Rs 98.68 crore against a total compute bill of Rs 246.71 crore. The support covered access to 4,096 Nvidia H100 GPUs for six months, making it one of the largest compute allocations under the initiative.
Apart from Sarvam, the other firms selected under the mission include Soket AI Labs, Gnani. ai, Gan. AI, BharatGen, Tech Mahindra, Fractal Analytics, Avataar. ai, ZenteiQ Aitech Innovations, Genloop Intelligence, NeuroDx and Shodh AI.
The latest funding round has also altered Sarvam's shareholding structure. HCLTech, which invested $150 million in the company, now owns about 10% of the startup.
In an interview with ET following the fundraise announcement, Raghavan had linked the investment to the growing importance of sovereign AI.
“We are in an era of sovereign AI. We've seen what happened with Fable 5 and Mythos. When you're running a sovereign AI company, it's important to get investment that is Indian. That's why we've collaborated with HCLTech for this funding,” he had said.
The funding round came shortly after the US imposed export restrictions on Anthropic's most advanced AI models, Fable 5 and Mythos, reigniting discussions on technological self-reliance and the need for India to develop domestic AI capabilities.
Lightspeed is another significant shareholder in Sarvam, holding an estimated 16-18% stake after backing the company at an early stage. However, the venture capital firm is not participating in the ongoing funding round, according to the people cited above.
