RevX Capital’s Rahul Chowdhury on the rise of private credit

RevX Capital is carving a niche in India’s private credit market with a focused micro fund strategy, aiming to bridge the financing gap for mid-sized businesses. At a time when traditional lenders are constrained by rigid underwriting norms, alternative credit solutions are gaining traction, particularly among companies seeking non-dilutive, flexible capital.

Founded by Rahul Chowdhury, RevX Capital operates with a fund size of Rs 500-750 crore. 

Unlike larger funds that often struggle with capital allocation and prolonged deal cycles, RevX emphasises investing within the first year of a fund’s lifecycle, ensuring strong IRRs and predictable liquidity for investors. The firm primarily lends to profitable SMEs, while selectively considering late-stage startups with strong fundamentals and cash flow visibility.

With institutional capital becoming harder to raise, smaller, private credit funds are increasingly resonating with investors who value capital preservation, quarterly yields, and co-investment opportunities. 

RevX Capital has differentiated itself with its shorter fund tenure, structured financing solutions, and high-speed execution model, closing funding rounds in as little as three to five weeks from due diligence.

It has invested in companies such as Farmley, electronic brand Mivi, and fintech company CASHe.

In this conversation with Yourstory, Chowdhury discusses why micro funds are outperforming, the risks and opportunities in India’s private credit market, and how macroeconomic shifts are influencing investor sentiment and credit deployment strategies.

Edited excerpts:

YS: How long does it typically take to raise and deploy capital? What factors influence this timeline?

RC: As a third-time fund manager, my fundraising timelines have shortened over the years. My first fund took 18 months to raise, the second took 10 months, and my current fund is expected to close within five to six months. Typically, raising capital for a private credit fund takes six to nine months, but this varies depending on fund size and strategy.

The speed of deployment is influenced by several factors. Having strong LP relationships and a proven track record helps secure commitments faster. A clear, well-defined investment thesis attracts LPs looking for high-yield private credit exposure. 

Once raised, capital is deployed strategically, with a large portion allocated within the first year. A strong deal pipeline and rigorous risk assessment ensure that we can move quickly without compromising quality.

YS: Why did you decide to keep your fund size small? Was it a strategic choice, operational necessity, or driven by LP preferences?

RC: The decision to maintain a micro fund strategy, with fund sizes ranging between Rs 500-750 crore, is rooted in both my investment philosophy and the ability to deliver results within a specific IRR target. 

A smaller fund size allows for faster deployment, diversified exposure, and more effective risk management, ensuring that capital is fully invested within the first year. From an LP’s perspective, a shorter fund life enhances liquidity by ensuring timely principal repayments and periodic yield distributions. This predictability allows LPs to plan their future investments better.

Each fund manager has a unique approach, but in my case, maintaining a disciplined and structured strategy aligns well with both my investment style and LP expectations.

YS: Does scaling up too fast pose a risk? How do you ensure investment discipline while managing growth?

RC: Scaling beyond market appetite is always risky, regardless of a fund’s investment thesis. To manage growth while preserving investment discipline, we have implemented three key safeguards. 

First, we cap single-company exposure at less than 5%, ensuring that no single investment dominates the portfolio, even if the company is performing exceptionally well.

Second, our team-driven deal flow enables us to be highly selective, evaluating a large number of opportunities before choosing the best ones. 

Lastly, we have built a credit-first culture, where even junior analysts have the authority to decline transactions. Every deal requires unanimous approval at all levels, from analysts to the investment committee. This structure ensures that investment discipline remains intact, even as we scale.

YS: Do micro funds outperform larger funds in terms of returns in private credit? What makes them more efficient?

RC: Micro funds have a structural advantage over larger funds, primarily due to their ability to be highly selective, agile, and capital-efficient. Larger funds often struggle with deploying capital quickly, leading to long underwriting processes and potentially weaker investment opportunities. 

In contrast, micro funds can execute deals faster and focus on niche, high-yield opportunities that larger funds might overlook due to ticket size constraints.

Our benchmark for success is delivering consistent quarterly cash yields to LPs, returning principal within six months of fund maturity, and ensuring maximum capital preservation. By keeping our structure lean, we avoid inefficiencies that come with managing large pools of capital and focus on maximising IRR through disciplined underwriting and timely capital recycling.

