Private Credit Surge: USD 10 Billion Mark Projected for 2024

Private credit deployments are expected to exceed USD 10 billion in 2024. A report highlights over USD 6 billion in private credit deals in the first half of 2023, with notable transactions across real estate, infrastructure, and healthcare. Domestic funds are increasingly influential in this space.

Private credit deployments are finally expected to surpass the USD 10 billion mark in 2024, according to a report by a consultancy firm on Wednesday.

Between January and June, private credit transactions reached over USD 6 billion across 96 deals. Over the last two-and-a-half years, more than USD 20 billion has been channeled to meet the credit needs of Indian companies through this emerging alternative.

Significant transactions were observed in the real estate, infrastructure, and healthcare sectors during the first half of the year, according to the report by EY.

Domestic funds are becoming more prominent, leveraging local expertise and the advantage of lower-cost domestic capital. Their market share in the private credit sector is on the rise.

The first half of the year saw companies like Reliance Logistics and Warehousing, Vedanta Semiconductors, and Matrix Pharma collectively raising around USD 1.3 billion. The real estate sector remained a key area of focus, with active borrowers such as Prestige Group, Puravankara Group, Kalpataru Group, and Shapoorji Group.

According to the firm's partner Bharat Gupta, private credit investments have reached an all-time high, primarily driven by growth-focused strategies.

'The outlook is promising, although thorough due diligence and effective deal oversight are crucial for maximizing returns and managing potential risks,' Gupta added.

With system maturity, there is a shift towards performing credit deals in India, with funds increasingly engaging in sub-18% Internal Rate of Return transactions, the report noted.

In the high-yield segment, mergers and acquisitions/buyout deals, and bridge-to-initial public offering transactions are gaining traction in private credit funding.

High-net-worth investors and family offices are increasingly viewing private credit as a key asset class, boosting the popularity of domestic funds.