India’s Private Credit Market Grows Strong in 2024
Big Deals by Reliance, Vedanta, and More
India’s private credit market demonstrated robust growth in the first half of 2024 (H1 CY2024), with total investments amounting to USD 6 billion, according to an EY report. This performance is a strong indicator of the market’s vitality, especially when compared to the USD 8.6 billion invested across CY2023.
The momentum seen in H1 CY2024 has already outpaced the deal flow of the previous year, showcasing the growing interest and activity in the private credit sector. Adding to this, the data does not include smaller deals under USD 10 million and offshore credit raises. When factoring in these additional transactions from public sources, they contribute at least USD 174 million and USD 1.9 billion, respectively, further emphasizing the market’s strong trajectory.
In terms of deal volume, H1 CY2024 saw private credit deals totaling USD 6 billion, slightly lower than CY2023’s USD 8.6 billion but surpassing CY2022’s USD 5.9 billion. Global funds, which have traditionally played a dominant role in the private credit market, contributed 53 per cent of the total investments during H1 CY2024, compared to 63 per cent over the previous two years. This decline allowed domestic funds to increase their share of the market, further diversifying the investor base.
Several high-value transactions were pivotal in driving the deal value during H1 CY2024. Notable deals include Reliance Logistics and Warehousing raising USD 697 million, Vedanta Semiconductors securing USD 301 million, Matrix Pharma obtaining USD 293 million, and GMR Airports closing a deal worth USD 271 million. These transactions highlight the increasing demand for private credit in high-growth sectors.
Approximately 60 per cent of respondents identified real estate and manufacturing as the sectors attracting the most deal flow, consistent with the findings of earlier surveys. Capital expenditure (Capex) was seen as the primary driver of private credit demand, with 50 per cent of fund managers expecting Capex-related investments to continue leading the market over the next 12 to 24 months.
Looking ahead, the outlook for India’s private credit market remains strong. Around 58 per cent of fund managers expect private credit investment activity to range between USD 5 billion and USD 10 billion over the next 12 months. This optimism is bolstered by the steady demand for credit in sectors like real estate, manufacturing, and capital-intensive industries.
However, despite this optimism, there are potential risks to monitor. The Reserve Bank of India has raised concerns about the rising interconnectedness between private credit, banks, and non-banking financial companies (NBFCs), as well as the growing complexity of deal structures.
Doubts Revealed
Private Credit Market -: This is a part of the financial system where private companies borrow money from investors instead of banks. It’s like when you borrow money from a friend instead of a bank.
Reliance -: Reliance is one of the biggest companies in India, involved in many businesses like oil, telecom, and retail. It’s like a very big shop that sells many different things.
Vedanta -: Vedanta is a large company in India that works with metals and mining. They dig up things like gold and silver from the ground.
USD 6 billion -: This means six billion US dollars, which is a lot of money. One billion is 1,000 million.
Reserve Bank of India -: This is the central bank of India, which controls the money supply and interest rates in the country. It’s like the boss of all banks in India.
NBFCs -: NBFC stands for Non-Banking Financial Companies. These are companies that provide banking services but are not banks. They can lend you money or help you invest, like a bank does.
Fund Managers -: These are people who manage large amounts of money for investment. They decide where to invest money to make more money, like a coach deciding the best strategy for a game.
Interconnectedness -: This means how different parts of the financial system are linked together. If one part has a problem, it can affect the other parts, like how one sick person can make others sick.
