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 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 emphasising the market's strong trajectory.
In terms of deal volume, H1 CY2024 saw private credit deals totalling 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. (ANI)
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