Kotak targets $2 billion for new private credit fund

Kotak Alternate Asset Managers CEO Lakshmi Iyer. Bloomberg

Kotak Alternate Asset Managers Ltd. aims to raise up to $2 billion for a new private credit fund to tap the growing demand for such products in India, according to its chief executive officer.

The fund will offer a range of financing options including acquisition funding, equity-backed loans, and annuity assets that generate steady cash flow, said Lakshmi Iyer.

“We’re seeking an investment return in the 18%-20% range,” she said. “Structured credit instruments will be the underlying, with tenors ranging from four to seven years.” The firm’s Strategic Situation Fund I, for instance, delivered over 20% of compound annual growth rate in local currency terms since it was launched in 2019, she added.

Kotak Alternate manages about $20 billion, with over $6 billion spread across 14 private credit funds, Iyer said. Overseas investors, including family offices and wealthy individuals, account for the bulk of the assets.

India’s private credit market is expanding, with investments reaching $9.2 billion across 163 deals last year, according to Ernst & Young. However, increasing competition is making it harder to execute deals and may impact credit quality, the report warned.

Kotak’s proposed fund will be open for subscription to both offshore and local investors, according to Iyer.