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India’s private credit market is moving from IBC-era rescue finance to a broader asset class. Performing credit is hot, but complexity-driven capital remains scarce and potentially higher alpha.
InCred Alternatives’ Ankur Jain, who is a managing director for private credit strategies, tells 9fin APAC reporter Rajhkumar Shaaw about a market that is still only about $25bn-$30bn in AUM, or 0.6% of GDP, but growing at roughly 25% CAGR.
Jain also unpacks India’s private credit boom, why global macro has had limited impact on India-focused borrowers, and how domestic funds and wealth-market co-investments are increasingly challenging foreign investors.
Have any feedback for us? Send us a note at podcast@9fin.com. Thanks for listening!
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**Rajhkumar Shaaw**
Hi everyone and welcome back to yet another Asia edition of the *Cloud* *9fin* podcast. I am Rajhkumar Shaaw and I cover the credit market for *9fin* in Asia. Private credit has gone from being this niche corner of the market to something everyone suddenly has a view on. We write about new deals, refinancing, structured solutions and promoter financing across Asia every week.
And every time we talk to investors in the region, India is always cited as a key market. However, the Indian private credit market is fairly small in absolute terms. The private credit market in India today is roughly 0.6% of the GDP with assets under management of about $25bn to $30bn and that is barely 1% of the total bank credit.
However, on the positive side, the growth is very impressive. Industry reports put the expansion at about 25% compounded annually. So today, we are going to dig into what is actually happening on the ground in the Indian private credit market space. And joining me today is Mr. Ankur Jain, Managing Director for Private Credit Strategies at **InCred** **Alternatives**. Ankur has spent nearly two decades across alternatives, private equity, consulting and of course private credit. His career includes time at **KKR**, **Edelweiss** and **Alvarez** **&** **Marsal**. Ankur, welcome to the podcast.
**Ankur Jain**
Thank you Raj, thank you for having me here.
**Rajhkumar Shaaw**
Great. So Ankur, let's start with the big picture first. Everyone says India is one of the busiest private credit markets in Asia right now. And from where you are sitting, what has really changed in India over the last three to five years that has got us here?
**Ankur Jain**
Thank you. I think it's a fit question to start this conversation. And yeah, from my vantage, if I look at it, what I'm seeing in the last three to five years is a significant step change in this industry. Why am I using this word step change? Borrowers' sophistication is increasing. Point number one. Second, a significant pullback of traditional financing sources is also happening. And third vector, which is institutionalization of Indian wealth. These are the three things which are happening in the last three and five years, which is shaping the way Indian private credit industry is currently formed.
Let's take one by one each. Point number one, borrower sophistication. Earlier, borrowers had, or Indian borrowers or Indian corporates. I'm using the word borrower interchangeably for Indian corporates. But Indian corporates initially used to have only two binary ways of taking financing. Raise equity, raise bank debt. Nothing in between. What private credit is providing them is a tool to explore financings which are more flexible, non-dilutive and not choosing either of these options. So, borrower sophistication is increasing.
Point two, as Indian economy is growing, corporate's need for financing is increasing. I think banks are going the other way. Totally different direction. If you look at the number, 2024, banking credit grew at a clip of 17% to 18%. In 2025, that number was literally half, not half, but maybe 10% to 11%. So while Indian GDP didn't stop growing, Indian GDP is continuing marching ahead and Indian corporate's need for financing is also increasing. So who is bringing that capital and filling that gap? That's private credit. So the formal financing channel is cooling off and private credit industry bearing that load is the second factor.
And the third factor is, what is Indian private credit comprised of? If you look at some latest numbers, you will realize 50% of financing being done in any typical year is coming from domestic private credit. This private credit industry load bearing is literally being done by domestic capital. Be it HNIs, regular HNIs, UHNIs, family offices. Formalization of this kind of capital into a fund structure and then expressing their investment strategy in the form of a private credit is a third vector which is resulting into Indian private credit industry in the last three to five years leapfrogging and showing kind of growth rate which you just mentioned which is 25% CAGR. I think these are the few factors which are currently playing out in Indian private credit industry in the last three to five years pretty noteworthy.
