ICICI Prudential Asset Management Company (AMC) is raising a R1000 Crore ($170.0 million; €124.1 million) alternative debt fund, according to sources close to the situation.
ICICI Prudential Alternative Debt Fund will provide mezzanine financing to companies in India across all sectors.
A first close is expected by June at around R300-R400 Crore ($50-$65 million) with a final close expected by December this year.
It is understood that the fund marks a departure in India’s private debt markets in that it is the first time Indian investors will be able to invest in a structured debt fund. Private equity firms KKR and Aeon Capital have set up similar investment vehicles but for international investors rather than domestic ones.
Fundraising is targeting a mix of domestic investors to include institutional investors, high net-worth individuals and small family offices.
It is hoped the fund will complete between eight to ten deals in the first 15 months. It is targeting returns of between 18 and 20 percent.
As a result of the pullback in bank lending, companies looking for growth capital or which are temporarily challenged are finding it harder to get financing in India, one of the sources said.
The recent general election in India has brought with it the expectation that the new government can tackle the scarcity of lending but that will take some time to come to fruition, he said.
The fund’s core investment instrument will be structured debt with an equity kicker such as a convertible option or a warrant. Loan terms will be between two and three years.
ICICI Prudential AMC is a joint venture between Indian retail bank ICICI Bank and UK-headquartered insurer Prudential. The firm declined to comment.