Apax co-CEO bets on India’s AI strengths, eyes faster investment

Mumbai: India's technological capabilities, education levels and intellectual capital will ensure it does not fall behind in the artificial intelligence (AI) race, said Mitch Truwit, co-chief executive of global private equity firm Apax Partners. In India to mark two decades of investing in the country, Truwit said the firm expects to step up its investment pace in the Indian market going forward.

“India may not be pioneers in LLMs and the rest of it. But if you look at what the challenge is for most businesses out there, the challenge is how do you operationalize AI in a way that creates efficiency. What I think India is quite good at is change management, which most companies are not,” Truwit said in an exclusive interaction with Mint.

“I believe, given India's capabilities in technology, and the need for change, and the ability, the brain power of the people and the education levels, that that's something that these companies can help effectuate change on,” he added.

The firm, which has backed companies such as Fractal Analytics, Globalogic and Healthium in the past, considers India as one of its best-performing markets. “If you look at our historic returns here, they have been exceptional. We've delivered $10 billion of value for investors, north of 25% IRR (internal rate of return). That's proven to be a really good market,” Truwit said.

At a time when many foreign portfolio investors have pulled money out of India over the past 12-18 months, long-term investors such as private equity and buyout funds have been raising their bets in the country. “India’s GDP is growing at 7 or 8%, not 15%, or when there's you know obviously inflation and things like that and currency issues, it looks riskier, right? And that's true, but we're patient capital, and I think there's an opportunity here,” Truwit added.

Despite the currency depreciation, India continues to be an attractive market for long-term investors such as Apax Partners. “I think some of this kind of short-term headwinds that we're seeing, whether it's because of geopolitics, oil prices, or the froth in the AI market, it's a different lens for public market investors. But when you take a five-seven-year view, and most investments, it's not a straight line. But like Mitch already said, we really want to focus on how we can continue to drive operational improvement and growth in the businesses, and some of these things are outside of our control. But we obviously, when we underwrite the deals, bake it in. This is the historical currency depreciation. How do we bake into our returns and cost of capital effectively,” said Harjot Dhaliwal, partner and India head for Apax.

Apax Partners has so far invested around $4 billion in the Indian market and has returned more than $10 billion to investors. Unlike most of its global peers that have an Asia fund to invest out of, Apax has just one pool of capital that it deploys across the globe. Currently, it is investing out of its eleventh fund of $12 billion. The firm is targeting a first close by March for its new twelfth fund, news reports said.

It might invest around 10% of the new capital into India going forward. It will put this capital behind technology, consumer, and healthcare businesses, Truwit said. Currently, exposure to India is under 10% of the firm’s total investments. “Supply chain management, cybersecurity and new age digital businesses are very attractive where we feel we can help them grow and maximize value,” Dhaliwal added.

Asked why Apax has been slower to deploy capital in India than its more active peers, Truwit said the firm does not allocate separate pools of capital to Asia and the US. “We are not asset gatherers like most of other PE firms and hence we don’t need to proliferate funds. We are a returns-based firm and that is why we invest out of a single pool of capital,” Truwit said.

Apax's current Indian portfolio includes iD Fresh, greytHR, Azentio Software and IBS Software, among others.