Motilal Oswal launches maiden private credit fund, targets Rs 3,000 crore

Rakshat Kapoor, Head – Private Credit, Motilal Oswal Alternates

Motilal Oswal Alternates, the alternative assets platform of financial services group Motilal Oswal, is preparing to enter India's fast-expanding private credit market with a new fund that aims to raise around Rs 3,000 crore, including a green shoe option of Rs 1,500 crore.

Motilal Oswal Alternates has raised over Rs 23,000 crore across 11 private equity and real estate strategies.

In an interaction with Moneycontrol, Rakshat Kapoor, Head - Private Credit at Motilal Oswal Alternates, who has spent nearly two decades in private credit, said Motilal Oswal's entry comes at a moment when corporate India is increasingly viewing credit funds as a mainstream capital solution rather than a last-resort alternative.

"The ecosystem already exists within Motilal Oswal, from equity investing, public markets, alternates, investment banking linkages, promoter access. The deal flow is natural," he said. The group’s relationships across 8,000-plus corporates through its mutual fund, investment banking and alternates businesses, he added, give the private credit platform an entrenched pipeline from day one.

Asked whether Motilal Oswal is entering the asset class later than peers, Kapoor said, "Private credit in India is still only about $17–18 billion today," he said, adding that most domestic managers are still on their first or second funds.

In his view, India’s scale means private credit demand will multiply as banks continue to focus on AAA and AA borrowers. "This $20 billion industry can easily become $40–50 billion, and some estimates even put the long-term potential near $100 billion as penetration increases," he said.

He believes the market will mirror mutual funds in structure over time, with five to six large, institutionally backed platforms commanding the largest wallet share, and smaller funds co-investing or participating in syndications. Motilal Oswal, he said, intends to be in the “tier-one bucket” from inception.

The new fund will operate through two primary buckets - growth capital and dislocated credits.

Growth capital will target strong, profitable mid-market companies, largely unlisted, which are looking to avoid equity dilution. These include promoter stake increases, consolidation, or funding ahead of a public listing.

Dislocated credit, meanwhile, will focus on companies facing temporary setbacks: cyclical downturns, commodity or tariff-driven pressure, or a one-time balance-sheet correction.

Across both strategies, Kapoor stressed that Motilal Oswal's edge lies in evaluating credit deals through an equity lens. "We’re looking at businesses where the equity will outperform. This group has a deep understanding of sectors, promoters and public markets," he said.

The fund is targeting 20–22% blended returns, largely through senior secured exposures coupled with equity kickers.

There will be no early-stage businesses, minimal infrastructure exposure, and no tech. The focus will be core-economy sectors: pharma, healthcare, life sciences, engineering, auto ancillaries, and select opportunities in specialty chemicals, which Kapoor said is currently seeing meaningful stress due to over-capacity and weak spreads.

Kapoor expects deal flow to remain healthy despite talk of overcrowding in the Indian private credit ecosystem.

Corporate deleveraging, promoter buyouts, and the resurgence in private equity exits, he said, have all created situations conducive to private credit. "Promoters have increased stakes, private equity has exited, and large investments have been absorbed by public markets. All this leads to credit opportunities," he said.

He also highlighted the ongoing capex cycle. While the first leg was led by large caps, he now sees mid-market companies putting up new capacity, borrowing aggressively, and seeking bespoke financing that banks are often not willing to provide.

For the first fund, Motilal Oswal expects participation from a mix of family offices and institutions, both domestic and offshore. Family offices will likely form a majority share in Fund I, though institutional interest is rising, Kapoor said.

As new themes like warehousing, data centres and renewable infrastructure continue to absorb capital, Kapoor believes private credit will become a mainstream corporate financing tool.

"This asset class will show that it can return money without extensions and deliver mid-teens equity-like returns in fixed income form. The downpour of capital is yet to come," he said.