Key Takeaways
- • Kapil Singhal, Managing Partner, Private Credit at True North Co, said India's performing credit funds manage just ₹25,000 crore in AUM against a ₹3-4 lakh crore market opportunity, per a panel discussion summarized by Moneycontrol.
- • Singhal argued Indian private credit is structurally more conservative than global counterparts, with company leverage generally below 4x debt-to-EBITDA versus 6-8x globally, no fund-level leverage, and closed-end structures with zero redemption pressure.
- • The panel advised investors to diversify across performing credit, venture debt, real estate and distressed credit, noting performing credit is less cyclical while venture debt and distressed credit are more sensitive to market cycles.
- • Taxes at the investor's marginal rate can significantly reduce post-tax returns, but private credit may still offer a meaningful premium over traditional fixed income, with trade-offs in liquidity and uncertainty.
Summary
CFA Society India and CFA Institute hosted the 11th India Wealth Management Conference (IWMC) in Mumbai, where a session titled "Private Credit: Beyond Theory - It's Not Fixed Income, But It Can Get Un-Fixed" examined the structure, risks and returns of India's private credit market. Kapil Singhal, Managing Partner, Private Credit at True North Co, led the session, which was moderated by Jayen Shah, Founder and Managing Director of Mavuca Capital Advisors Pvt. Ltd., according to the Moneycontrol article.
The panel argued that Indian private credit is structurally different from global markets and should not be benchmarked directly against them. Singhal described global private credit as characterized by high leverage at company and fund levels, with company debt-to-EBITDA ratios of 6 to 8x, open-ended fund structures permitting redemptions, significant software exposure and vulnerability to interest rate hikes. By contrast, India's framework features company leverage generally below 4x, companies actively paying down debt, no fund-level leverage, closed-end structures with zero redemption pressure, limited software exposure and a banking system free of systemic funding stress.
On market crowding, the panel rejected the view that too many funds are chasing limited opportunities. Singhal said that while many managers are entering the space, the actual pool of capital remains constrained, with total AUM for performing credit funds at ₹25,000 crore against a ₹3-4 lakh crore opportunity. He also identified scaling as a major challenge for managers.
The session distinguished private credit from bank lending, noting that banks lend within defined structures and bureaucratic processes, whereas private lenders offer tailored loan structures, deeper due diligence and continued lender involvement over the life of the loan. Strategies covered include performing credit, venture debt, real estate and distressed credit, each with a distinct risk-return profile. Performing credit was described as generally less cyclical, while venture debt and distressed credit are more sensitive to market cycles, leading the panel to recommend diversification across strategies with attention to market cycles, portfolio construction and manager quality.
Finally, the panel addressed taxation, arguing private credit should be evaluated as a debt investment taxed at the investor's marginal rate rather than compared with equity returns. Taxes can materially reduce post-tax returns, but private credit may still offer a meaningful premium over traditional fixed income. Investors were advised to treat it as part of their fixed-income allocation, weighing higher potential returns against lower liquidity and greater uncertainty.
The panel argued that Indian private credit is structurally different from global markets and should not be benchmarked directly against them. Singhal described global private credit as characterized by high leverage at company and fund levels, with company debt-to-EBITDA ratios of 6 to 8x, open-ended fund structures permitting redemptions, significant software exposure and vulnerability to interest rate hikes. By contrast, India's framework features company leverage generally below 4x, companies actively paying down debt, no fund-level leverage, closed-end structures with zero redemption pressure, limited software exposure and a banking system free of systemic funding stress.
On market crowding, the panel rejected the view that too many funds are chasing limited opportunities. Singhal said that while many managers are entering the space, the actual pool of capital remains constrained, with total AUM for performing credit funds at ₹25,000 crore against a ₹3-4 lakh crore opportunity. He also identified scaling as a major challenge for managers.
The session distinguished private credit from bank lending, noting that banks lend within defined structures and bureaucratic processes, whereas private lenders offer tailored loan structures, deeper due diligence and continued lender involvement over the life of the loan. Strategies covered include performing credit, venture debt, real estate and distressed credit, each with a distinct risk-return profile. Performing credit was described as generally less cyclical, while venture debt and distressed credit are more sensitive to market cycles, leading the panel to recommend diversification across strategies with attention to market cycles, portfolio construction and manager quality.
Finally, the panel addressed taxation, arguing private credit should be evaluated as a debt investment taxed at the investor's marginal rate rather than compared with equity returns. Taxes can materially reduce post-tax returns, but private credit may still offer a meaningful premium over traditional fixed income. Investors were advised to treat it as part of their fixed-income allocation, weighing higher potential returns against lower liquidity and greater uncertainty.
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