Investec Capital is a global financial service company. It is ready to set up its maiden private credit alternative investment fund in India.
Private credit means direct lending, where the debt is not traded or issued in public markets. The company pays the principal amount with interest to the lending institution on maturity.
Investec has created Emerging India Credit Opportunities Fund I to raise ₹ 1000 crores. The fund is targeting senior citizens, secured credit investments, mid-market businesses in niche markets with expertise.
Private credit is still in the developing stage in India. It is an asset class that is still in the initial stages of evolution and will witness notable growth in the upcoming years. The development of this asset class will be similar to that of in other markets.
The fund has managed to raise more than half of the targeted corpus. It has been able to collect ₹ 530 crores from more than 200 wealthy investors and family offices. The fund is expecting to complete its second round of Rs 1000 crores soon.
The traditional credit providers in India are unable to meet the demand for non-standard, flexible debt solutions.
The demand is strong because of the continued activity in Mergers and Acquisitions (M&A), stake consolidations (i.e., when the assets, liabilities, etc. of two or more entities are combined) and bridge financing (short term financing to cover up costs till the company raises long term funds).
The main focus is on companies with strong operating history, promoter decency and corporate governance record. The fund will be for a four-and half-year period, during which it will provide credit and finance for acquisitions, bridge financing, stake buyouts, growth Capex, and refinancing.
The Emergency India Credit opportunities Fund will be sector-specific, barring the real estate segment.
After the collapse of the Lehman Brothers, the fourth-largest investment banker in the United States, the private credit market in India has assumed materiality. After the credit crisis in 2018, many wholesale non-banking financial companies (NBFCs) had to withdraw from the mid-market private credit space in India.
With the recent rate cuts and increasing liquidity, large caps are enjoying ample liquidity and spread commission. But there is still a significant demand or supply gap in the mid-market private credit space, and it shall continue for some more time.
Follow and connect with us on Facebook, LinkedIn & Twitter
