Business Today’s Post

In recent years, India's private credit market has emerged as a vital component of the country's financial landscape, playing a crucial role in providing alternative financing solutions beyond traditional banking channels. The private credit market encompasses a diverse range of NBFCs, AIFs, fintech platforms, and other entities offering credit facilities outside the conventional banking system. Unlike traditional banks, which have stringent lending criteria and regulatory constraints, private credit providers often offer more flexible terms tailored to the specific needs of businesses and individuals. What is fueling this space Gap in Traditional Financing: Traditional banks may be unable to meet the diverse and evolving credit needs of businesses, especially small and medium enterprises (SMEs) and startups. Private credit providers fill this gap by offering customized solutions, including working Asset Leasing/Financing, Structured debt and mezzanine financing. Emergence of NBFCs and AIFs: Non-bank financial companies (NBFCs) and alternative investment funds (AIFs) have played a pivotal role in expanding the private credit market. These entities leverage their sectoral expertise, risk assessment frameworks, and innovative funding structures to cater to underserved segments. Investor Interest: Institutional investors, including pension funds, insurance companies, and sovereign wealth funds, are increasingly allocating capital to Indian private credit opportunities. The attractive risk-adjusted returns offered by these investments have bolstered the sector's growth trajectory. Challenges Credit Risk Management: Effective credit risk assessment and management are critical, particularly in a diverse market landscape characterized by varying borrower profiles and economic cycles Liquidity and Funding Risks: Dependency on wholesale funding sources and market volatility can pose liquidity challenges for private credit providers, necessitating prudent asset-liability management strategies India's private credit market is poised for continued expansion, driven by evolving financing needs, technological advancements, and supportive regulatory reforms. As stakeholders navigate the opportunities and challenges inherent in this dynamic ecosystem, fostering transparency, innovation, and sustainable growth will be key to unlocking the sector's full potential and meeting the diverse credit needs of India's vibrant economy. #GFIO Raman Chandna Abhishek Goyal

Private Credit: Because Sometimes Banks Just Don’t Get Your Vibe! 🎉💸 🔍 What is Private Credit? Private credit is non-bank lending where companies raise funds from investors like private equity or credit funds instead of banks. It’s a flexible way for businesses to borrow money, often tailored to their needs. 🏢 Which Companies Use It? This type of credit is ideal for mid-sized companies or large corporations that need funds for: Growth and expansion 🚀 Working capital 💼 Mergers & acquisitions 🤝 It’s especially helpful for businesses that might struggle to get loans from traditional banks. 💸 Who Can Invest in Private Credit? Typically, institutional investors like private equity funds, hedge funds, high-net-worth individuals, and family offices invest in private credit. This investment offers them higher returns compared to traditional bonds or public markets. 📊 What Returns Can Investors Expect? The average interest rates (returns) in private credit deals are typically 12%-20%, much higher than bank loans, reflecting the higher risk. For high-yield opportunities, some deals may even cross 24%. 📈 The Size of the Private Credit Market in India In 2024, India’s private credit market stands at $6 billion, continuing its robust growth. Sectors like real estate, infrastructure, and pharmaceuticals are seeing the most private credit action. 🛡️ Is Private Credit Regulated? Yes, private credit in India is subject to RBI and SEBI regulations. However, it often has less oversight than traditional bank lending, which can create both flexibility and higher risks for investors. 🔑 Why is Private Credit Growing? Banking limitations due to regulations. Flexibility of loan structures. Access to faster capital for companies. Private credit is creating new opportunities for both Indian businesses in need of capital and investors seeking higher returns. 🌟 #PrivateCredit #Investment #BusinessGrowth #Finance #IndianEconomy #InvestSmart #Regulation #growth #india LinkedIn

3 Financial Strategies This Indian SME Used to Attract Investors Meet Raj, a determined SME owner in Delhi, navigating the bustling market landscape with dreams of expansion. Yet, Raj realized that to turn his dreams into reality, he needed to prioritize financial fitness. Raj discovered its profound impact on every aspect of his business and stated paying more attention on : 1. Profitability Metrics: Metrics like gross profit margin, net profit margin, and return on investment attract investors by demonstrating the company's ability to generate profits. 2. Cash Flow Management: Steady funds, managed through metrics like operating cash flow and free cash flow, ensure smooth operations and fuel future growth initiatives. 3. Financial Ratios: Metrics like liquidity ratios (current ratio and quick ratio) and solvency ratios (debt-to-equity ratio and interest coverage ratio) serve as guides to financial health, bolstering investor confidence. Raj also built a Strong Financial Foundation through: 1. Budgeting and Forecasting: By accurately projecting expenses and revenue streams, Raj could allocate resources effectively and capitalize on growth opportunities. 2. Debt Management: Sustainable debt, managed through careful consideration of debt-to-equity ratio and interest coverage ratio, shows the company's ability to responsibly leverage debt.    3. Working Capital Management: Ensuring liquidity, demonstrated through metrics like the current ratio and quick ratio, showcases stability and the company's ability to meet short-term obligations. With financial fitness, Raj approached investors confidently, leveraging MergerDomo's resources (https://lnkd.in/d6TzaXPD) and investor network to secure funding and unlock growth opportunities. Prioritize financial health, embrace best practices, and chart a course towards SME success. #SME #India #Fundraising #equity #debt

