Private Credit Sees Record High Deals in 2023

Chennai: Private credit deals have witnessed record high investments of $7.8 billion in CY2023 and the market holds a potential to further increase this up to $10 billion in 2024.

In 2023, 108 private credit deals worth $7.8 billion were recorded against 77 deals totalling $5.3 billion. This remarkable increase in both deal count and value was primarily fuelled by several factors, including the stabilization of interest rates in 2023, heightened activity within the real estate sector, and a notable increase in deal value resulting from certain large transactions executed during the year.

At least 11 new AIFs have registered in second half of 2023 with credit/special situation orientation and five are in process for registration. Additionally, nine funds have announced new fund raises aggregating to more than $2 billion in H22023. According to fund managers, stress-related needs were the primary driver for private credit deals in 2023.

In 2023, global funds contributed approximately 63 per cent of the total deals by value, primarily due to their participation in large deals. However, domestic funds led in terms of deal count, accounting for approximately 61 per cent of the deals. The real estate sector continued to be dominant, attracting investments totaling $1.7 b in 2023 compared to $1.6 billion in 2022.

“A growing economy, a cautious banking sector and a deliberate reduction in the wholesale books of NBFCs continue to provide a fertile ground for private credit funds to grow and deploy capital. Despite real estate being recognized for its elevated risk by fund managers, the sector continues to see high deal activity,” said Bharat Gupta, Debt and Special Situations Partner, EY India.