Private credit in India poised for big leap, could exceed $10bn: EY

MUMBAI: Private credit in India is poised for a significant leap, with deployments expected to exceed $10 billion in 2024, according to a report by consultancy firm EY.

 This surge comes on the back of increasing demand from Indian companies across sectors such as real estate and infrastructure, with over $6 billion deployed in 96 deals during the first half of 2023 alone.

In the past two-and-a-half years, private credit investments have surpassed $20 billion, underscoring the growing reliance on this alternative financing route.

What’s private credit?

Private credit refers to non-bank lending, where funds are raised and deployed by private investors or institutions, typically through private debt funds.

These loans are offered to businesses that may not seek traditional bank financing, either due to specific needs (like flexibility or faster execution) or situations where bank credit may not be available (such as for leveraged buyouts, distressed financing, or high-yield projects).

Domestic funds

Domestic funds are emerging as key players in this space, leveraging their local expertise and access to lower-cost capital to carve out a larger market share.

Major deals in the first half of 2023 included substantial raises by Reliance Logistics and Warehousing, Vedanta Semiconductors, and Matrix Pharma, which collectively secured approximately $1.3 billion.

Meanwhile, prominent borrowers in the real estate sector such as Prestige Group, Puravankara Group, Kalpataru Group, and Shapoorji Group remained active in securing private credit.

All-time high

Bharat Gupta, partner at EY, noted that private credit investments have reached an all-time high, driven by growth-focused strategies. He emphasised the importance of due diligence and deal oversight in managing risks and ensuring optimal returns.

Lower risk deals

The report also highlighted a shift towards lower-risk, performing credit deals in India, with many funds now engaging in transactions yielding under 18 per cent Internal Rate of Return (IRR).

High-yield opportunities, such as mergers and acquisitions, buyouts, and bridge-to-IPO financing, have gained popularity, attracting a growing number of high-net-worth investors and family offices. This influx of domestic capital is further bolstering private credit’s position as a key asset class.