**Rajhkumar Shaaw**
Right. Fair enough. Good point, Ankur. But tell me that when you look at the opportunity so where exactly are the most interesting deals happening? Is it still promoter financing, structured capital or are you seeing more of a special situation, rescue deals or some event-driven trades? So where exactly are the most interesting deals happening?
**Ankur Jain**
Raj, while in last three to five years and I'm going to link it to our previous discussion and then bring it to this question. I think last three and five years as private credit industry is maturing, is growing. It's also forking into two separate vectors. One is plain vanilla performing credit. And second is complexity driven capital. A lot of, a lot of us use terms like special situation, distress capital, but a catch all term that I would want to use here on is complexity driven capital. Someone who is giving solution for some complexity, which needs a solution.
So the private credit industry in last three to five years, in addition to maturing is also forking out into being a private performing credit strategy or into a complexity driven strategy. What am I seeing? What I'm seeing is a lot of capital, a lot of new fund raising, a lot of new fund deployment on the domestic side is happening on the performing credit side, while complexity driven capital is still scarce. So now if you ask me, where are the interesting deal happening? I would say plain vanilla transactions are a lot, which is performing credit, but complexity driven capital is where a lot of interesting things are happening. There is a real alpha to be made. Only few players and international capital is available to cater to that kind of a demand but a lot of interesting things are happening in that specific sub-segments within the private credit.
**Rajhkumar Shaaw**
So for the benefit of our listeners, can you give us one or two examples without taking names of course of some specific examples where these companies have come to you for financing rather than going to the formal banking channel.
**Ankur Jain**
Yeah, absolutely. And I will give you examples on both these sites which is plain vanilla transactions both performing and complexity driven let's call it special situation. Both of these examples are hypothetical but very representative of the situation.
Look at the public side. A good company, healthy company, mid market company, let's call it 500 to 1000 crores top line company profitable, engaged into manufacturing as senior security lender sitting on the debt stack of that company that company wants to go and acquire another company. A mid-segment M&A still cannot be financed by the banking system. The reason why I'm specifically taking this representative example is because a lot of your viewers would know that recently, M&A financing has been made as been allowed by **RBI**. So that's a reason specifically using that representative. It's a welcome step. But again, M&A financing of mid segment is still not a purview, not a focus area for Indian banks.
**Rajhkumar Shaaw**
True.
**Ankur Jain**
So if this company, this typical company of 500 to 1,000 crores of the topline wants to go and acquire another of its competitor or a company which is is right around the corner in the vicinity, who would provide financing? So, very, very, very typical bread and butter business for performing credit in India. So, our representative example is mid-segment M&A financing. If this borrower goes to a bank, it would be turned away. If this borrower goes to tap into the bond market, it's not applicable because the bond market in India is non-existent.
So, I'm now coming to the second example, which is a complexity driven capital. Think of an operating solar power plant, which has 25 year PPA, 20 years of that is still outstanding, running brilliantly, no receivable issues, nothing. So the asset is very good, but sitting on a parent's balance sheet which is correctly distressed. You want to go and acquire that asset. So what you can do is either you can express this complexity driven capital by strategy by just providing an acquisition financing of an asset or maybe providing a resolution of this entire entity under and NCLT or OTS process (one time settlement process). Both of these ways, you can unlock the situation which is a good asset on a bad balance sheet. Again, a hypothetical but a very representative example of what is going on in either of these two vectors or substrategies of performing credit.
Now think of this situation.I want to make an overlaying point here which is... A lot of people actually say what should be the delta between either a performing credit or a special situation credit versus a senior debt? I don't think a borrower thinks about it like that.The way a borrower thinks about this is the amount of extra premium that I'm giving is not over senior debt pricing, but over equity dilution pricing. Which is, if I were to dilute my equity, what is my cost of equity? Performing credit or complexity credit is always delta over the dilution cost of equity. And that's the way the borrower thinks about it.
