The $12-billion-a-year private credit market is set to heat up with the entry of new players such as Nuvama, even as PAG and Kotak Alternate Asset Managers plan new funds. The Indian market delivers returns of 14–22%, far above the compressed spreads in the US and Europe, writes Raghavendra Kamath
l What is the role played by private credit?
PRIVATE CREDIT MEANS debt provided by non-banking channels for corporates and businesses. Banks remain constrained by end-use restrictions, exposure norms, and conservative underwriting, leaving a persistent funding gap, particularly in real estate, mid-market capex, acquisition financing, and special situations. Private credit fills this void with bespoke structuring flexibility that bond markets and bank lending cannot offer.
Private credit is seeing deals mostly in real estate, healthcare and industrials, according to EY. India is expected to account for 20–25% of Asia-Pacific’s projected $90–110 billion growth in private credit by 2028, supported by regulatory reforms, diversified funding structures and sustained demand for flexible financing, consultant Knight Frank has said earlier. By 2025, India could contribute up to 30% of regional private credit fundraising, it had said.
However, despite hitting $12.4 billion volumes in CY 2025 , with a 35% year-on-year jump, the Indian private credit market still represents only ~0.6% of GDP and ~1.2% of corporate lending.
l Why funds/investors are flocking to the Indian market?
FOR FOREIGN PLAYERS, the attraction is yield and diversification. Indian private credit delivers 14–22% internal rate of returns, far above the compressed spreads in the US and European markets. India’s over 6.5% GDP growth, infrastructure buildout, and energy transition create a deal pipeline that mature markets cannot match, says Ankur Jain, MD, Incred Alternative. Funds such as Ares, Oaktree, KKR & BlackRock have ramped up India allocations. For domestic players — alternative investment funds, NBFCs, family offices — the pull is equally structural. Performing credit, which is debt given to profitable and cash flow generating companies, is a natural bet for them. Domestic funds accounted for over 64% of deal value in H2 2025, reflecting a maturing local ecosystem that competes with — rather than merely complements — global capital.
l What kind of deals are there in the market?
VISHAL SRIVASTAVA, MD at Anarock Capital, said while distress deals have reduced in the market, opportunistic credit deals, pre-IPO financing deals and refinancing deals continue to dominate the market. Global players typically focus on $80-500 million deals in opportunistic and special situation debt.
Special situation debt means debt given for purposes such as refinancing, restructuring, mergers and so on. For instance, Shapoorji Pallonji raised $3.35 billion in May last year, which was the largest such private credit deal so far .The group is also looking to raise $2.5 billion to refinance the Tata Sons’ stake backed dollar bond which is set to mature in April this year.
Domestic players usually look at `70-150 crore deals, Srivastava said.
l What are the kind of returns to be made in India?
WHILE returns on performing credit deals are between 12-14%, global funds do opportunistic credit deals at internal rate of returns of 18-20% and distressed deals of above 20%.
For instance, the Shapoorji Pallonji group Group arm — Porteast Investment — raised $3.35 billion in May last year through three-year bonds at 19.75%. The cost rose to 21.75% in December after the company failed to meet a covenant linked to a stake sale, according to reports.
l Who are the big players?
KOTAK ALTERNATIVE INVESTMENT Managers was the biggest private debt provider in 2025 at $1162 million . Global managers Farallon Capital ($909 million) and Varde Partners ($783 million) followed, as per Octus Intelligence. The end-use was related to refinancing and acquisition, besides property deals. In Q4,2025, top private credit lenders were Varde Partners with $ 295 million, 360 One Asset Management with $250 million and Neo Asset Management $223 million. By issuance type, 75.1 % was non-convertible debentures, 21.6% offshore debt, and 3.3% was hybrid securities.
l Impact of West Asia war
JAIN OF INCRED says the West Asia war and the reverberations in the stock market will impact deal-making in the immediate future. There is no incentive to take immediate decisions, both from the borrower’s and the lender’s perspective. This is largely true for the performing credit space where there is no imminent factor for capital requirement and the timing of the fund-raise can be tweaked.
However, if this disruption continues for a while, performing credit deals, especially growth capital requirement led deals, will materially slow down. In contrast, the special-situation type deals volume will materially jump up. Net-net, it is neutral to negative for performing credit strategies from the deal volume perspective. For special situation strategies from the deal volume perspective, it is positive to very positive, Jain said.