Investing in Essential Economy Sectors Through Private Credit
The Indian financial landscape is undergoing a seismic shift.
For sophisticated investors, this asset class offers a unique opportunity to generate inflation-beating returns while participating directly in India's structural growth story. This article explores how to navigate the private credit market in India, highlights the top private credit funds, and examines the private credit trends for 2025 that are shaping the future of finance. Companies like Ascendant Globalcredit Group play a vital role in this ecosystem, acting as financial introducers that connect capital with curated opportunities in these essential sectors. As traditional banks navigate tighter regulatory norms, a powerful alternative has emerged to fuel the country's growth engine: private credit. Far from being a niche product, private credit has become a cornerstone for funding essential economy sectors, providing the lifeblood for infrastructure, manufacturing, and real estate projects that form the backbone of the nation .
What is Private Credit and Why is it Essential for the Economy?
Private credit refers to lending and debt financing provided by non-bank entities, unlike loans from traditional banks or funds raised through public bond markets. These investments are typically arranged through Category II Alternative Investment Funds (AIFs) regulated by the Securities and Exchange Board of India (SEBI) .
The "essential economy" tag comes from the sectors this capital serves. Banks have become cautious about lending to sectors with long gestation periods or complex funding requirements, such as infrastructure and real estate. For instance, the Reserve Bank of India (RBI) restricts bank lending to developers for land acquisition, creating a funding void . Private credit steps in here, offering bespoke, flexible capital that allows these critical projects to move forward. It is often referred to as "solution capital" because it solves specific pain points for borrowers, such as irregular cash flows or the need for last-mile construction funding .
The Performance Landscape: Returns and Market Growth
The financial performance of private credit has been nothing short of remarkable, attracting significant attention from family offices and high-net-worth individuals (HNIs). According to recent data, yields in this space can be mouth-watering, but they vary based on the risk profile.
Performing Credit: Offers yields in the range of 14-16% .
Special Situations/Distressed Debt: Can yield between 18-22% or more, depending on the complexity .
These returns represent a significant premium over traditional corporate bonds. In the first half of 2025 alone, nearly $9 billion was deployed across 79 deals, marking a 53% jump year-on-year, with the total industry assets swelling to nearly $25 billion . By the end of CY 2025, total deployment hit a record $12.4 billion, driven by sectors like real estate, healthcare, and industrial products .
Key Essential Sectors Driving Private Credit Demand
Private credit is not a monolith; its strength lies in its adaptability to specific sectoral needs. Currently, the demand is concentrated in areas critical to India's economic fabric:
Infrastructure: This sector leads the charge, accounting for a massive share of private credit deals. Major transactions, such as the refinancing of large conglomerates, demonstrate the market's capacity to underwrite multi-billion dollar exposures. In 2025, deals exceeding $100 million represented 9% of the total count but accounted for nearly 36% of the aggregate deal value .
Real Estate: Developers are increasingly turning to private credit, not as a last resort, but as a strategic tool for unlocking capital tied up in last-mile construction and legacy debt restructuring. This allows them to complete projects and monetize receivables without the procedural delays of traditional banking .
Healthcare and Manufacturing: With India's focus on boosting domestic manufacturing and healthcare infrastructure, these sectors are emerging as hotbeds for private credit. Funds are being deployed for capacity expansion, acquisitions, and funding working capital needs, particularly in chemicals, pharma, steel, and auto components .
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The AIF Route and Regulatory Landscape
Most private credit investments in India are made through Category II AIFs. This vehicle allows managers to pool capital and deploy it into unlisted corporate debt. The minimum investment ticket size for these funds is typically high, starting at Rs. 1 crore . This high barrier to entry has historically limited participation to institutional investors, foreign investors (who make up about 50.3% of the pool), and large family offices . However, new platforms are emerging that aim to democratize access, allowing retail participation with lower ticket sizes through listed bonds and structured credit .