And I'm telling you in the last three to five years, Indian borrowers have become smart. They understand it totally. And that is a reason why a lot of volume is being created where borrowers are willing to take on this kind of financing because versus equity dilution cost, this is far, far, far cheaper.
**Rajhkumar Shaaw**
Right. Yeah, I think these are great examples. Ankur, let me take you back to 10 years ago when the Insolvency and Bankruptcy Code was introduced. I think we are completing a decade of that IBC code. Due to the IBC code there was a lot of demand for private credit because some of the companies whether they were going into resolution they wanted to do an OTS (one time settlement) of the debt or there was a or somebody wanted to acquire a company from the distress company out of insolvency so that drove the private credit market growth a lot during those years and now that most of the cases have been solved the non-performing asset as a percentage of the total banking debt has come down to less than 1%. Do you think that is a factor that previously contributed to the growth of private credit but now it's not there?
**Ankur Jain**
Yeah, so the way I would articulate this let's say a growth pattern of private credit in India is back in the 2017-18 vintage, Indian private credit was a monoline business. One trick only. A handful of international funds, a handful of domestic funds were active and were providing only complexity driven capital. So that's it. That's about it.
In the last three to five years, our monoline business or monoline private credit industry has diversified into a multiple line private credit industry. Where there is in addition to just special situations or complexity driven capital also has various layers of performing credit, venture debt. So the lines or the kind of solution which a private credit industry can provide has now grown not to rescue finance only, but to provide plain vanilla structured financing capital, which is saving dilution for the promoter.
I think coming back to the point of which we have been talking is the maturity of this ecosystem. The hallmark of a mature ecosystem is that you can provide capital across the spectrum of what a corporate would require. If they require growth capital, yes, you can get that from private credit solutions. If they require rescue capital, they can get that from private credit solutions. So that dimension has expanded. And again, if you want to expand it from the time IBC happened till now, there are no longer situations where there were only one or two domestic guys in and around BKC who could have provided capital. And only people who were in dire need of capital as of yesterday would go to them and ask for capital. Now a healthy borrower also for the structured capital requirement now can come and see capital from our private credit ecosystem. So this is what has changed since 2016-17 when only one end or very small subsegment of the private credit industry was kind of because of a regulatory push expanded disproportionately. Now other pillars of private credit have also emerged in the country and are also growing in a very, very healthy manner.
**Rajhkumar Shaaw**
So let us change gears a bit. And I want to zoom out to the macro for a moment from the micro we have been talking about. And there have been a lot of things that are happening globally from geopolitics to energy markets and to questions around trade flows. How much of this is all showing up in the Indian private credit market space, if at all?
**Ankur Jain**
Actually, I would say, Raj, I mean, I get this question a lot. But we at **InCred** also manage domestic money and our investors also keep on benchmarking versus what is happening outside in terms of macro and does it have a translation effect into India? I would say not a lot. So not a lot of global macro is impacting the private credit industry because the Indian private credit industry is based on domestic facing consumer demand focused businesses and their capital requirement. I would, if I were to hazard a guess, say a very small portion of our private credit industry has been exposed to businesses, which are truly global. A lot of their businesses are actually outward looking and there are our industries focused on or exposed to.
In fact, I would say a majority of our borrowers are actually very, very, very inward focused Indian domestic, Indian GDP growth dependent businesses. That is a reason why we are not seeing a lot of that volatility translating into any kind of a margin compression, working capital stretch, any kind of borrowed behavior change in any of our portfolio companies. Think of a situation like, I mean, who are we financing? We are financing a typical solar developer, solar power project developer, a rooftop solar power developer or a module manufacturer who is not impacted with what is happening in Hormuz or extension of the Iran war. Similarly, a diagnostic chain, a hospital owner, I don't think is impacted. So again, suffice to say, and I'm hazarding a guess because we look at our portfolio and we're not seeing any macro volatility impacting Indian borrowers and hence private credit.
