Reliance AIF Asset Management Company Ltd, part of Reliance Nippon Life Asset Management Ltd, is raising its first credit fund to tap into rising distressed debt in the country as banks burdened with growing bad loans seek to offload such assets, a person privy to the development told VCCircle.
The company joins a string of major alternative investment firms, including KKR and Baring Private Equity Asia (Baring PE Asia), which are putting together similar credit funds, to leverage the business opportunity in the space.
Reliance AIF aims to raise Rs 1,000 crore (around $150 million) for its credit fund called Reliance Yield Opportunity AIF Scheme 1. This includes a green-shoe option of Rs 750 crore, the person cited above said.
The credit fund will seek to deploy funds for acquisition financing, holding company financing and loans against shares. It will also look to invest in debt instruments of emerging non-banking financial companies (NBFCs) and microfinance institutions.
The fund will target gross returns of 12-12.5% per annum at the portfolio level, the person said.
Mint first reported about the development, citing Shahzad Madon, head of portfolio management services and alternative assets at Reliance Nippon Life Asset Management.
Madon told the newspaper that the first close of the fund is expected in March. A first close is a milestone in an alternative investment fund’s fundraising process as it gives room to begin deploying the funds raised so far.
An email query sent to Reliance AIF did not elicit a response till the time of filing this article.
Early in January, Reliance AIF said it has floated a new real estate-focused fund with a target corpus of Rs 1,000 crore (around $147 million then).
Credit funds becoming the flavour of AIFs
Many large international alternative investment firms also have credit as another asset class. Indeed, debt is emerging as an important business for PE firms in the country.
Global private investment giant KKR has a separate credit business in the country and in 2015 floated a new NBFC along with Singapore’s sovereign wealth fund GIC to invest in Indian real estate markets.
Separately, KKR has marked the pre-close of its second India-focused credit fund and aims to make the final close in a few months with a target of Rs 2,000 crore, The Economic Times reported in January.
Last year, VCCircle reported that Baring PE Asia set up BPEA India Credit under its parent company to explore the growing debt market. It brought on-board almost all the team members of Religare Credit Advisors LLP (RCA), a subsidiary of financial services company Religare Enterprises Ltd.
In February, Reuters reported that Bain Capital is also planning to launch its first Asia-focused credit fund, seeking to raise $1 billion.
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