Kotak AMC set to enter AIF space; to launch Rs 2,000 cr private credit fund

Joins other fund houses that have already forayed into AIF space amid growing investor interest

Kotak Mahindra Asset Management Company (AMC) is set to enter the fast-growing alternative investment fund (AIF) space with the launch of a private credit fund next month.

 

The fund, which aims to raise between Rs 1,500 crore and Rs 2,000 crore, will cater to the capital needs of unlisted companies by providing debt funds for acquisition financing and capital expansion.

 

According to Deepak Agrawal, CIO of fixed income of Kotak AMC, the company will contribute 20 per cent of the total funds from its own side. "We plan to complete the fundraising within the first year and deploy the funds as soon as possible," Agrawal said.

 

Private credit funds provide debt financing to companies, offering an alternative to traditional bank funding sources. Companies with lower credit ratings often seek these funds that require more flexible repayment terms.

 

With the launch of its private credit fund, Kotak AMC will join other fund houses that have already entered this space, amid growing investor interest.

 

“While over half a dozen fund houses have entered this space, we don’t see ourselves as late entrants. There are enough opportunities in the Indian ecosystem,” said Saurabh Tripathi, CIO- Private Credit, Kotak AMC.

 

The returns generated by private credit funds range between 13 per cent and 16 per cent, he added. 

 

Earlier this year, Aditya Birla Sun Life Asset Management Company (ABSL AMC) announced its Rs 2,500 crore performing credit fund, the first close for which will be done by early next year. Several other fund houses have also launched funds in the credit risk category.

 

AIFs have witnessed rising interest from ultra-high net worth individuals (UHNIs) and Indian family offices from Tier-II cities with commitments crossing Rs 12 trillion.

 

“We have witnessed the significant rise of private credit on a global scale. We find acceptance and need of strategies like performing credit in domestic markets--both in terms of acting as solution capital while providing investment opportunities to domestic investors,” added Tripathi.

 

A report last year by Praxis, along with the AIF association Indian Venture and Alternate Capital Association (IVCA), estimated the private credit AUM in India to reach $60-70 billion by 2028.

 

The report added that the average deal size in 2023 stood at around $80 million, up from $33 million in 2022. In the first half of 2023, over $5.1 billion was deployed through private credit funds. 

(Disclosure: Entities controlled by the Kotak family have a significant holding in Business Standard Pvt )