INDIA Trends and Developments Contributed by: Anuja Tiwari, Mallika Anand, Pranjal Bhattacharya and Antra Shourya, AZB & Partners
Private debt − a potential structuring option Private debt is a relatively new trend in alternative investments and refers to the provision of debt financ- ing to companies by a fund or a non-banking entity not ordinarily in the business of capital lending (private equity firms, hedge funds, or other institutional inves- tors), rather than by traditional banks. These loans are typically provided to private companies or projects that may not have access to public markets. Private credit can include direct lending, distressed debt, or mezzanine financing, and it often offers higher returns compared to traditional bank loans or bonds. Private debt, as a financing option, expanded rapidly after the “global financial crisis” when the financial institutions exited from leveraged lending and con- centrated their corporate operations on larger clients. The funding gap created in the market was filled by private debt funds. The debt provided in such structures is in the form of debentures or other debt-based instruments, which are often secured through a pledge of shares or assets of the company and/or its promoters. The redemp- tion premium of the debt-based instruments that are available to the lenders may be linked to identified performance indicators or targets (eg, achievement of financial targets by the company). The benefits of availing private debt are: • it provides lenders with the upside protection of equity (ie, conversion and appreciation charac- teristics built in the instrument) and the downside protection of debt (by way of a pledge or security); and • immediate availability of financial assistance to companies without any dilution, at times when retention of control may be essential. In recent times, private debt has emerged as one of the most viable structuring options adopted by com- panies and is being explored by seasoned investors of varying scale. In the context of the energy and infra- structure sectors, which are capital-intensive with high gestation periods, private credit provides the investors with more control over risk management, as repay- ment schedules and financing terms can be appropri- ately tailored based on the investor’s risk appetite and
the company or the asset’s risk profile. India’s robust insolvency framework has also contributed towards investor confidence and the growth of private credit. As of March 2025, India’s private credit market is esti- mated to have assets under management of USD25 billion to USD30 billion, representing about 0.6% of India’s GDP (according to S&P Global) and is expect- ed to reach USD60 billion by 2028 (according to Busi- ness Line). Thus, funding of energy and infrastructure sectors through private debt funding will continue to grow in India, with a key focus on the security pack- age, redemption events and favourable coupon rates available to the investors. Infrastructure investment trusts Recently, India has witnessed a tremendous growth in infrastructure investment trusts (“InvITs”) as an invest- ment vehicle in the infrastructure sector. In 2025, there were 27 InvITs registered in India, with a total assets under management (AUM) of USD73 billion. Projec- tions indicate that the total AUM could reach USD258 billion by 2030. In view of the expected decline in interest rates, the introduction of tax incentives, and a more flexibleinvestment regime, fund mobilisation by the InvITs looks increasingly promising for large- scale infrastructure projects (according to the Eco- nomic Times and Knight-Frank India). With an increase in e-commerce, digitalisation and data localisation in India, it is expected that various warehouse-focused and data-centre-focused InvITs may be constituted, especially after the recent clas- sification of data centres as infrastructure. As the portfolio of InvITs diversifies into non-traditional asset classes, potential for the green and sustainable urban expansion of India’s infrastructure is unlocked in the process. Warranty and indemnity insurance India has witnessed an increasing trend, particularly in energy and infrastructure deals, whereby sellers or exiting investors either seek non-recourse or limited recourse deal – ie, post-acquisition, the buyer has limited recourse to the seller. In this context, warranty and indemnity (“W&I”) insurance has emerged as a favourable option in the Indian M&A framework.
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