Private credit is the buzzword on deal street. The global private credit market is estimated to be US$ 1.5 trillion and likely to reach US$ 2.7 trillion by 2027. While most of this is centred around the United States and Europe, private credit is rapidly becoming an alternate pool of debt capital in India. Some reports estimate that private credit investors had almost US$ 15 billion of assets under management in India as of December 2022 and over US$ 4 billion was deployed in the first half of 2023 alone.
In the aftermath of the crisis in the non-banking financial sector, many non-banking financial companies have focussed their attention to the retail sector and are re-balancing their wholesale debt exposures. Indian banks, who have recovered some of their non-performing loans thanks to the Insolvency and Bankruptcy Code, 2016 (“IBC”), have pulled back from riskier corporate loans. As a result, there is an increase in demand for new avenues of debt capital. The IBC has brought about a robust insolvency regime and in the last seven years, more than 800 resolution plans have been approved and creditors have realised over Rs. 3.16 trillion. Several promoters have lost control over their companies and creditors have truly been in the driving seat for the first time in India. Not surprisingly, debt alternative investment funds have mushroomed in India over the past few years, and global and Asia Pacific credit funds have also steadily increased their allocation to India.
Please click here to read the full article by Aashit Shah, published in Asian Legal Business.