**Rajhkumar Shaaw**
So how do you describe the mood right now? Does the market feel hot, cautious or it is somewhere in between?
**Ankur Jain**
I would say actually, I will give you both the answers. Hot and not hot. Look at the same analogy which I use, which is plain vanilla performing credit, complexity driven capital. Plain vanilla performing credit market is hot. A lot of money is flowing in. A lot of new players are coming in. That is resulting in price compression. Covenant loosening stuff. Complexity, very few players still exist. As a result of which there is a real alpha to be made. So the point that I'm making is to answer your question. The market is hot. One segment of the market. The market is very, very from a demand supply gap perspective, very, very attractive on the other segment, which is complexity driven.
**Rajhkumar Shaaw**
So are you noticing any change in behavior either from the LPs or from the fundraising side or from borrowers? Are they thinking about leverage, tenors and covenants?
**Ankur Jain**
Yeah, so borrowers. So let me start with LPs. I have been observing Indian capital coming in hordes in this capital formation activity, which is pooling their money into this sophisticated fund structure and using that money towards either private equity or private credit. So that trend I've been seeing and I believe that it is going to continue to expand. Same thing, domestic institutional capital also. We are seeing slowly, slowly, small signs of domestic, domestic institutional capital finding favors in these AIF structures or these private credit or private equity structures.
International capital is still, I would say is, is, is a bit soft in terms of, in terms of these trends. I think it's more because of the forex issues that India is facing currency depreciation, relative value. Sometimes, I mean, some people would believe that their home countries or countries would have better investment opportunities as compared to investing into India, emerging markets like India. So I think from the LP mood standpoint, domestic capital is a way to go. Domestic capital is coming in hordes and that trend will continue.
Coming to the borrower behavior, borrowers are maturing. They are utilizing this form of capital for their business needs and understanding what this kind of capital has the value of addition into their business or in their capital structure, which also means that they're getting smarter. They will play one versus another. They're negotiating a lot. They're negotiating on the tenors, on the security package, covenants, all of the pricing, all of that. That's the reason why I'm saying performing credit is a space where I think the alpha is reducing with increasing number of players coming in. On the complexity side, because the players are lesser and the demand is real, I don't think so there is any alpha compression.
**Rajhkumar Shaaw**
So as you said, with hordes of capital coming into the market. But with that, is the return the same because that is where all the competition lies? Or is this too much money coming into the market, chasing a few deals that have started to bite into the spreads and also the loosening of the terms or the covenants?
**Ankur Jain**
Raj, I will answer it in two ways. I have kind of answered the first question which is definitely alpha is reducing on the performing credit side. But does that mean that credit quality is deteriorating? I don't think the answer is yes. Because let's say if the right price of that debt or that deal should be 15% if but if it is getting priced at 14% underline credit quality continues to remain robust. If it was lendable at 15% it is lendable at 14% also. So yeah, yields are compressing not necessarily that means that we are doing bad deals as an industry. So the performing credit side may be the answer is, is, yeah, our little bit of mispricing is happening or coverage loosening is happening, but the credit quality continues to remain robust. We're not going to see any bad deals happening. Yeah, maybe at a suboptimal pricing, but that's about it.
But there is a degree of caution which I want to state here. Mispricing is not necessarily resulting into credit quality impact. Fine. But you can't be pricing a risk in such a manner where you are optimizing everything. What do I mean when I say that? See, when you take secure positions in loads or in credit, your inherent assumption is the security has a specific value and that asset is monetizable. So you take both these views simultaneously. If I'm pricing my credit or debt transaction at let's say 15% IRR. For this 15% pricing, I'm assuming a risk where this asset has 2x3x4x of value against which I have lent it and also in a default situation this asset still realize its value and give me money on a very speedy manner.
