On 14 May, Moneycontrol reportedMoneycontrol that one of India’s leading IT services companies, HCLTech, was investing $150 million in Sarvam AI, the country’s leading foundational AI company.
This was, interestingly, half of the total money Sarvam was raising in its latest round, making HCLTech the round’s lead investor.
This was the largest pure-play Indian AI startup fundraise to date.
Not unusual for VCs and PEs in the frothy world of AI, but certainly so for an Indian IT services company.
He estimates productivity gains could eliminate 9–12% of total IT services revenue over the next three to four years.
On 14 May, Moneycontrol reportedMoneycontrol that one of India’s leading IT services companies, HCLTech, was investing $150 million in Sarvam AI, the country’s leading foundational AI company. This was, interestingly, half of the total money Sarvam was raising in its latest round, making HCLTech the round’s lead investor.
This was the largest pure-play Indian AI startup fundraise to date.
It is unusual for a venture round this size to be led not by a VC but by a strategic—a company that invests like a VC. HCLTech invested at a 7X markup on Sarvam’s last fundraise, back in December 2023. That means a valuation of $1.5 billion on FY25 revenue of Rs 29 crore. Not unusual for VCs and PEs in the frothy world of AI, but certainly so for an Indian IT services company.
So, I set out to try and understand what the investment rationale might be for both sides—Sarvam and HCLTech. I invited two guests to help me with this.
The first was Abhishek Pathak, lead analyst for IT services and internet at Motilal Oswal Financial Services. He co-authored the report “Indian IT Services: Assessing the Narrative Shock,” about the narrative shock from AI, as well as reports on the impact of Anthropic and others on Indian IT services.
The broad gist of his work is that roughly 30–40% of Indian IT services revenue comes from application development, maintenance, and testing, and that’s at risk from AI. He estimates productivity gains could eliminate 9–12% of total IT services revenue over the next three to four years.
My second guest was Kashyap Kompella, founder and CEO of RPA2AI Research, an industry analyst firm founded in 2019. The firm advises global corporations, VC and PE firms, and government agencies on AI investments and strategy.
Kashyap has spent over 20 years in the sector as an industry analyst and in M&A advisory roles.
The Ken reached out to both HCLTech and Sarvam to take part. Sarvam declined and HCLTech did not respond, so what follows is an outside-in reading of the deal, with no insider visibility into its mechanics.
