International Finance Corporation (IFC) plans to make an equity investment of up to $20 million in a global credit fund of Dubai-based private equity firm Abraaj Capital.
The PE firm aims to raise up to $500 million for Abraaj Global Credit Fund, the World Bank’s private-sector investment arm said in a disclosure.
The fund will lend capital to mid-sized companies mainly across consumer-driven sectors in Africa, Asia, Latin America, the Middle East and Turkey, IFC said.
Specifically, the Abraaj Global Credit Fund will provide “growth credit and mezzanine debt financing” as an alternative to equity to mid-market companies that have limited access to long-term debt capital, it said.
With this, the Abraaj Group joins other global funds such as KKR in diversifying its investment strategy by launching a global credit vertical.
The firm will seek to invest primarily in mezzanine debt, but may also invest in senior debt if the situation is favourable to its strategy, according to its website.
In addition, it will focus on growth credit which may involve financing capital expenditure, acquisition financing, project financing and other situations that require bespoke and structured credit solutions.
Abraaj Capital’s largest investment in India to date is in Care Hospital where it acquired Advent International’s stake for Rs 1,300 crore. It invested $150 million in BigBasket in 2016, marking its first e-commerce investment in India. It also agreed to form a joint venture with Aditya Birla Group for renewable energy assets in 2015.
As it hunts for credit investment opportunities in India, it may face tough competition from other PE firms which have recently entered the lending business to target the mid-market space.
In addition to KKR’s India-focussed credit fund, Baring Asia recently set up a credit platform. Avista Advisory Group is also seeking to launch a debt fund. In addition, asset management units of Life Insurance Corporation of India and State Bank of India are in the process of launching such funds. IDFC Alternatives, too, had told VCCircle that it would launch a debt fund.