Burgeoning private credit deal flow in India for 2023
Based on data published by SEBI in H22023, at least 11 new AIFs have registered with credit/special situation orientation and five are in the process of registration. Nine funds have announced new fund raises aggregating in excess of US$2b in H22023.
Private credit deal flow in India in 2023 was higher than CY22 both by deal count and value (CY23: 108 deals totaling to US$7.8b versus CY22: 77 deals totaling to US$5.3b). Surge in deal flow was primarily driven by stabilization of interest rates in CY23, higher deal flow in the real estate sector and a bump in deal value from certain large deals executed in CY23. Kindly note that our analysis does not include venture debt deals, investments into financial services players, term loans / WCLs disbursed by NBFCs and offshore bond placements by Indian corporates. We have also taken a cut-off of single private placement over US$10m for the purpose of our analysis.
In CY23, global funds contributed approximately 63% of the total deals by value, primarily due to their participation in large deals. However, domestic funds led in terms of deal count, accounting for approximately 61% of the deals, due to their focus on the mid-market segment and strong deal origination capabilities. Real estate continued to be a dominant sector, attracting investments totaling US$1.7b in CY23.
In this edition, we have also commenced coverage of private credit exits during CY2023. Based on the data tracked by us, we have reported on exits aggregating ~US$2.3b. List of transactions covered in these exits has been included in our report.
EY Private Credit Pulse survey results H2 2023
The report includes a survey of fund managers, with half of them believing that over the next 12 to 24 months, capital expenditure related financing will be the biggest driver of private credit deals, followed by stress-related financing. This is a distinct change from the previous survey. Real Estate was also ranked by 50% of fund managers as the sector with the most deal activity over the next 12 to 24 months. Manufacturing followed closely. Interestingly, real estate was also perceived as the riskiest sector in the current private credit portfolio.
While optimism exists regarding sufficient fund availability for private credit deals, competitiveness in the industry has intensified over recent years. Respondents suggest an overall private credit investment of US$5 to US$10b in CY24. In line with our past surveys, there is an indication of a slightly more bullish outlook in the two to five-year horizon compared to the next one to two years.