HCL Technologies Ltd’s new minority stake in Sarvam AI marks a distinct shift in how India's top information technology (IT) services firms are navigating the artificial intelligence (AI) wave. According to chief executive C Vijayakumar, the investment underscores the company's push into ‘sovereign AI’—developing specialized AI solutions for governments.
Until last week, India's IT giants had primarily managed the rise of automation in three ways: upskilling their workforces, partnering with AI-native firms, and expanding into data centres to handle massive AI workloads. HCLTech’s equity investment introduces a fourth strategic playbook—a textbook case of "if you can't beat ’em, join ’em”.
The company’s Sarvam investment “really creates one more very significant growth vector, which is sovereign AI”, Vijayakumar told Mint in an interview on Tuesday.
On Monday, HCLTech became the country’s first IT services company to pick up a significant stake in an AI firm, acquiring 10% in Sarvam AI for about $150 million. Sarvam is an AI startup in Bengaluru that specialises in providing AI models in Indian languages. It reported revenue of ₹45.1 crore in FY26, up from just ₹1.5 crore in FY25. Sarvam's founders, including Vivek Raghavan and Pratyush Kumar, own about 52% of the company. “We note this is the first of its kind investment by any Indian IT services company in a sovereign AI company,” Nomura analysts Abhishek Bhandari and Karan Nain wrote in a note dated 15 June.
According to Vijayakumar, the investment aligns with the needs of Indian businesses, which are focused on balancing price and performance, accessing multilingual models, protecting data privacy, and retaining full ownership of their systems.
Such opportunities exist in foreign markets as well, he added. “Many large countries are also looking at building their own language models as a sovereign solution. And then that way, Sarvam’s capabilities, especially the multilingual capabilities, really stand out. We see good traction in taking these solutions to Africa, Latin America, some parts of Europe, and the Middle East,”he said.
This strategy contrasts with that of Tata Consultancy Services Ltd, which launched a sovereign cloud business last year. Rather than investing directly in AI developers, TCS’s approach centers on providing dedicated cloud infrastructure to governments, ensuring all sensitive data remains strictly within the host nation's borders.
HCLTech grew the fastest among India’s top five IT services firms in FY26, ending the year with $14.66 billion in revenue, up 6% from the previous year.
Deeper integration
Until now, most Indian IT services companies have upskilled and retrained their executives on AI tools, giving them certifications based on their AI competence. At least a million employees, or three-fifths of the total workforce across India's top five IT firms, are now trained in basic AI skills, according to these companies. Some firms, including TCS, Infosys and HCLTech, have also partnered with AI pioneers such as OpenAI and Anthropic to co-develop solutions and integrate generative AI directly into enterprise workflows.
Now, a race for deeper integration is intensifying. Last year, TCS committed $6.5 billion over six years through Hypervault to pioneer AI data centre management for the sector. HCLTech is taking this evolution a step further. By embedding itself directly into Sarvam, the firm gains an immediate capability boost that standard partnerships cannot offer, positioning it to aggressively pursue global government contracts. Management said the Sarvam investment would allow it to quickly grow its capabilities.
Vijayakumar noted that because the AI sector is evolving rapidly, time is a critical factor. He said that even with unlimited capital, it would still take at least two to three years of development to scale Indian-language AI models from scratch. “Sarvam has some of the best researchers from some of the best organizations in the country and the world. It's very difficult to replicate that in a short time,” he added.
AI solutions to AI problems
This development comes against the backdrop of an AI-led assault on IT shares, which have plunged on fears that rising automation tools may render IT services obsolete. Shares of TCS, Infosys, HCLTech, Wipro, and Tech Mahindra have fallen 32%, 29.7%, 30%, 31%, and 10.1%, respectively, since the start of the year. Still, shareholders welcomed HCLTech’s announcement, sending its shares up 2.1% during trading hours on Tuesday.
Nomura analysts said, “The investment will enable HCLT to develop industry and client-specific language models and AI solutions for its global client base, delivering compelling price-to-performance outcomes and enabling differentiated enterprise AI solutions across industries.” They added that it would “accelerate the development and adoption of sovereign AI solutions for governments, regulated industries, and enterprises seeking localized, secure, and compliant AI deployments”.
For now, HCLTech will secure a seat on Sarvam's board of directors, with the specific appointee to be decided in due course, according to Vijayakumar.
No stranger to big bets
This is not the HCL Group’s first bold bet. In January 2024, Vama Sundari Investments (Delhi) Pvt Ltd, which owns almost 45% of HCLTech’s shares, announced a joint venture with Chinese electronics manufacturer Foxconn to assemble semiconductor chips in Uttar Pradesh. This project is in the construction phase.
In 2018, HCLTech spent $1.8 billion to acquire six software products from IBM, marking the company's entry into the software products business. This transaction was HCLTech's highest spending on specific software products and was the largest purchase by value in the Indian IT sector at the time.
For now, the company is planning on cross-selling its solutions. “I think those software products will now complement what we will bring with Sarvam. There are products like Unica for marketing automation. It caters to very large scale customers like State Bank of India, which uses it for all their marketing and automation activities. Bringing in Sarvam to scale this would be a great opportunity,” said Vijayakumar.
