Baring's Rahul Bhasin expects Indian IT services to retain global dominance despite AI disruption

Rahul Bhasin, Managing Partner, Baring Private Equity Partners  believes Indian information technology (IT) services companies will continue to retain their global dominance despite the challenges posed by artificial intelligence (AI).

However,  he says, "They (the industry) will go through a transition time...there is an inflection point and a state of flux, which the industry will go through. And I think there will be revenue uncertainty and business model uncertainty for a while."

Currently, a bulk of the work earlier being done by Indian IT companies is getting automated due to AI. This shift, Bhasin believes, will necessitate transitions in business models within the IT industry, especially for large IT service companies.

While technology and software will stay the world's fastest growing industry, eating up all other industries, "what people may have missed is that it will also eat itself up ."

Bhasin says while Baring will still prefer the tech theme, it will pick business models depending on evolving market trends.

In addition to the technology sector, Bhasin discussed the outlook for consumer and industrial sectors. While he acknowledged the soundness of consumer businesses with promising growth trajectories, he cautioned against their current expensive valuations.

Regarding the industrial sector, Bhasin noted the absence of a significant capital expenditure (capex) cycle since approximately 2011. He suggested a potential turnaround, citing increasing activity in real estate, hotels, hospitals, and malls. With government support for infrastructure investments, Bhasin anticipated a positive impact across the value chain.

Talking about PE firms exiting via block deals, IPOs, Bhasin said, “Private equity industry is time bound. So any investment made, you will see divestments. Now, that mode of divestment keeps evolving and keeps changing, depending on market conditions. Sometimes it's strategic, sometimes it's M&A, sometimes it's via buyback and sometimes it's through the listed markets in the public markets.”