Private credit in India hits record high with $5.1B invested in H1 2023

Private credit investment has seen an increase in India with soaring deal sizes, as per a report by the Indian Venture and Alternate Capital Association and Praxis Global Alliance.

Indian Private Credit investments stood at $5.1 billion across 63 deals in the first half of the year. Average deal size surged by nearly 140% to $80 million, driven by a rise in mega deals—12 deals over $100 million in the first half of 2023, compared to 15 in 2022.

Projections in the report indicate the total assets under management (AUM) could reach $8-9 billion through 120-125 deals by the end of 2023, compared to $6.4 billion across 190 deals last year. Praxis estimates Private Credit AUM in India to reach $60-70B by 2028.

"India is a capital-short country both - in Equity and Debt. Private Credit strategies ranging from performing credit to esoteric high-yield credit strategies will have significant room to grow in the coming decade," Srini Sriniwasan, Managing Director, Kotak Alternates Asset Managers Limited said in a statement.

"Domestic regulations are restrictive on banks and NBFCs which is an opportunity for such funds. At the same time regulations do not permit leverage at the Fund level for Private Credit funds making it an interesting interplay of risk and reward for Investors in such funds," he added.

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Private Credit is essential when banks face regulatory restrictions or for projects deemed risky. It offers flexible solutions, avoids equity dilution, supports revenue-based financing, and aids mid-cap companies with low credit ratings, according to the statement.

In 2023H1, Private Credit investments surged in infrastructure and metals and mining sectors, comprising 51% of total investments compared to 39% in 2022, the report Unlocking Opportunities: India’s Private Credit Landscape, noted.

A global shift from real estate to Private Equity/Venture Capital (PE/VC) and Private Credit has occurred in the last five years due to factors like rising interest rates and reduced office demand. The share of PE/VC and Private Credit in alternative assets is anticipated to increase due to higher return expectations,

"Private Credit in India is a large structural opportunity. As India grows to a US$ 7.5T economy over the next decade, we see a US$ 100B opportunity for private credit managers. Private Credit strategies have the ability to deliver attractive returns across the risk spectrum, resulting in an increasing interest from domestic and offshore investors alike," Venkat Ramaswamy, Vice Chairman, Edelweiss Financial Services said.