Brokerages have offered contrasting takes on HCL Technologies Ltd.'s Rs. 1,427 crore investment in Sarvam AI, with Nomura calling it a first-of-its-kind move in Indian IT and Morgan Stanley flagging execution risk on a minority stake in an early-stage company.
HCLTech has led a $234 million Series B round in Sarvam AI, acquiring a 10.46% stake as the strategic investor, valuing the India-built sovereign AI company at $1.5 billion post-money.
In the wake of the acquisition, Nomura has come out with a note on HCLTech, maintaining a 'buy' rating with a target price of Rs 1,600, calling the investment first of its kind by an Indian IT services company in a sovereign AI platform.
The brokerage said funds raised will help Sarvam continue R&D for training next-generation frontier models, while the deal will enable HCLTech to develop industry and client-specific language models and AI solutions for its global client base.
Nomura also flagged that the investment could leverage and expand Sarvam's multilingual AI capabilities beyond India and accelerate the adoption of sovereign AI solutions across regulated industries and governments.
Meanwhile, Morgan Stanley was more measured, maintaining its Equal-weight rating with a target price of Rs. 1,410. While acknowledging that the investment in Sarvam AI may provide a strategic advantage around sovereign AI themes with governments and regulated enterprises globally, it said the financial impact will be limited given the minority stake.
The brokerage called it unusual compared to regular investments and M&A activity seen across HCLTech and its peers. It also flagged a flipside risk that the current investment could become obsolete given the typically low success ratio in early-stage AI ventures.
Morgan Stanley said the key to watch will be proof points of real-world use cases at HCLTech's global enterprise clients over coming quarters.
HCLTech CEO C. Vijayakumar described the move as aimed at creating a differentiated full-stack AI platform for enterprises and governments.
ALSO READ: HCLTech Snaps Up 10.46% Stake In Sarvam AI For Rs 1,427 Crore, Propels Startup To $1.5B Valuation
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