The latter point I don't think holds in India still. NCLT or IBC is still a process which has not established a timeframe as to how much time it takes in terms of recovering money. So in performing credit situations where pricing are getting compressed, I think the mispricing is happening with respect to the calculation with respect to when the asset can get realized. The reason why making this point is because our industry has not seen a default cycle. So all these points will get established once a proper default cycle and a recovery cycle will come and then we'll get to know whether performing credit is or as an industry as a whole is understanding is this the right price for that. Having said that I don't think so we are I mean there is a credit cycle which is upcoming because because fundamentally borrowers in India are under leveraged, balance sheets are good, borrower DNA has been good.
But still, I just wanted to paint this point of caution, which is mispricing also means they are taking a very aggressive view with respect to realization and realization at a time.
**Rajhkumar Shaaw**
No fair point. Let me turn the conversation to something else now. So in the last one year or maybe 18 months, the private equity market has clearly become more selective. IPOs are not very straightforward to do at the moment. The QIPs are patchy and the valuations are not what the promoters would have kept in mind. So are you seeing those companies who might have raised equity maybe in good times, are they coming to the private credit market? Are they exploring structured capital or maybe plain vanilla private credit for their growth?
**Ankur Jain**
Yeah, we are seeing a lot of such situations coming where promoters are having conversations with us saying, yeah, I need equity. I know that. But right now is not the right time to actually price my equity and dilute myself. So the point which I made earlier in the conversation, which is private credit priced versus relative to price of equity or cost of dilution. So a lot of such conversations are currently happening where either there is a stalled IPO situation or there is a voluntary delay on the part of the promoter or the sponsor saying that I do not want to go into public markets and raise equity right now.
So a lot of such conversations are currently going on and actually we love such situations quite frankly because these are fundamentally very solid companies who are just stuck in a timing mismatch of capital market event. So the view that you have to form is when will capital markets get unlocked and at that point of time on a conservative basis what is the variation of this equity that you are leveraging. So as I said, having multiple such conversations and we love such situations.
**Rajhkumar Shaaw**
Ankur, when I talk to the international private credit funds who are operating in India, or maybe they are based out of Singapore or Hong Kong, they say there are a lack of meaningful, large size, large ticket private credit deals in India right now. And on the other side, you are saying the market is flush and there's a 25% CAGR growth for the next few years. So how do we explain both of these to our listeners?
**Ankur Jain**
Yeah, we had this conversation multiple times in the past. And I again want to put it on record, I fundamentally think after spending so much time in this industry, the belly of the Indian private credit market is smaller-sized transactions. Anyone who is building a business basis, large size transactions in India, I think they're not building a scalable, sustainable private credit franchise in India. I think the scalable, sustainable private credit franchise in India can only be built over a thesis that you are targeting at 200 to 300 crore transactions. Let's call it 20 to 30 million dollar transaction size on a median basis. That’s the belly of the market where a large volume of transaction happens. If you're in that segment, you're always busy.
If you're in a segment where you're only targeting a $100m, $200m transaction, a very senior industry colleague of mine at some point of time in a public forum said, then they are classified as or they would be called as suitcase investors. So yeah, then you are targeting a very small sliver of this entire market opportunity. Yeah, if you're happy with doing one transaction, two transitions in a year or three transitions in two years, yeah, that's a business model that you are in. But if you want to remain busy, you want to profitably deploy capital in India, that's the belly of the market that you have to come.
**Rajhkumar Shaaw**
Yeah, that's a great term - suitcase investors.
**Ankur Jain**
Yeah, and I'm again giving credit to one of our very senior industry colleagues who actually coined this term and said it a public forum.
**Rajhkumar Shaaw**
Okay. Now, finally, is there any particular risk do you think that is being underpriced? Or is there any assumption that a lot of people are making now that could be challenged if the cycle turns or the liquidity tight ends? What is the risk?
