Arm of Uday Kotak's group joins the rush for private credit market

The nation’s fifth-largest asset management company is in the process of building a five-member private credit team and appointed Saurabh Tripathi as the strategy’s chief investment officer last month.

An arm of Indian billionaire Uday Kotak’s group is planning to launch its first private credit fund this year, joining industry peers rushing to tap the booming market for direct lending.

The fund would aim to raise about 10 billion rupees ($119 million) depending on investor demand, said Nilesh Shah, chief executive officer of Kotak Mahindra Asset Management Company, which manages 4.8 trillion rupees in assets.

While private credit as an asset class has expanded globally, India has become a hotbed for the strategy, where institutions and funds make loans directly to companies, as investors hunt for higher returns.

Kotak Mahindra AMC’s peers Nippon Life India Asset Management and ICICI Prudential Asset Management Co. have already entered into the space. Global players including Cerberus Capital Management LP and Varde Partners LP are also seeing opportunities in the market, intensifying competition.

“The demand for private credit is rising in India as traditional channels only tap top-rated credit,” Shah said in an interview on Monday. The fund will invest in performing credit, he said.

There is a subtle shift toward performing credit deals in India, with funds engaging in sub-18% internal rate of return transactions, according to a report by EY last week. Private credit investments in the first six months of 2024 soared to an all-time high of $6 billion, it said.

The nation’s fifth-largest asset management company is in the process of building a five-member private credit team and appointed Saurabh Tripathi as the strategy’s chief investment officer last month. The planned private credit fund is expected to be launched by December after securing regulatory approvals.