Ascertis Credit last week raised $520 million (nearly Rs 4,600 crore) in the first close of Fund IV of $1 billion targeted by the end of the next year. In an interview with Raghavendra Kamath, Kanchan Jain, head of Ascertis Credit Group, speaks about the fund manager’s plans and the private credit market in the country. Excerpts:
Your previous fund was around $475 million. What gives you confidence to scale it up to $1 billion?
The underlying market has expanded very significantly. What we specialise in is providing growth capital in the form of debt to companies across sectors. Companies need capital for multiple reasons and bank credit can’t fund them all. We can provide a holistic solution over and above bank lines. We will look at the next two, three, four years. We’ll disperse it in tranches. We feel that private credit in India will not replace bank credit. It’s incremental to bank credit.
The RBI has allowed banks to do acquisition financing. How will it affect private credit funds like yours that are active in the segment?
It doesn’t affect us. If you look at acquisition opportunities in our transactions, they are a small percentage – 10-15%. There are a lot of end users who still need private credit solutions. We think this is a good move by the RBI. I have always said other than the US, all central banks will have some restrictions on acquisition funding, and that is correct. But now, just reviewing it makes sense. I think it will create a boom, a surge in M&A activity. Bank lending coming into M&A will bring the cost down. And it is a typical end use where banks and private credit funds together can provide the best capital solution for an M&A opportunity. There is a way for banks and private credit funds to collaborate.
When do you think you will be able to raise the entire $1 billion? Is the time taken to raise funds becoming elongated now?
I believe we have another 9-12 months remaining for the capital raise. I do not think time taken is getting elongated. These investors do a very detailed diligence which takes four to six months. So, it takes around one-and-a-half years to raise a fund. I don’t think there are any shortcuts here.
In which segment are you seeing the highest demand?
For us, direct growth lending is the biggest segment. Even in the past, nearly 70% of our end-use was growth-related. Globally, where private markets are much bigger, more than 50% of the market is direct lending.
Do you feel hedge funds are now occupying more market space than pure play credit funds?
Pure play credit funds are larger and will remain larger, because there is a requirement for this pure credit. We are a very high-growth economy compared to many developed markets. Our markets will become even bigger. So, the scope for credit will also expand.
Do you think global funds are a bit cautious about directly investing in Indian private credit market?
No. There is a lot of interest. Global funds are large and they make big investments directly. Experienced credit managers are needed on the ground to handle large transaction sizes.