India's Wealthy Embrace Private Credit for Superior, Stable Returns
In a significant shift in investment strategy, India's high-net-worth individuals (HNIs) and affluent family offices are increasingly turning to private credit deals to secure higher and more predictable returns. This trend is fueling growth in a market that expanded to nearly $13 billion locally in 2025, offering these investors a crucial avenue for portfolio diversification.
Regulatory Changes Drive Shift from Traditional Debt
Regulatory and tax adjustments have diminished the appeal of debt mutual funds, making Sebi-regulated alternative investment fund (AIF) structures a more attractive and scalable option for investors. "Sebi-regulated AIF structures provide both comfort and scale to investors," explained Nilesh Dhedhi, MD & CEO at Avendus Finance.
Private credit involves debt financing provided by non-bank lenders primarily to mid-market companies. According to S&P Global, large family offices globally and in India allocate 15%-25% of their portfolios to alternative investments, with 25%-30% of that specifically directed toward private credit solutions.
Rapid Growth from a Small Base
Most private credit platforms in India operate as category II AIF entities under Sebi's governance. "In an environment where public equity can be volatile and bond yields may not fully offset inflation and credit risk, private credit offers visibility, security, and yield," said Prakash Bulusu, joint CEO at IIFL Capital. Many HNIs value the ability to invest in deals backed by tangible assets and strong covenants, enhancing capital protection.
The rise of private credit is largely driven by banks' inability to meet all funding requirements, creating a significant gap for mid-market structured credit. "Private credit can provide non-dilutive capital tailored to each borrower's specific needs," noted Dhedhi. Amit Dharod, MD of alternative assets at JM Financial AMC, added that companies across various sectors utilize private credit for multiple end-uses.
Explosive Growth and Domestic Investor Push
Private credit instruments experienced a remarkable growth rate of 40%-50% in 2025 compared to the previous year, according to Dharod. While foreign capital initially spurred momentum, the real acceleration has come from domestic investors, including HNIs and family offices, as highlighted by asset managers. For instance, Vivriti Asset Management has completed 10 investments across different sectors in just the past 7-8 months, as reported by chief investment officer Soumendra Ghosh.
Robust Pipeline and Sectoral Activity
The pipeline for private credit in India appears robust this year, particularly in the Rs 100-1,000 crore ticket size segment. "We are seeing dozens of active mandates at any given point, with aggregate deal activity running into several tens of thousands of crores annually," said Bulusu. High activity is noted in sectors such as manufacturing, renewables, real estate, logistics, financial services, healthcare, and select technology-led businesses, indicating broad-based demand and opportunity.
