Credit Opportunities Fund (Category II AIF)
Credit Opportunities Fund in India is a type of Category II AIF which employs diverse strategies to generate better returns than fixed income investments like Debt Mutual Fund, Fixed Deposits, Bonds etc. They actively invest in secured credit instruments issued by companies with healthy promoter / business track record.
India’s Growth Opportunity
- The Indian economy is on track to reach a USD 5 trillion milestone
- Reforms of the past decade have created a runway for sustained growth over the next decade.
- Credit demand remains robust, driven by economic expansion and evolving credit dynamics.
India’s Private Credit Growth
India growth story coupled with demand for structured credit solutions provide significant opportunity for AIFs.
AIFs can capitalize on the growing opportunity as limited funding options are available from traditional source of finance.
Transaction volume is expected to exceed USD 20 billion in CY 2025, with active involvement from domestic and global funds.
Private Credit activity in India is projected to grow to USD 60-70 billion by 2028.
Focus area of Performing Credit Fund
Growth Capital
Strategic capital including acquisition finance & bridge financing
Facilitating PE exit and cash flow mismatch
Generally, avoid early stage companies / distress assets and venture debt
- The objective is to generate risk adjusted low to mid teen returns over a 4 – 6 year time frame.
- They are suitable for investors who seek diversification beyond traditional debt investments.
Minimum investment is typically ₹1 crore. Investment can be made by both individuals and non-individuals.
Pass-through taxation to investors, taxed as per slab rates for interest and capital gains.