AIF / Performing Credit an alternative to NBFC funding
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AIF / Performing Credit an alternative to NBFC funding
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Speaker on “AIF / Performing Credit” at 7th Treasury Management India Summit held on 23rd & 24th May 2023. Spoke on Private Credit / Performing Credit Opportunity in India and its benefits to the Corporates and the country's financial system.
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AIF / Performing Credit an alternative to NBFC funding
- 1. AIF’s Performing Credit Alternatives to NBFC Funding
- 2. Asset Liability Mismatch Increased scrutiny on Mutual Fund investment in NBFC Banks Focus on Retail Credit
- 3. As the Opportunities have dried up in the stressed space (GNPA have reduc ed to ~6% as of Mar-22) the focus has shifted to Performing Credit AIF’s / have emerged as a significant source of financing to businesses not funded by Banks / NBFC’s. Stressed Assets Performing Credit There are more than 1,000 registered AIF’s in India
- 4. Performing / Private Credit Market Opportunity in India… Performing Credit & Real Estate $70 bn Stressed Assets $30 bn ‘Unrated’ to ‘A’ rated Corporates borrowings is currently at ~ US$ 100 bn. Performing Credit/real estate credit and stressed/distressed credit put together to provide an addressable market opportunity of $100 billion over the next 5 to 6 years. As India grows to become a $5 tn economy it needs to add $2 - 2.5 trillion in credit to support this growth. Credit in India remains a long-term structural opportunity with a CAGR of 15% p.a.
- 5. AIF’s AUM 4,387 5,119 10,538 Investments Made Funds Raised Commitments Raised (Amount in US$ mn) 35,507 39,233 80,170 Investments Made Funds Raised Commitments Raised FY17 FY22 Investments Expected to touch US$ 50 bn by end of Mar-24
- 6. Types of AIF’s Operating in India and their share Invest in economically and socially viable start-ups and Small and Medium Enterprises (SMEs) through Venture Capital Funds (VCFs), Angel Funds, Social Venture Funds, and Infrastructure Funds. Invest primarily in viable equity and debt securities – Private equity funds, funds for distressed assets, real estate funds, debt funds, and fund of funds Focuses on earning short-term returns through diverse or complex trading strategies.CAT III includes hedge funds and private investment in public equity funds (PIPE). 8% 70% 22% Category I Category II Category III
- 7. Yield on Performing / Private Credit Performing Credit IRR – 12% to 18% Stressed Asset IRR – 18% to 24% Minimum Ticket Size – US$ 5-8 mn
- 8. Good credit is a rare commodity…..…? Stressed Asset Funding Performing Credit (No to Low Rating) Regular Bank Funding Stressed Asset Good Credit 23% 18% 12%
- 9. Challenges in AIF Funding 03 01 04 02 Identification of Good Business / Promoters Corporate Governance Scale / Size of the transaction Tracking Performance
- 10. Indian AIF’s Foreign AIF’s 1.Kotak 2.Axis 3.ICICI 4.Vivriti 5.Edelweiss 6.Axis 7.Aditya Birla 8.Sundaram 9.HDFC 10.Motilal Oswal 11.IIFL 1.Cerberus Capital 2.SSG Ares 3.Blackstone 4.Lone Star 5.Varde Partners 6.Barings 7.True North 8.Apollo Global 9.Oaktree Capital 10.SSG Capital
- 11. Thank you
Hinweis der Redaktion
- NBFC’s started focusing on Retail and also Corporate Funding credit standards were enhanced in line with the Banks to due to increased regulatory pressure. Funding was restricted to “A” rated corporates.