Indian Government Set to Acquire Minority Stake in Sarvam AI Through IndiaAI Mission Support

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, where the government offered compute infrastructure in exchange for compulsorily convertible debentures. 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. 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. 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. Also Read: Anthropic ban: Sarvam AI's Pratyush Kumar warns against reliance on foreign models 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. Also Read: US ban on Anthropic's Fable 5 & Mythos 5 to put Indian IT services firms at competitive disadvantage 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. Also Read: Lightspeed bets big on AI, India's real edge is in applied innovation: Ravi Mhatre & Bejul Somaia

Govt could get a minority stake in Sarvam through IndiaAI Mission

The Indian government could become a minority shareholder in AI startup Sarvam through its support under the IndiaAI Mission, according to an Economic Times report. The report said the Centre may end up with a 1-2% stake in Sarvam as part of the startup's ongoing $300 million funding round, which values the company at about $1.5 billion. Under the IndiaAI Mission, the government provided computing support to Sarvam and received compulsorily convertible debentures (CCDs) in return. The ongoing funding round is expected to convert these CCDs into equity. Funding round and unicorn status: The development comes days after Sarvam announced the first close of its Series B round, raising $234 million and becoming one of India's few AI unicorns. HCLTech led the round with a $150 million investment, while existing investors, including Khosla Ventures and Peak XV Partners, also participated. The company is yet to close the remaining portion of the round. IndiaAI Mission support: Founded in 2023, Sarvam was selected by the government in 2025 to build a sovereign large language model under the IndiaAI Mission. The company received the largest compute subsidy under the program, Rs 98.68 crore against a total compute bill of Rs 246.71 crore, for access to 4,096 Nvidia H100 GPUs for six months. The government-backed IndiaAI Mission has a five-year outlay of Rs 10,371.92 crore to support AI infrastructure, foundation models, startups, and research. However, the government had released only about Rs 400 crore under the mission by February 2026, according to data it presented in Parliament earlier this year. Sovereign AI push: Sarvam's latest funding round comes amid growing debate over India's dependence on foreign AI models. Days before Sarvam announced the investment, the United States restricted foreign access to Anthropic's advanced AI models, renewing discussions about India's efforts to build domestic AI capabilities. Questions around funding model: The proposed government stake also revives questions raised by some IndiaAI Mission participants earlier this year over the use of convertible equity instruments in exchange for compute support, with some arguing that grant-based funding would reduce ownership dilution for startups.