YS: Are LPs shifting their interest toward smaller, more specialised funds? What kind of LPs resonate most with your strategy?

RC: LPs today are more sophisticated and well-researched than ever before. Over 90% of our capital comes from investors in India’s top six cities, where there is significant awareness of asset class allocation across fixed income, VC, PE, real estate, and public markets. Within private credit, LPs tend to choose funds based on their specific liquidity needs, comfort with the manager’s strategy, and access to co-investment opportunities.

Our LPs trust our approach because we prioritise yield generation, capital preservation, and co-investment opportunities. Additionally, direct access to the fund manager is a crucial factor—many LPs prefer smaller funds because they can engage with the manager directly, which can become difficult in larger funds.

YS: What key metrics or signals do you look for when lending to loss-making but high-growth startups?

RC: While two-thirds of our portfolio is focused on profitable SMEs, we do consider late-stage startups with strong fundamentals and cash flow visibility. Early-stage startup lending is rare and usually falls under government-backed guarantee schemes with small-ticket loans for short tenures.

When assessing startups, we focus on cash burn trends, business viability, founder background, and financial transparency. A controlled burn rate aligned with revenue growth signals financial discipline, while reckless cash burn raises concerns. The promoters’ experience and commitment are also critical—founders with prior successes and significant skin in the game inspire more confidence. Finally, integrity in financial reporting and governance is non-negotiable.

YS: How does RevX Capital differentiate itself from other private credit funds?

RC: Our differentiation lies in fund structure, execution speed, and deal flow. We have deliberately kept our fund tenure shorter (four years) to provide LPs with liquidity faster. We also offer accelerated drawdowns—LPs can opt for 100% upfront drawdowns or staggered drawdowns in one to three tranches based on their liquidity preferences.

On execution, our internal processes allow us to move from first due diligence to a funding decision within 10 days, with final disbursement in three to five weeks. This speed gives us a competitive edge in a space where timely access to capital is crucial. Additionally, our deal flow is entirely organic, with 70+ companies funded in two years, sourced from our network and founder referrals, rather than outbound marketing.

YS: What are the key risks in the private credit space, and how do you mitigate default risks?

RC: Like any lender, we face credit risk, market sentiment shifts, and regulatory challenges. A weak funding environment can make it harder for companies to raise debt or equity for growth, while regulatory changes can affect borrower financials.

To mitigate these risks, we structure deals with adequate security, maintain strict fund utilization tracking, and ring-fence cash flows to prioritize debt repayments. Many of our transactions include collateral, share pledges, or personal guarantees, depending on the deal. Additionally, we use escrow mechanisms and structured cash flow controls to ensure repayments are made on time.

YS: Are you seeing rising demand for structured credit or revenue-based financing in India?

RC: Yes, demand for non-dilutive, flexible capital is rising, particularly among mid-sized businesses that do not want to dilute ownership through equity fundraising. Traditional banks remain constrained by rigid underwriting norms, leaving a gap that private credit funds are filling.

At RevX Capital, we bridge this gap by providing structured financing solutions that are timely, tailored, and well-covenant, ensuring both investor protection and borrower flexibility.

YS: How do macroeconomic conditions like interest rate changes and inflation impact your investment strategy?

RC: Interest rate fluctuations, inflation, and regulatory shifts all shape our strategy. Rising interest rates make traditional bank lending more restrictive, increasing the appeal of structured private credit. Inflationary pressures impact business cash flows, making non-dilutive financing options more attractive for mid-sized enterprises.

We navigate these challenges by focusing on customised credit solutions, ensuring yield generation, principal preservation, and rapid execution. Our agile approach helps us capitalise on market opportunities while mitigating macroeconomic risks.

YS: Which sectors show the most demand for private credit in India?

RC: Private credit is gaining traction across multiple sectors. Real estate and infrastructure remain the biggest borrowers, as developers seek financing for land acquisition and last-mile funding. Healthcare, pharmaceuticals, and manufacturing are also major users of private debt, particularly for expansion and working capital.

Growth-stage tech startups, renewable energy firms, and consumer businesses are increasingly looking at private credit as a non-dilutive alternative to equity fundraising, making these industries strong areas of opportunity for us.