Recently, when Vishesh Shrivastav, managing director, investment (India), Temasek, said the Singapore state-owned investor would look at the Indian private credit market when it matures and offers opportunities with the right risk-reward balance, not many were surprised in the private debt circles.
Industry POV
According to senior executives in the segment, beyond limited deals in the $200–300 million range that global funds find attractive, tough debt resolution processes have made large investors, especially pension funds and global PE funds, less enthusiastic about India’s private debt space.
“Large deals here are small. More importantly, the resolution process is not easy, which keeps global LPs (limited partners) away… GPs (general partners) are okay with it as their risk appetite is high,” said a former CPPIB executive.
The executive agrees with Temasek’s Shrivastav that even if a deal offers 18–19% returns in rupee terms, post-forex and hedging costs shave off about 5%, reducing dollar returns to around 12–13%.
“12% deals are available in Europe and the US… why would they need to come to India?” he said, adding that two to three years ago, returns here were competitive, but that advantage has diminished with falling rates. Shrivastav, in a recent interview with FE, said: “For now, however, it (private credit) remains more of a developed markets story than an India one.”
Saurabh Agrawal, partner at Spark Asia Impact Asset Management, said the private credit market in India is where private equity was 15 years ago. “The average deal size is Rs 200–300 crore, which does not move the needle for global funds,” he said.
In addition, the IBC framework has been a mixed bag, and resolution timelines have been long—factors that definitely affect how attractive the market appears to global funds, he added.
“I suspect large funds will sit on the fence for a long time. As the market deepens and legal frameworks improve, we should see more action from them,” Agrawal said.
Moreover, PE leverage is not allowed in India, and once that changes, deal activity could pick up significantly. A large portion of global private credit deals are sponsor-backed (PE/VC-backed), where investors draw comfort from governance structures and aligned interests, he added.
Different strategies
Temasek’s peers, such as Canada’s CPP Investments (CPPIB) and KKR, have adopted more cautious strategies.
For instance, CPPIB has been investing in private debt in India through partnerships with local firms like Piramal Group and Kotak.
“Global pension funds don’t want to take a direct bet on Indian credit because they don’t want to get involved in debt enforcement, so they rely on local partners,” said the head of an NBFC, requesting anonymity.
CPPIB did not respond to an email on the subject.
A spokesperson for CPPIB-backed India Resurgence Fund said it invests in stressed or underperforming but promising mid-sized Indian businesses, deploying capital in the form of debt or equity as needed. “In addition to financial investment, the fund is actively involved in controlling and leading business transformation to create long-term value, thereby not dependent on debt returns,” the spokesperson added.
After KKR exited its corporate NBFC and liquidated its real estate NBFC with GIC, it is now executing debt deals through its Asia-Pacific credit platform.
Recently, the US-based investor lent $600 million to the Manipal Group through this platform.“Deals are opportunistic, and India competes with other markets. KKR is doing debt deals very selectively here, and Manipal is a one-off,” said a source close to the investor. He added that the era of 20–22% returns is over—large companies now raise debt at 10–11%.
Ankur Jain, managing director, credit strategies at InCred Alternatives, said: “Global investors (other than those focused on special situations) feel they get one or two deals and look at India as a satellite market.”
A mail sent to KKR did not elicit a response.
In India’s private credit market, direct lending held the largest share in 2024, accounting for more than 75% of total capital raised (over $150 billion). The second most-subscribed debt strategy was special situations, which raised close to $25 billion, according to PwC India.
Sources said investors such as Varde Partners, PAG, and Oaktree are primarily lending to stressed assets or in special situations, focusing on high-yield credit.