UP govt cancels ₹25,000 crore MoU with Puch AI over financial concerns

The UP government cancelled its ₹25,000 crore MoU with Puch AI within days of signing, citing lack of net worth and credible financial linkages for the project

The Uttar Pradesh (UP) government on Thursday cancelled its memorandum of understanding (MoU) with Bengaluru-based startup Puch AI, citing "lack of net worth and credible financial linkages" for the project’s scale.

 

"As per standard protocols laid by the state government, the MoU signed with Puch AI on March 23 was reviewed. Necessary details as per SOP were sought from the investor, but they failed to provide them timely. Due diligence showed a lack of net worth and credible financial linkages for the project's scale. On directions of the state government, the MoU is cancelled effective today. No rights or obligations remain," Invest UP, the state government's investment promotion agency, said in a post on X.

 

 

It added that the MoU has been cancelled in the "interest of transparency and the highest level of probity in governance". 

What went wrong?

The development came three days after the government signed a ₹25,000 crore MoU with Puch AI aimed at "embracing the power of artificial intelligence".

 

UP Chief Minister Yogi Adityanath, on Monday, said that the partnership will bring AI parks, large-scale data centres, AI Commons, and an AI university to the state. According to a report by NDTV Profit, a 40-acre site near Lucknow airport had already been identified for India’s first AI City, with Noida, Kanpur, Varanasi and Prayagraj were also included in the broader plan.

 

However, soon after the announcement, the agreement drew widespread criticism on social media. Several X users added community notes to the CM's post, questioning the startup’s capacity and the scale of the project. "Puch AI is a 1-year-old startup with revenue of less than ₹50 lakh per annum. They have no real capability or capacity to execute an MOU of this scale," the community note claimed.

 

A day later, Adityanath clarified that the MoU is "an initiation of the process" and the project will only be approved after a detailed evaluation by the government.

 

"MoUs are non-binding on the state government. Any further progress, including any government permission, approval or license, is subject to a detailed evaluation of the prospective investor's proposal. Any prospective investor falling short of the above will automatically have their MoU terminated," the CM said.

 

Siddharth Bhatia, co-founder of Puch AI, also said that the deal involved no taxpayer money and would be executed in phases with support from "external investment partners". He also disputed reports citing revenue below ₹50 lakh, claiming those figures pertain to another company and that Puch AI’s revenue is not publicly disclosed.

 

However, the deal collapsed after the government's review revealed inadequate net worth of Puch AI and the absence of credible financial linkages for the project's scale.