INDIA Trends and Developments Contributed by: Tirthankar Datta, JSA Advocates & Solicitors
a bridge financing to an equity round, IPO or a longer term cheaper financing. However, more recently there has been a push towards “per - forming” private credit funds. Push towards a deeper debt capital markets and development of a liquid market for secondaries The deep corporate bond market is an important alternative to traditional bank financing. Indian banks, NBFCs and public sector undertakings dominate Indian bond issuances by size, with NABARD, REC, HDFC, PFC and SIDBI being major issuers. India’s securities regulator has been pushing towards a deeper listed corporate bond mar - ket. A number of regulatory changes have been made, including an amendment to the SEBI (Listing Obligations and Disclosure Requirement) Regulation, 2015 (LODR Regulations) which mandates that, on and after 1 January 2024, if an entity has any listed NCDs outstanding or issues any listed NCDs, then all other issuances after 1 January 2024 also need to be listed. The entity will not have the option of issuing NCDs that are unlisted. While NCD issuances to private credit funds and even higher rated issuers who issue to market participants such as mutual funds have signifi - cantly deepened the debt capital markets, the wholesale debt market needs more liquidity for easier price discovery in the market for syndica - tion of debt. The secondary trading market in stressed debt is still considered illiquid, and is dominated by asset reconstruction companies. There is an opportunity for private credit funds to find value in picking up distressed debt with a solid underlying security package of real assets in a sector undergoing an up cycle.
The meteoric rise of the IFSC at GIFT City The IFSC at GIFT City has seen a rebirth from the ashes, with a plethora of new regulations. The tax benefits available at the IFSC at GIFT City and greater regulatory and operational flexibility in view of foreign exchange control regulations not being applicable to IFSCs are resulting in many fund houses considering a move of their offshore India-focused credit funds to be set up as AIFs in GIFT City and their portfolio hold - ings being transferred to such funds. This trend is a great opportunity to promote a flourishing ecosystem of financial services providers and products within India, and would push India to become a bigger financial services hub. Significant future opportunity for longer tenor financings A lot of private credit deals are currently for more short-term maturities. There is a require - ment for longer tenor financings, especially for commercial real estate lease-backed assets or infrastructure assets where long-term cash flows need to be discounted. Therefore, private credit deals of longer tenor maturities of seven to 20 years would be beneficial to the needs of the infrastructure sector. However, a shorter fund life may pose a hurdle for such requirements. Insurance companies, sovereign funds and other asset managers that manage longer tenor funds are well placed to provide the long tenor financings that are preva - lent in more developed jurisdictions. The future may also see private credit expand to a broader array of asset classes and sectors. Use of technology and AI in credit processes Many private credit funds are rethinking tradi - tional processes in the lending business. They are looking at leverage technology to obtain a cost and speed advantage vis-à-vis traditional
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