We believe the majority of rate hikes is behind us: Aakash Desai, CIO & Head, Private Credit at 360 ONE Asset

This fund, which raised over ₹2,130 crore, is the firm’s largest credit fund to date, and is more than twice the size of its earlier funds. The fund was launched with a target corpus of ₹1,500 crore, with a green-shoe option. Investor interest in the private credit space and 360 ONE Asset’s track record have helped garner 1.5 times the originally envisaged corpus.

Corporate treasuries, family offices, high net worth individuals (HNIs), and domestic financial institutions participated in the fund.

The fund is sector-agnostic with an underlying investment philosophy focused on providing flexible and secure credit solutions to clients. The fund has deployed a significant amount across diversified sectors and has a robust pipeline for further investment.

Private credit is an asset class that provides flexible non-dilutive capital solutions to clients. These are typically for acquisition financing, growth capital, private equity exits or consolidation, among others. From an investor perspective, the private credit asset class provides access to bespoke, secured, fixed income investment products.

They are structured as close-ended credit-focused alternate investment funds that can offer reasonable returns to achieve significant alpha over conventional debt products. Private credit has emerged as a new investment category offering investors, particularly high net worth investors, access to diversified, fixed-income portfolios managed by investment professionals.

Private credit funds can be largely categorised as: High-grade credit (invest in AAA/ AA-rated large companies considered relatively safe and generate benchmark yields); performing private credit that provides flexible non-dilutive capital to mid-market companies, large conglomerates and diversified industrial houses. These are bespoke transactions that require in-depth and detailed credit and structuring expertise to generate healthy returns in the 13–15 per cent) range; and distressed credit exposure (high-risk high-reward, where the company is in financial distress with a potential for turnaround and given the risks involved, the returns may be commensurately higher).

Private credit funds largely cater to the latter two categories.

These funds might also decide to lend for certain use cases beyond traditional lending backed by assets, including financing for M&As, PE exits, special situation funding and capital expenditure.

The alternate investment market in India has witnessed significant inflows in the last few years. The industry has doubled in size in just two years, recording assets under management of $103 billion as of June 2023.

Within alternates, we see stellar growth in private credit, which accounted for a 17 per cent alternate asset market in 2022, compared with less than 2 per cent in 2005. Private credit is a structural long-term opportunity in India, currently a $96-billion market estimated to grow at about 12 per cent.

The current geopolitical situation will clearly impact global commodity cycles and overall liquidity. So, from a specific company lens, one could end up seeing some impact on the commodity industry or export-oriented companies, and firms with a significant amount of offshore borrowings.

From a domestic market standpoint, we are closely monitoring the data print coming out and believe the RBI, after six consecutive rate hikes since 2022, has paused any further rate increase. The RBI will adopt a wait-and-watch approach, awaiting clarity on oil prices and the US Fed rate trajectory. We believe that the majority of the rate hike is behind us and we should see rates stabilise over the medium term. This would be a good time to invest in fixed-income securities and lock in higher yields.