Volatile markets see pvt credit’s big fund rush

Fund Launches Accelerate

A flurry of fund launches in recent weeks reflects the growing appetite. ASK Alternates and Lighthouse Canton have both launched new private credit funds, while Sundaram Alternates on Thursday raised a Rs 2,500-crore real estate credit fund. The roughly $12-billion-a-year Indian private credit market has also seen new entrants such as Nuvama, while Kotak Alternate Asset Managers and PAG are planning fresh fundraising. India’s private credit market offers returns of 14-22%, significantly higher than the compressed spreads available in the US and Europe, making the market increasingly attractive for lenders.

“When public debt markets become choppier and equity issuance windows narrow, we see increased demand for bridge financing from companies and promoters dealing with temporary stress or looking to consolidate promoter stakes without diluting equity at current valuations,” said Pranob Gupta, managing director and head of India alternatives (credit and hybrid strategies) at Lighthouse Canton.

The Singapore-based firm last week launched the Rs 1,200-crore LC Lumiere Credit Fund, focused on senior secured lending to real-economy companies backed by strong collateral. The fund will deploy capital across growth financing, acquisitions, sponsor-backed transactions, refinancing and cross-border opportunities.

Gupta said the current environment gives lenders greater negotiating power. “In a relatively uncertain environment like this, investors are able to negotiate better terms around collateral, covenants and cash-flow servicing,” he said.

As the asset class has expanded, deal sizes too have grown sharply. According to Gupta, many transactions are now in the Rs 200-500 crore range, while the largest deals are running into several billion dollars, among the biggest in Asia.

ASK Alternates, the alternatives arm of Blackstone-backed ASK Asset & Wealth Management Group, last week launched its second private credit fund with a target corpus of Rs 2,500 crore and a greenshoe option of Rs 1,500 crore.

Shantanu Sahai, head of private credit at ASK Alternates, said the firm expects returns to improve marginally as larger fund sizes and ticket sizes strengthen its ability to negotiate pricing and structure transactions independently.

“Given that we are targeting a larger fundraiser, it will allow us to structure deals ourselves as well,” Sahai said.

He added that with public equity markets delivering muted returns over the last two years, private credit has emerged as an attractive alternative offering mid-teen yields backed by exposure to high-quality businesses and secured collateral, though the asset class remains subject to credit, liquidity and market risks.

Sahai said the current environment favours performing credit over distressed debt or venture debt. “In difficult macro conditions, it is usually the stronger companies that survive and consolidate market share. This is a good time for us to increase exposure to such businesses,” he said.

Bespoke Funding Solutions

Rahul Chhaparwal, partner at Kotak Alternate Asset Managers, echoed a similar view. With public markets volatile and IPO sentiment weakening, companies are finding it harder to raise growth capital through listed markets, he said.

“This is where alternate asset investors are stepping in. We expect strong demand for bespoke funding solutions such as preferred equity, structured last-mile financing and mezzanine financing,” Chhaparwal said.

While near-term macro headwinds could affect corporate cash-flow timelines, the need for strategic capital across corporate India remains intact, he added.

“The traditional banking system has structural rigidities, creating a clear complementary space for private credit. We see the current macro environment not as a demand destroyer, but as a catalyst for highly structured and resilient corporate financing solutions,” he said. Kotak Alternate Asset Managers is currently looking to raise a $3-billion private credit fund.