State of AI: Government may take minority stake in Sarvam through IndiaAI support

NEW DELHI: The Indian government’s artificial intelligence ambitions may soon come with a seat at the cap table. As part of its support for homegrown AI development, the Centre is set to acquire a small equity stake in Sarvam, marking a rare instance of direct government ownership in a private AI startup.

According to a report by The Economic Times, the government could end up holding a 1-2 per cent stake in Sarvam as part of the AI startup’s ongoing $300 million funding round, which values the Bengaluru-based company at around $1.5 billion. The stake is linked to compute infrastructure support extended under the IndiaAI Mission rather than a direct cash investment.

Under the arrangement, the government received compulsorily convertible debentures (CCDs) in exchange for subsidised access to computing resources. These instruments are expected to convert into equity during the current fundraising round.

“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 was quoted as saying by The Economic Times.

The development highlights the government’s evolving approach to nurturing India’s AI ecosystem. Rather than limiting its role to policy support and grants, the Centre is now exploring mechanisms that allow it to participate in the value created by strategic technology ventures.

Earlier this month, Sarvam announced the first tranche of its fundraising round, securing $234 million led by HCLTech, with participation from Bessemer Venture Partners, Khosla Ventures and Peak XV Partners. The startup is expected to raise the remaining capital in the coming months.

Sarvam was among a select group of companies chosen under the IndiaAI Mission to build indigenous foundation models tailored to India’s multilingual and domain-specific requirements. The programme aims to strengthen the country’s AI capabilities by reducing dependence on foreign models while fostering domestic innovation.

A key part of the initiative is access to high-performance computing infrastructure. Selected companies receive subsidised graphics processing unit (GPU) resources, with the government covering up to 40 per cent of the associated costs, helping startups tackle one of the biggest barriers to AI development: access to affordable compute power.

If the conversion proceeds as planned, the move could become a landmark example of how governments can support emerging technologies while retaining a small stake in the success of strategically important startups. For India, it signals that the race to build sovereign AI capabilities is increasingly moving from policy discussions to ownership structures and long-term investment.