Private credit 2.0 is moving beyond traditional uses

Private credit investments in India were close to $10 billion in FY24; it is projected that total assets under management in this space will touch $60-70 billion by 2028, according to an EY report.

- SHILPA MANKAR AHLUWALIA

Such credit has historically been driven by global capital investing in non-convertible debentures via the foreign portfolio investment route. However, a large part of its growth is now fuelled by domestic funds, which are mostly structured as Category-II alternative investment funds (AIF) registered with the Securities and Exchange Board of India and target a mix of offshore and domestic capital. High-net worth individuals and family wealth offices have found the higher risk-reward profile of such investments appealing and contributed to its growth.

Private credit has been able to solve two unique gaps in the market. First, the ability to fund use cases where the banking system is unable to lend due to regulatory restrictions and more stringent lending norms. Acquisition finance and leveraged buyouts being one example. And second, the ability to offer bespoke lending solutions that meet the specific requirements of corporate borrowers.