Jinesh Gopani, former Axis MF star, plots comeback with Taksh AIF

Gopani has received financial backing from legendary investor Shivanand Mankekar and family, according to a person familiar with the matter who spoke on condition of anonymity. Gopani was formerly head of equity at Axis Mutual Fund but left in 2023. Axis Mutual Fund faced a front-running investigation in 2023 and saw a complete revamp in its senior team.

The fund’s first offering signals Gopani’s renewed focus on capturing India’s entrepreneurial spirit with backing from one of the most respected names in the investment community. The AIF has a minimum ticket size of ₹3 crore.

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Taksh means to ‘create’ or ‘carve out’, according to Gopani. “I admire the work that Nalanda Capital (Pulak Prasad) does and I wanted to come up with a name on similar lines,” he said.

Taksh, named after the ancient university of Takshashila in Gandhara (now Afghanistan), marks Gopani’s re-entry into the investment landscape. Known for his growth and quality-driven investment style, Gopani made a name for himself at Axis Mutual Fund, which he joined in 2009. His strategy earned widespread acclaim in 2019 when his growth-focused picks outperformed the market. However, as market dynamics shifted from growth to value, many of Gopani’s high-valuation selections fell out of favour.

Reflecting on his past approach, Gopani acknowledged the lessons learned, particularly the missed opportunity in the post-pandemic shift toward business-to-business (B2B) businesses.

We were heavily invested in B2C, and while those did well, B2B grew much faster

With Taksh AIF, Gopani plans to adopt a more balanced strategy, with a roughly equal focus on B2B and business-to-consumer (B2C) businesses, while maintaining his signature quality-driven approach, the person quoted above said.

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Did Gopani time the launch to coincide with the shift? “It is sheer luck,” he said.

Gopani said wealth creation will mainly happen in mid- and small-cap companies rather than mature large-cap companies.

“I’m looking for two types of plays. First, young founders who are hungry for growth or second/third generation inheritors of established companies ready to embrace new technologies and new style of working. These kind of businesses will have long growth runways,” he said.

There’s a third category of companies that Gopani calls B2G or business-to-government, like defence and railways. 

In a candid reflection on his past investment strategy and his vision for Taksh AIF, Gopani shared insights into how he plans to balance quality-driven investments with lessons learned from market shifts:

How has the timing of your launch been, given the recent market rotation towards quality?

The timing is quite fantastic, with the market rotating back toward quality. However, it’s impossible to time everything perfectly. I learned that the key is to focus on executing well, as market cycles will always come and go. Our philosophy is to identify companies with durable governance, excellent execution, and the potential to outpace incumbents in growth.

Why did you choose category III over category II for your public market strategy?

After consulting with our tax advisors, lawyers, and distributors, we concluded that category III was a better fit for a long-only public market strategy. There were concerns regarding taxation and recognition in category II, while category III offered a cleaner, more straightforward structure.

(Category III AIFs focus on diverse, high-risk strategies like hedge funds and complex trading, aiming for short-term gains, while Category II AIFs, such as private equity and debt funds, invest in medium to long-term projects without leverage, focusing on steady returns.)

Historically, you’ve not been a mid and small-cap focused fund manager. How do you view the opportunities and challenges in that space now?

In my previous roles, we identified companies across the market cap spectrum, from ₹700 crores to ₹50,000 crores. I believe mid and small-caps are where you often find the next big ideas, as the entrepreneurs are more nimble and can innovate faster. However, valuations in that space have become quite stretched. Our approach is to maintain a balanced portfolio across large, mid, and small-caps, focusing on execution and valuation.

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Can you share some historical examples of traditional business houses that were not able to scale up effectively?

I don’t want to name specific companies, but I’ve seen cases where traditional business houses in the South, with good integrity and honesty, were not able to scale up as effectively as newer players came in and disrupted the market. The lack of hunger for growth and the inability to transition from a promoter-led to a professionally-led company were some of the challenges faced by these traditional groups. But we’ve also seen many of them reinvent themselves and create significant wealth.

How are you planning the research and team structure for this new venture?

We are building an institutional setup with a focus on fundamental research. The team will start with five analysts plus two interns, and we plan to expand it further. The key is to have good minds who can add value through their analysis, rather than just increasing the team size for the sake of it. We also plan to leverage our partners’ network in the unlisted space to get additional insights on the listed companies we’re researching.

What are the key sectors you are focusing on in your portfolio?

We have bifurcated our portfolio into three broad categories – B2B, B2C, and B2G. The larger focus is on B2B and B2C, with around a 60:40 or 55:45 split, depending on the valuation comfort. We are staying away from the B2G space for now, as we have seen execution challenges in some of those sectors.

Can you provide some historical examples of sectors or companies where you feel you should have invested more aggressively in the past?

One example would be the manufacturing sector. In the past, we were a bit more biased towards the B2C space, as we felt it was India’s long-term growth story. However, in hindsight, we should have invested more aggressively in some of the B2B manufacturing companies, as they started executing well, especially post-Covid.

Another example would be Reliance. We missed out on the initial run-up in the stock, as it was not part of our initial portfolio. By the time we realised its potential, our existing portfolio was already committed, and it became difficult to make changes.

Are you considering any exposure to specific sectors?

We believe the composition of the Nifty 50 will likely change significantly over the next 10-15 years, and we want to be positioned to capture that shift. Sectors like technology, healthcare, and others currently underrepresented in the index could become larger constituents going forward.

Our fundamental research process aims to identify these emerging leaders, whether they are budding entrepreneurs or traditional business houses reinventing themselves. We want to be able to back the companies that can become the next big names in the Indian market.

Can you share more details on the AIF structure and the expense ratio you are offering?

For the AIF, we have a standard fixed fee structure of 2% management fee and the performance fee will have a 10% hurdle rate, and then we will charge 15% on the profits above that.

We are not disclosing the exact AUM at this stage, as we have just started the fund a couple of months ago. However, it is a decent number in the hundreds of crores, raised through a friends and family round.

How much cash do you plan to hold in the portfolio, and will you be using any derivatives?

We plan to hold around 5-10% cash in the portfolio at most. We believe cash calls should be limited, as it is not a good thing to have too much cash sitting idle. Unless there is a significant market event or volatility, we will try to keep the cash allocation low.

As for derivatives, this is a pure, long-only public market strategy, so we do not intend to use any derivatives in the portfolio.

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Do you plan to launch any feeder fund structures to cater to international investors?

Yes, that is definitely something we are considering. Given the interest we are seeing from international investors, we will look at launching a feeder fund structure that can channel the inbound money into our India-focused strategy.

The open-ended nature of the AIF will provide the necessary liquidity for such a feeder fund structure. We believe there is a significant opportunity to tap into the global appetite for Indian equities, and a feeder fund can be a good way to facilitate that.