Our Inclusive Finance India Report 2023 is an in-depth, well-researched one-stop, state-of-sector reference book presenting the advancements in the policy and implementation of financial inclusion in the country during the year.   In chapter five, "MSMEs: The Pillars of India’s Economic Strength", authored by Ramesh Arunachalam, the focus is on the evolving inclusive financing ecosystem for India's MSMEs. The chapter presents an analysis of lending patterns by public and private sector banks, revealing a divergence. Public sector banks have shown reasonable annual growth of around 5% in MSME loan amounts. In contrast, private banks, despite a robust average 22% growth in loan amounts, have reduced the number of accounts post-2020, indicating a shift towards fewer, larger mid-sized borrowers. This trend underscores the need for prudent risk management. SFBs and Non-Banking Financial Companies (NBFCs) are making their mark with niche interventions, suggesting that decentralised approaches tailored to specialised strengths can bring balance to the ecosystem. Data from Pradhan Mantri Mudra Yojana (PMMY) provides insights into emerging credit patterns. Public sector banks have slightly underperformed recently, but private banks have surpassed sanction targets due to their agility and attractive offerings. SFBs and MFIs have shown commendable performance, capitalising on their regional presence.   Read more here: https://lnkd.in/gvykrZkV   #financialinclusion #InclusiveFinance #MicroFinance #SmallFinanceBanks #Report23 #ACCESS Sudipto Saha Akash Shrivastava Satyan Kumar

The Need for Professional Financial Management in India: Key Insights India's financial landscape is evolving rapidly, yet there are significant gaps that present opportunities for professional financial management. Let’s take a closer look at some crucial data points: 1️⃣ Mutual Fund AUM vs. GDP India’s GDP is approaching $4 trillion, but the mutual fund AUM stands at approximately ₹60 lakh crore (around 5% of GDP). In comparison, globally, mutual fund AUM typically represents about 70% of GDP. This disparity highlights a major opportunity for growth in retail and institutional investing, as more individuals and institutions begin to embrace financial markets as a tool for wealth creation. 2️⃣ Rising UHNI Population India is witnessing one of the highest growth rates in the Ultra High Net-Worth Individuals (UHNI) segment globally, with a staggering 30% increase year-on-year. As wealth creation accelerates, the need for professional money management becomes more urgent, with sophisticated strategies to optimize returns, manage risks, and plan for long-term growth. 3️⃣ The FD Conundrum While Fixed Deposits (FDs) remain a go-to investment for many Indians, they are not keeping pace with inflation. A massive ₹212 lakh crore is still parked in FDs, yet these products often fail to generate returns that beat inflation. Many believe FDs are "safe," but there's a catch: while the Reserve Bank of India (RBI) guarantees deposits up to ₹5 lakh, not all banks pay premiums to the Deposit Insurance and Credit Guarantee Corporation (DICGC). This exposes investors to potential risk, underlining the importance of exploring other, more lucrative and secure financial avenues. 4️⃣ Foreign Investment Surge India's emergence as a global economic powerhouse has attracted foreign investment, with the world viewing the next decade as "India's decade." Recent fluctuations in capital outflows should not overshadow the long-term optimism around India’s growth prospects. This further highlights the need for professional financial advice to navigate global capital markets and capitalize on growth opportunities. In Conclusion: As India’s financial ecosystem matures, the role of financial managers will only grow. From UHNIs to retail investors, there is a pressing need for sound, professional advice to ensure wealth is managed wisely and grows in line with the country's robust economic trajectory. #FinancialManagement #WealthManagement #InvestingInIndia #GDP #MutualFunds #UHNIs #InvestmentStrategies #PersonalFinance #FinancialPlanning

Investing in bonds in India requires careful consideration to ensure they align with your financial goals and risk tolerance. Here are three key points to check: 1. Credit Rating of the Bond Bonds are rated by credit rating agencies like CRISIL, ICRA, or CARE in India. The rating reflects the issuer's creditworthiness and the risk of default. Look for higher-rated bonds (AAA, AA) for safer investments, though they may offer lower yields. Lower-rated bonds offer higher yields but come with higher risk. 2. Yield to Maturity (YTM) and Interest Rate Risks Yield to Maturity (YTM) indicates the total return you can expect if you hold the bond until it matures. Compare YTM across similar bonds to identify the best options. Assess the impact of interest rate movements. Bonds with longer maturities are more sensitive to interest rate changes, which can affect their market value. 3. Issuer and Type of Bond Check the issuer's financial health (e.g., government, corporate, or PSU bonds). Government bonds (G-Secs) are typically safer but may offer lower returns. Understand the bond type: >Fixed-rate bonds: Offer steady returns. >Floating-rate bonds: Returns fluctuate with market rates. >Tax-free bonds: Interest is tax-exempt but may have lower yields. By thoroughly analyzing these factors, you can make informed decisions and align your bond investments with your financial strategy.