The Role of Financial Introducers
Navigating this complex landscape requires expert guidance. This is where firms like Ascendant Globalcredit Group come into play. As a financial introducers company, they act as a vital bridge between sophisticated investors and vetted private credit opportunities. They help clients perform due diligence on fund managers, understand complex deal structures, and gain access to top-tier funds that might otherwise be difficult to find. Their role is crucial in ensuring that investors are matched with opportunities that align with their risk appetite and financial goals, particularly when targeting essential economy sectors.
Understanding the Risks: Beyond the High Yields
While the returns are attractive, investing in private credit is not without significant risks.
Illiquidity: This is a feature, not a bug. Private credit investments are typically locked in for the long term, with no established secondary market. Exiting early, especially during a market downturn, can be extremely difficult and may require selling at a steep discount .
Credit Risk: These funds lend to lower-rated or unrated companies. As financial expert Joydeep Sen notes, "The high yield itself is an indicator of the risk" . Defaults can and do happen, eroding capital.
Untested Cycles: A significant concern for 2025 and beyond is that the private credit market in India has not yet faced a full-blown credit cycle. While established players have navigated various economic phases, many newer fund managers have only operated in a benign environment. How their portfolios will perform under stress remains to be seen .
To mitigate these risks, seasoned fund managers employ strategies like overcollateralization (taking security cover of 2-3x the loan value), obtaining promoter guarantees, and routing cash flows through monitored escrow accounts .
Private Credit Trends 2025 and Beyond
As we move through 2025, several key trends are defining the market:
Refinancing Dominates: Corporates are increasingly using private credit to refinance existing debt. This allows them to consolidate borrowings, simplify lender structures, and align repayment schedules with business cycles. Only a small fraction of capital is going toward pure growth financing, indicating a focus on balance sheet optimization .
Global vs. Domestic Capital: The market presents a dual-engine structure. Global investors contributed a staggering 68% of total deal value in H1 2025, particularly in large-ticket transactions. However, domestic funds are leading in deal count (68%) , driven by their agility and deep local market intelligence .
Broader Investor Participation: While AIFs remain the primary vehicle, the investor base is widening. Family offices are moving towards direct allocations, and platforms are emerging to lower the entry barrier, suggesting that the "sophisticated investor" category is set to broaden meaningfully .
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Inflation reduces returns by increasing borrowing costs and lowering valuation multiples. However, strong portfolio companies with pricing power can maintain profitability.
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While a bank FD offers assured returns (typically 6-7%) with high liquidity and safety, private credit offers much higher potential yields (14-22%) but comes with significantly higher risk, including credit default and illiquidity, meaning your money is locked in for a longer period .
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The primary risks include credit risk (the borrower may default), illiquidity risk (difficulty in selling the investment before maturity), and the fact that the market has not been fully tested through a major economic downturn. Recoveries through the insolvency process can also be time-consuming
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There are numerous funds operating in this space. While we cannot name specific funds, they are typically registered as AIFs with SEBI. Investors can find a list of registered AIFs on the SEBI website. Consulting a financial introducer like Ascendant Globalcredit Group can also provide curated access to top private credit funds based on your investment profile.
Frequently Asked Questions (FAQs)
Is private credit legal and regulated in India?
Yes, private credit funds operate legally under the SEBI (Alternative Investment Funds) Regulations, 2012. They are categorized as Category II AIFs. However, the underlying lending activities are less regulated than banks, which is why thorough due diligence is essential .
What are the key trends in the Indian private credit market for 2025?
Key private credit trends 2025 include a surge in refinancing deals, massive growth in infrastructure and real estate funding, increased participation from global investors in large-ticket deals, and the gradual democratization of access through digital platforms .
Can retail investors invest in private credit?
Traditionally, it was exclusive to HNIs. However, the market is evolving. SEBI-registered online bond platforms (OBPs) now allow retail investors to invest in listed bonds and structured debt issued by companies, sometimes with tickets as low as Rs. 10,000. This provides indirect exposure to the private credit space .
What does a "financial introducers company" like Ascendant Globalcredit Group do?
A financial introducer acts as an intermediary or matchmaker. Ascendant Globalcredit Group helps connect investors with relevant private credit opportunities and fund managers. They assist with due diligence, provide market insights, and facilitate access to investments in essential economy sectors that align with an investor's financial goals, though they may not manage the funds directly.