New Delhi: Cognizant is also believed to be in the process of investing in the Indian startup, Sarvam AI, which is developing language models for India’s diverse languages. Details of the deal this week indicate a valuation of anywhere from $3.5 billion to $4 billion.
Neither anything has been signed nor numbers can shift. The general shape is enough to give a sense of the direction in which India’s tech industry is moving in the coming days.
A fast climb
This is a very young company in billion dollar terms Sarvam was founded in 2023. It emphasizes on its so-called sovereign AI, which are models developed for Indian language and intended for use by enterprises and government institutions, and the data controlled by India.
Currently, the list of products is already quite extensive. Indic scripts are a challenging task for the Vision AI which is able to do the optical character recognition. Two voice tools, Saaras V4 and Bulbul V4 Flash, cover speech work.
The money has also been available in a timely fashion. Sarvam recently closed an investment round valued at $1.5 billion with HCLTech as the leading investor. Currently, it is believed to be seeking $300 million more. The reported valuation in that round is in the range of $3.5 billion to $4 billion, which is more than double the value of the transaction, led by HCLTech. There may be several large domestic companies and cognizant to rely on to support the new money.
The defence contract
In addition to the raising of money, Sarvam has inked a five-year deal with the Indian Ministry of Defence. The agreement will be limited to the application of AI in military operations, training and decision making processes, and with a focus on data sovereignty, as stated. The sensitive material remains in India and executes on Indian made systems.
That focus is important, and likely contributes to the valuation increase. A long government contract in a sensitive industry provides investors with a solid point of interest. Not every startups in the early days of foundations have this amount of visibility of their revenues. I’d like to see the value of the contract before getting too carried away with this, but having a 5 year contract is a pretty good sign.
Why the IT giants are circling
Who is the check being written to? HCLTech was the leader in the final round, while Cognizant is poised to be the anchor in the following round. These are the old-school IT services businesses, the ones that have been in existence for a long time and have been established on large teams developing software and providing outsourcing services. Some of that model is at direct risk from generative AI, as many of the tasks previously performed by many different types of engineers can now be automated.
Supporting local AI developers is like making a gamble. The services companies get to invest in the technology before it comes to fruition and then presumably have access to it first for their clients. The summary of the story states that established IT companies are getting ready for AI pressure, relying on local solutions which is apt.
But there’s a pragmatic aspect to it too. Global models may not work well with Indian languages, particularly with lower resource languages or any regions specific written or spoken variation. A company that does it effectively has a unique competitive advantage in a country where hundreds of millions of people do not speak English, and where the government is increasingly seeking to control the processing of its data.
What we don’t know
There are some questions that remain unanswered. To the extent of information available, no comment on final terms has been made by either Cognizant or Sarvam. The size of Cognizant’s stake isn’t known. But a more than double valuation in a few months will surely bring the classic question of whether revenues can sustain it.
Sarvam’s models are also yet to be tested in the big systems of the world in terms of quality and cost. Sovereignty is a compelling reason, but once customers have it, they don’t stick around when it doesn’t deliver.
However, the path is easy to discern. Two of the largest ICT companies in India are no longer satisfied with reselling or integrating AI developed by others and are eager to pay for a solution that is locally created. If this round is closed at the reported value, Sarvam will have evolved from a startup to one of the most valuable artificial intelligence startups in the country in just three years.
