India’s Private Credit AUM Expected to Reach $70 Billion by 2028
- ByStartupStory | December 11, 2023
As 2023 draws to a close, India’s private credit sector is marking a historic year, witnessing a remarkable surge in investments, crossing $5.1 billion in 63 deals during the first half alone, according to a report by Praxis Global Alliance and IVCA.
Private credit has become indispensable for companies facing various scenarios, including regulatory constraints on traditional bank lending, the need for adaptable financing solutions, project financing, revenue-based financing, resistance to equity dilution by promoters, and support for mid/small companies with low credit ratings.
“Private credit strategies, spanning from performing credit to esoteric high-yield credit strategies, will experience substantial growth in the coming decade. Domestic regulations impose constraints on banks and NBFCs, creating opportunities for funds in areas such as acquisition financing and share buybacks,” stated Srini Sriniwasan, Managing Director of Kotak Alternates Asset.
The private credit industry has seen a noteworthy 140 percent increase in average deal size, accompanied by a rise in the number of mega deals. In the first half of 2023 alone, there were twelve private credit deals surpassing $100 million, exceeding the total for the entire year of 2022, which saw 15 such deals.
Projections indicate that Private Credit Assets Under Management (AUM) in India are poised to reach $60-70 billion by 2028. Both domestic and foreign Limited Partners (LPs) are showing growing interest in this space, with the registration of 55 private credit Alternative Investment Funds (AIFs) in the last five years, according to Madhur Singhal, Managing Partner and CEO of Praxis Global Alliance.
Major players in the Indian private credit arena include Kotak Alternates Asset, Edelweiss Alternatives, and Avendus, falling under the Category-II AIFs. Globally recognized names such as Invesco, KKR, and Blackstone are also making their mark in India’s private credit space.
“As India advances toward becoming a $7.5-trillion economy in the next decade, we foresee a $100-billion opportunity for private credit managers. These strategies have the potential to deliver attractive returns ranging from 12-24 percent across the risk spectrum, resulting in increasing interest from both domestic and offshore investors,” highlighted Venkat Ramaswamy, Vice-Chairman of Edelweiss Financial Services.
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