AVCJ Awards 2021: Exit of the Year – Mid Cap: Infogain

ChrysCapital’s investment in US and India-based IT services provider Infogain – it took a controlling stake for USD 63m in 2015 – returned more than the acquiring vehicle. Fund VI closed at USD 510m in 2012. Infogain was sold to Apax Partners last year for an estimated USD 550m, generating a 6.4x return, although ChrysCapital declined to comment on financial details.

Perhaps the first thing that must be said is that this transaction was realized during one of India’s most frightening chapters of the pandemic, when the availability of hospital beds and life-saving oxygen had evaporated, and chilling death tolls were said to be radically underestimated.

During this period, Infogain experienced no work disruptions – having implemented a work-from-home policy – and re-planned its cash flow management considering various worse-cast scenarios. This allowed it to help clients deal with their own challenges related to lockdowns as well as give comfort and visibility to employees in the face of extreme uncertainty.

The end result is unmistakable as the most important investment in ChrysCapital’s history both in terms of potential to uplift the GP’s brand and the resources deployed. Six investment professionals worked extensively on Infogain, including at least two who spend the majority of their time on it. This is from a 20-person shop that almost exclusively focuses on minority deals.

Akshat Babbar, a director at ChrysCapital, led the deal and its value creation program, including supervising a string of key bolt-on acquisitions. Indeed, the initial acquisition was planned in parallel with the acquisition of Blue Star Infotech.

As a result, the first two years were not only about onboarding new technical capacities; there was also a difficult matter of smoothing out a cultural integration. This process was extended with the acquisitions of Silicus Technologies and Revel Consulting in 2019 and Absolutdata in 2020. By the time of exit, headcount had more than doubled to around 5,000.

“There was a dearth of mid-tier assets in this space, which catalysed us to ask, ‘Why don’t we create our own platform and transform it into the kind of asset we would like to invest in?’ Babbar said. “If this white space indeed exits, then such an asset would have a lot of scarcity value. That is exactly how things played out with the incoming buyers.”

Shifting focus

Much of the development was about building up expertise in more advanced data-oriented services in areas such as cloud, analytics, and user experience design, while retaining the company’s core engineering DNA. Overall revenue increased 220% during the holding period, with digital services rising from about 20% of total income to 85%.

The diversification helped Infogain begin branding itself as a “human-centred” digital platform engineering services specialist that optimizes IT transformation through a strong focus on end-user pain points and employee needs.

There was also a concerted effort to transition from a predominantly staffing approach to IT support toward a more practice-led model, where in-house technical knowhow is leveraged to cross-sell and suggest upgrades with clients. The idea is that a small analytics project could become a large, long-term partnership with multiple digital services components.

“We needed to take Infogain up the value curve with an approach where we go to the client rather than the other way around and take ownership of projects,” Babbar explained. “That approach takes the perception of the vendor up a few notches in the minds of the clients. It helps you win far more strategic projects, deepen relationships, and grow fast, while also improving margins.”

The reorientation also involved a focus on improving quality of revenue through a greater focus on long-term order booking. This was to some extent a cultural issue as the sales staff were incentivised to win deals that were executed within the year rather than the kind of multi-year contracts large organizations prefer. Clients went on to include Microsoft, Sabre, Mitchell, HP, FedEx, and Facebook.

Much of the transformation on this front was realised through the engagement of Rajiv Naithani in 2018, initially as India HR head and later as chief HR officer. ChrysCapital also oversaw the hiring of Kulesh Bansal as CFO and Ayan Mukerji as president and COO. The latter has now become the CEO under Apax. (Blue Star’s CEO Sunil Bhatia, became Infogain CEO until mid-2021.)

“The initial cultural challenge was just linking two companies together and making sure everybody was aligned as part of the same company. After a couple of years, that shifted to really creating an identity for Infogain that was about bigger deals and solution-oriented thinking,” Babbar said. “That not only increased client satisfaction, it also increased employee satisfaction, which you could see in our year-on-year improvements in attrition metrics and rankings for great places to work.”

Corridor of opportunity

The most industry-significant angle of the Infogain story is its role in opening up a now flourishing US-India corridor in IT services.

ChrysCapital counts LiquidHub as its first major success in this theme; it took an approximately 40% stake in the company in 2013 as part of a USD 53m growth round and sold it to French counterpart Capgemini in 2018 at a valuation of USD 500m. Pre-pandemic, ChrysCapital’s India-based management regularly visited US portfolio companies in person, using the occasions to scout further in-country investments.

The logic for betting on the US-India IT opportunity is sturdy: the largest market for services and arguably the largest supplier of talent share, strong cultural ties, and a facility of language. At the same time, the emergence of new-age technologies in the sector have required vendors and clients in the two countries to cooperate more deeply, often leading many Indian service providers to relocate headquarters to the US.

“It used to be enough to have a classic IT company delivering services from India, but in the digital world, that wasn’t sufficient,” Babbar said. “It wasn’t enough to understand a client’s problem and provide talent to solve it. It was equally if not more important to be very close to the customer, co-creating solutions, and leveraging talent around the world. We were the first to identify that trend.”

The success of the Infogain exit – said to be the largest-ever divestment by an Indian fund – confirms that ChrysCapital not only pioneered the US-India play, it has now perfected it. This comes with the knowledge that the opening won’t last forever. New talent supply hotspots such as Eastern Europe and rising demand centres across Europe and Asia will eventually redraw the global IT services map.

“The US-India corridor will probably continue for another 5-10 years, but the world is becoming more global in both supply and demand of digital services,” Babbar said. “This thesis still has legs, and we will continue to build on it, but we’re keeping an eye on how it is evolving so we can stay ahead of the curve.”

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• South Asia
• Trade sale
• Technology
• Support services
• India
• USA
• ChrysCapital Management
• professional services
• AVCJ Awards