In an interview with Financial Express (India), Vinay Pai, Head of Fixed Income, Equirus, said, “To propel the economic growth to achieve a $5-trillion economy there is a need for strong push towards issuance and subscription of corporate bonds and reducing the burden on the banks. This may require a relook at reducing the taxation between the equity and bonds.” Read the full article: https://lnkd.in/gSCka3u4 #economy #5trillioneconomy #india

🚀 𝗞𝗲𝘆 𝗜𝗻𝘀𝗶𝗴𝗵𝘁𝘀 𝗳𝗿𝗼𝗺 𝗘𝗬'𝘀 𝗛𝟭 𝟮𝟬𝟮𝟰 𝗥𝗲𝗽𝗼𝗿𝘁 💼💰 As the private credit landscape continues to evolve in India, here are some insightful takeaways from EY's latest report that every finance professional should know: 🔍 𝟭. 𝗠𝗮𝗿𝗸𝗲𝘁 𝗚𝗿𝗼𝘄𝘁𝗵:  India’s private credit market reached $𝟲 𝗯𝗶𝗹𝗹𝗶𝗼𝗻 in H1 CY2024, showcasing robust activity despite economic fluctuations. This growth trajectory positions private credit as a vital source of capital for businesses. 🏢 𝟮. 𝗦𝗲𝗰𝘁𝗼𝗿 𝗙𝗼𝗰𝘂𝘀:  The 𝗿𝗲𝗮𝗹 𝗲𝘀𝘁𝗮𝘁𝗲 sector remains a prime target for private credit investments, followed closely by 𝗶𝗻𝗳𝗿𝗮𝘀𝘁𝗿𝘂𝗰𝘁𝘂𝗿𝗲 and 𝗵𝗲𝗮𝗹𝘁𝗵𝗰𝗮𝗿𝗲. Major players like 𝗥𝗲𝗹𝗶𝗮𝗻𝗰𝗲 𝗟𝗼𝗴𝗶𝘀𝘁𝗶𝗰𝘀 (Reliance Logistics Group Inc.) and 𝗩𝗲𝗱𝗮𝗻𝘁𝗮 𝗦𝗲𝗺𝗶𝗰𝗼𝗻𝗱𝘂𝗰𝘁𝗼𝗿𝘀 are leveraging this funding for expansion and operational needs. 📊 𝟯. 𝗜𝗻𝗰𝗿𝗲𝗮𝘀𝗶𝗻𝗴 𝗗𝗼𝗺𝗲𝘀𝘁𝗶𝗰 𝗣𝗮𝗿𝘁𝗶𝗰𝗶𝗽𝗮𝘁𝗶𝗼𝗻:  While global funds accounted for 𝟱𝟴% of total deal value in H1 CY2024, the rise of domestic funds is noteworthy. This shift underscores the growing engagement of local players in the private credit space. 🔑 𝟰. 𝗘𝗰𝗼𝗻𝗼𝗺𝗶𝗰 𝗢𝘂𝘁𝗹𝗼𝗼𝗸:  With India projected to grow at 𝟳% in CY2024, demand for capital is on the rise. This economic backdrop creates a fertile environment for private credit to thrive. 📈 𝟱. 𝗙𝘂𝘁𝘂𝗿𝗲 𝗣𝗿𝗼𝗷𝗲𝗰𝘁𝗶𝗼𝗻𝘀:  Fund managers anticipate that private credit investments will range from $𝟱 𝗯𝗶𝗹𝗹𝗶𝗼𝗻 𝘁𝗼 $𝟭𝟬 𝗯𝗶𝗹𝗹𝗶𝗼𝗻 over the next year, signaling a bullish outlook for this asset class. #PrivateCredit #InvestmentInsights #Finance #IndianEconomy #BusinessGrowth #EYReport #InvestmentOpportunities

Private credit is one of the 4 key mega trends which Angel One Wealth believes in. But one key aspect investors should note- keep the diligence and underwriting as the key yardstick in such opportunities and not the targeted returns. Don’t guard your risks lower. Piyush Thakkaar, my colleague, has penned about this topic with as much ease for readers as the complexity he goes through while evaluating a transaction ;). Does make it a 3 mins quick read scoping opportunities and risks too.