ASIA-PACIFIC-WIDE Trends and Developments Contributed by: Anand Shah, Suharsh Sinha, Ishan Handa and Saloni Thakkar, AZB & Partners
The RBI has also issued draft updated guidelines to facilitate the securitisation and direct assignment of loan exposures, enabling private credit funds to par - ticipate more actively in the secondary market for dis - tressed and performing assets. Key trends • Domestic funds are leading in deal participation (by number), but global funds continued to drive value. • There is active credit participation from mutual funds, NBFCs, retail investors, and foreign banks. (a) The EY Report highlighted a convergence in credit appetite across several large trans - actions in H1 2025. Vedanta Limited raised USD884 million from a wide base of lend - ers – mutual funds (USD480 million), NBFCs (USD174 million), foreign banks (USD162 million), insurance companies (USD33 million), and an Indian bank (USD35 million). Similarly, L&T mobilised USD334 million from mutual funds, JSquare Electrical Steel Nashik Private Limited raised USD302 million from foreign banks, GMR Airports Limited secured USD174 million largely from foreign banks with some NBFC participation, while Renserv Global Pri - vate Limited raised USD118 million from mutual funds, USD29 million from a bank, and USD12 million from NBFCs. (b) The domestic investor base has widened in recent years with the rise of high net worth individuals and family offices seeking diversi - fication and chasing yield. Large family offices globally and in India have 15% to 25% of their portfolios in alternative investments, of which 25% to 30% goes into private credit solutions, according to Julius Bäer’s report “The Indian Family Office Playbook.” (c) The EY Report theorises that Indian family office assets are set for exceptional growth, un - derpinned by India’s anticipated position as the global leader in ultra high net worth individual growth, with the number expected to rise by 50.1% to nearly 20,000 by 2028. India could account for as much as 30% of private credit fundraising in APAC by 2025, with annual deal flow potentially reaching USD10 billion.
• The share of the conventional lending industry in the overall credit is declining with greater focus on retail portfolios. (a) Some regulations in India have pushed borrow - ers outside the traditional bank lending sphere and towards alternative funding sources. In the real estate sector, the RBI restricts bank lend - ing to private developers for the acquisition of land, even as part of housing projects. Conse - quently, real estate-related transactions now dominate India’s private credit sector, account - ing for more than a third of the total transaction value. (b) A report by PwC theorises that one of the fac - tors driving growth could be the continued risk aversion of the banking sector, as evidenced by the decline in risk weighted asset density due to limited lending to lower-rated entities. The ratio of risk weighted assets to total assets for banks declined for banks from 74% to 58% over a ten-year period (as of December 2023). This could point to an opportunity for alterna - tive lenders to step in and lend to lower-rated corporates and mid-corporate borrowers, as well as manage capital market exposures and high-risk weight exposures. (c) Indian banks are not permitted to advance funds to firms seeking equity stakes in acquisi - tion targets. This has created a void in financ - ing that private credit has filled, and about 35% of private credit deals are M&A-related, accord - ing to PwC research. • The IBC has emerged as the leading route for recovery, accounting for 48% of total bank recov - eries in FY 2023–24. • Mismatch of demand and supply: competition with other forms of capital has intensified as equity market valuations have provided issuers with a cheaper alternative. Today, borrowers have options including wholesale lenders, foreign banks, mutual funds and finance companies that focus on struc - tured credit. Invariably, that has put demand for private credit and its yields under pressure, which in turn has led to an uptick in covenant-lite trans - actions.
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