What Indian credit managers are seeing amid the pandemic

Private debt fund managers in India have been facing fundraising delays since a nation-wide lockdown. Still, some see emerging opportunities due to credit market dislocations and economic policy changes.

As part of its economic response to the coronavirus crisis, the Indian government on 13 May televised its plan for a $266 billion stimulus package. For micro-, small-, and medium-sized enterprises, the government has introduced 16 measures to help small businesses so far, from collateral-free loans to equity funding via fund-of-funds.

Although further details will be disclosed throughout this week, the announcement reflects the liquidity shortage small businesses are facing due to the impact of the pandemic on their businesses.

Private credit investors which lend to selected small businesses in India have been also facing the impact of the national lockdown which was put in place on 25 March. It is effective till 17 May, with the possibility to be extended further.

Among alternative lenders which focus on Indian performing credit for small- and mid-sized companies, Northern Arc Investments (formally known as IFMR Investment) has been fundraising for its first US dollar-denominated private debt fund.

According to Ravi Vukkadala, Northern Arc Investments’ chief executive officer, the expected fundraising timeline for the Impact Fund is likely to be delayed by at least a quarter due to the nation-wide lockdown.

However, he added that the fundraising opportunity for the impact fund seems optimal now, given potential investment flows from domestic and overseas BFSI (Banking, financial services, and insurance companies) in the post covid-19 world.

The impact fund’s main investment focus will be based on liquidity situations at potential investee companies with every segment impacted by the covid-19 outbreak differently, according to Vukkadala.

Northern Arc Investments connects other capital providers and LPs such as banks, insurance firms, pensions, family offices, and endowments, to non-bank financial companies (NBFCs). It also backs some of the NBFCs that lend to retail borrowers, and micro-corporates.

Another Indian private credit investment manager, SC India Credit Manager, decided to delay the launch of its second credit fund, PDI understands. The second fund was planned to be launched during the second quarter of this year. However, it is understood to be delayed by three to six months due to the coronavirus disruptions.

As PDI reported in August 2019, the manager planned to raise up to $250 million for its second mid-market performing credit fund, SC India Credit Fund II.

It is understood that the management team is now mostly focusing on portfolio management, dislocated secondary credit opportunities, opportunistic corporate re-financing, and bridge financing deals. The private corporate lender typically invests in traditionally asset-heavy industries.

The SC India Credit Fund series is managed SC Credit Trust, a joint venture between Mumbai-based Catalyst and Dubai-based Samena Capital.