Avendus seeks $466 million for new private credit fund in India

Avendus’ latest fund will have a tenor of about seven years and is targeting a gross return of 16%-18% for its investors.

Avendus PE Investment Advisors Pvt. is launching a third private credit fund, as it seeks to tap demand from investors for high-yielding debt in India and satiate a growing need for capital among medium-sized companies.

The 25 year-old Mumbai-based financial services firm aims to raise as much as Rs 4,000 crore ($466 million) through the fund, that will invest in the debt of mid-sized businesses in the country, Anshul Jain, executive director for Avendus Structured Credit Funds told the media Wednesday.

The launch builds on a growing pipeline of deals that saw India’s private credit market raise close to a record $10 billion last year. Prime Minister Narendra Modi’s push for massive infrastructure projects has provided business opportunities for plenty of mid-sized firms, leading to growing demand for capital. And customized financing solutions offered by private credit funds have suited them well given the difficulty they face in accessing bank loans.

Avendus’ latest fund will have a tenor of about seven years and is targeting a gross return of 16%-18% for its investors, Jain said.

In comparison, a 10-year government bond gives roughly 7% while equity benchmarks Sensex and Nifty have returned under 10% over the last year.

“We will invest in secured credit transactions, with deal sizes between 2 billion rupees to 5 billion rupees,” Jain said, adding that the preference would be for companies in the pharmaceuticals, manufacturing, chemicals, healthcare and technology sectors.

Avendus’ first private credit fund launched in October 2017 gave investors a yield of 18%, while the second in January 2022 returned about 17%, Jain said. The latest offering will close its first round in a month.

“This asset class is bridging a critical financing gap which existed between traditional debt and equity, making it one of the fastest growing asset classes,” Nilesh Dhedhi, managing director at Avendus Finance Pvt. said at the event. “Mid-market enterprises are increasingly leveraging private credit as a powerful financing,” he said.