**Ankur Jain**
Performing credit investors in India are currently not pricing realization of security value or timeline of realization of security value in their calculations when they are undercutting each other and pricing deals lower just to win the deal. I think that's a big risk which people are not factoring in when they are pricing their transaction. How do you price a transaction Raj? Think about it. I mean, on a very layman basis, let's not go very technical, but let's say if a company comes to you, how do you price that loan? How do you say, what is that magic formula which says 13% plus because of this variable plus because of that variable, right?
I mean, at the end of the day, credit is a very look and feel gut feeling. How do you price that risk? A lot of these gut feelings, I would say you get, you assign some of these numbers basis what's your view with respect to value, what's your view with respect to what can go wrong and probability assessment of that. I think that factor is missing when people are competing with each other on the performing credit at least. So I think overwhelmingly, I believe people are underpricing or underestimating what if things go wrong, how much time will they take to revive this? And I think it's a very typical highly hyper competitive time within an industry. I think performing credit is currently going through that.
**Rajhkumar Shaaw**
Also, have you seen instances of deals where international investors have been undercut by domestic private credit investors?
**Ankur Jain**
Oh, many, many, many times. What is also happening, Raj, I must tell you, in addition to domestic funds increasing, there is a lot of co-investment retail participation, which is currently going on on a direct deals basis. So think about a situation where a performing credit fund, domestic performing credit fund can do only 200 crore transactions, but the transaction size is 500 crores. What they will do is do 200 crore in their fund, remaining 300 crores they will distribute in the wealth market. Combination of funds, hold position, plus an appetite within the Indian retail industry or Indian wealth industry to have direct access to the deal is resulting into a combination, which is a serious, serious competition for foreign investors.
What is a foreign investor's real, I would say, calling card? What is the right to win in this industry? What is, let's say, a very, very large Singapore-based fund calling card to win in Indian private credit. It is the size. We also as domestic fund managers also understand complexity. We also understand what to do diligence upon. We also can structure the transaction. It's just that we couldn't have provided sizable solutions, capital solutions to some of the borrowers back in the days. Now between a combination of our own ever-growing larger fund sizes and our ability to structure a transaction where we can get co-investors in. We are giving a serious competition to these foreign investors.
**Rajhkumar Shaaw**
Wow that's very interesting Ankur that's I think that's all the questions I had for you. Is there anything I may have missed or you want to tell our listeners?
**Ankur Jain**
Only point that I'm making is I mean this is this industry is just growing into a very exciting asset not only from the borrower standpoint which we discussed threadbare during the last 30-35 minutes of conversation but also think about it from investors perspective who are investing into this this is not just any other exotic asset class where you should be taking exposure into I yeah I have some net worth. I have some money to be parked. Let me try out this product. This is not that phenomenon.
I think it's a proper asset class, which has proven its worth in the last many, many years of track record, which our industry has built. And it's a serious portfolio allocation asset class, which people should be applying their mind to and allocating their capital towards. Less volatile, predictable, not prone to so much of drawdown, which equity capital is prone to and can give you very predictable and sustainable returns. So the only point that I'm making is also that from an investor standpoint, putting money into these funds is an asset class which is proven, predictable and needs a serious allocation in your portfolio.
**Rajhkumar Shaaw**
And do you think this 25% CAGR which we have seen in the last few years will continue for the time being?
**Ankur Jain**
I think it will continue. If the current equity market volatility remains the way it is I think the growth rate can in fact increase only because a lot of volume with a lot of capital which gets raised in the capital markets will also move towards private credit. So if the current market equity market situations continue I think I won't be surprised if the 25% actually increases to 30%.
**Rajhkumar Shaaw**
Wow. With that, thank you Ankur so much. It was a very insightful conversation and I hope our listeners have also enjoyed it a lot. Thank you so much for taking your time out.
**Ankur Jain**
I also enjoyed our conversation, thank you for organizing. Bye.
**Rajhkumar Shaaw**
Thank you. Bye.