INDIA Trends and Developments Contributed by: Tirthankar Datta, JSA Advocates & Solicitors
2002 (SARFAESI Act) was enacted as a quicker and more efficient mode of enforcing security interests without requiring the intervention of a court. The SARFAESI Act security enforce - ment mechanism involves taking constructive possession of usually hard assets provided as a security and selling them through an auction process. The SARFAESI Act is only available to listed NCDs. While many private credit deals are structured as NCDs listed on a recognised stock exchange in India, a large number of NCD issu - ances are unlisted, to make it easier for issuers to execute due to lower compliance and disclo - sure requirements. While IBC has improved the resolution of stressed assets, the average time taken for completion of the process has increased substantially, to 571 days from the statutorily contemplated timeline of 180 days. There is still a substantial amount of litigation involving various interpretations of IBC provisions. The haircuts to lenders in insolvency are also substantial. For the next stage of growth of private credit, the framework for the enforcement of security interest needs to be made speedier, and the insolvency resolution process may also need to be tweaked in order to reduce delays and make it more value accretive. Recent prominent private credit deals In 2023, the private credit space was dominated by a few mega-deals, including Shapoorji Pal - lonji group raising funds from a clutch of private credit funds on the back of its shareholding in the Tata group (which was fraught with contro - versy). From public sources, the following key deals may also be noted: • the Reliance group raised more than USD600 million through its logistics and warehousing
group company to fund the refinancing of its debts; • GMR Airports Limited (which operates mul - tiple airports in India) availed a private credit financing aggregating to USD271 million; • the promoter of Matrix Pharma Private Limited took private credit financing for the acquisition of the API business of Viatris Inc; • Manipal Healthcare availed private credit financing from a leading wealth manager and private credit financier; • the proposed financing of the acquisition of Reliance Capital by the Hinduja group is being financed by a number of private credit funds; • Adani Green Energy has taken the private credit route through listed NCDs to fund its ambitious renewable energy target; and • Vedanta group entities have been very active in the debt market, raising private credit in India as part of their liability management exercise. The real estate sector saw the highest market share of private credit deals, followed by infra - structure and manufacturing. Trends for the future of private credit Move from high-yield to performing credit Traditionally, private credit deals have been seen as high-yield, which would have internal rate of return requirements of 18–24% (many times structured as a smaller upfront cash cou - pon, with the majority of it back-ended to a PIK return). This has been criticised by many as pro - moting unsustainable debt. The counterpoint to the private credit funds has been that they were funding a company from a down cycle to an up cycle, and would inevitably be replaced by cheaper financings as the balance sheet of a stressed company recovers and profit margins increase. At times, the high-cost debt may be
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