India's Private Credit Market Surges with USD 6 Billion Investments in H1 2024: EY Report

India's private credit market has shown significant growth, achieving USD 6 billion in investments during the first half of 2024. The market's vitality is indicated by its performance outpacing 2023's figures. Key sectors driving this growth include real estate and manufacturing, with optimistic projections for the upcoming year.

India's private credit market demonstrated robust growth in the first half of 2024, with total investments reaching USD 6 billion, an EY report reveals. This performance underscores the market's vitality, significantly outpacing the USD 8.6 billion invested across the entire year of 2023.

The momentum seen in H1 2024 has already surpassed last year's deal flow, reflecting rising interest and activity in the private credit sector. The data, excluding smaller deals under USD 10 million and offshore credit raises, would see an addition of at least USD 174 million and USD 1.9 billion respectively when such transactions from public sources are considered.

H1 2024 observed private credit deals totaling USD 6 billion, slightly trailing behind 2023's USD 8.6 billion but exceeding the USD 5.9 billion recorded in 2022. Global funds contributed 53 per cent of these investments in H1 2024, a decrease from 63 per cent over the last two years, allowing domestic funds to expand their market presence and diversify the investor base. Noteworthy deals included USD 697 million raised by Reliance Logistics and Warehousing, USD 301 million by Vedanta Semiconductors, USD 293 million by Matrix Pharma, and USD 271 million by GMR Airports, highlighting the sector's demand in high-growth areas.

Around 60 per cent of respondents identified real estate and manufacturing as sectors attracting substantial deal flow, consistent with previous surveys. Capital expenditure remained a primary driver for private credit demand, with 50 per cent of fund managers projecting Capex-related investments to lead the market over the next 12 to 24 months.

Fund managers remain optimistic about the future, with 58 per cent expecting private credit investment activity to range between USD 5 billion and USD 10 billion in the coming year. This optimism is fueled by steady credit demand in real estate, manufacturing, and other capital-intensive industries.

Nevertheless, potential risks loom. The Reserve Bank of India has raised concerns regarding the increasing interconnectedness between private credit, banks, and non-banking financial companies, and the growing complexity within deal structures.

(With inputs from agencies.)