Private Credit — Lifeline Or Liability?

DECODE THE NEWS

Expensive Debt Better Than Idling Biz, Experts Sum Up Private Credit Popularity

What?

India is seeing a big boom in private credit. Major deals like the one by the Shapoorji Pallonji Group’s record-breaking $3.5 billion zero-coupon bond and Manipal Group’s $600 million raise for healthcare.

Even though founder Kiran Mazumdar-Shaw says Biocon Biologics’ structured venture debt is hurting profitability, private credit is taking off in India.

The private credit market, which was once limited to collateral-based funding such as loans against property (LAP) in 2012, has now grown into a $10 billion market as of 2024. In the first half of 2025, it has already recorded around $6 billion in private credit transactions, according to 1Lattice.

Private credit funds cater to capital-starved companies that need alternatives to traditional bank loans or equity dilution. Private credit serves a range of needs — growth capital, acquisition finance, real estate, and unique, time-sensitive cases where traditional funding falls short.

Why?

“Non-equity dilution for funding needs ensures a higher retention of equity with the promoters/current shareholders,” explains Mitesh Shah, CEO of Equirus Credence Family Office. It helps promoters hold onto control in a tough capital market environment.

As banks remain conservative and public equity turns expensive or unavailable during volatile markets, private credit players offer quick, flexible, and bespoke structures. With rising capital from domestic AIFs and innovative financing models, players now serve even unconventional areas like litigation funding and renewables, although they still avoid early-stage startups.

“There are situations where families behind businesses go through internal realignments... That’s where private credit steps in,” says Venkatakrishnan Srinivasan of Rockfort Fincap LLP.

Why It Matters

With expectations of 11–13% net returns in performing credit and up to 20% in distressed scenarios, the cost of capital can become a strain. “Borrowers need clarity at such rates,” said Sundaram Alternates’ Karthik Athreya.

For some promoters, this high-stakes credit is a lifeline, enabling strategic decisions that would otherwise slip away. But when returns don’t match the optimism, as in Biocon’s case, the consequences can be stress for the business.

Can such high-cost debt really help a business turnaround?

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CORE NUMBER

20.04 lakh

That’s the total number of vehicles sold across India in June 2025, according to the Federation of Automobile Dealers Associations’ (FADA’s) latest auto-retail report.

📌 The details:

Retail volumes grew 4.84% year on year (YoY), though they dipped 9.44% month on month (MoM).

Segment-wise YoY growth:

Two-wheelers: +4.73%

Passenger Vehicles (PV): +2.45%

Commercial Vehicles (CV): +6.6%

Tractors (Trac): +8.68%

Construction Equipment (CE): +54.95%

Three-wheelers (3W): +6.68%

MoM trends remained mixed, with 2W retails down 12.48% and PV down 1.49%, as heavy rains and tight financing impacted demand.

🧾 Why it matters:

While June reflected a slowdown from May, every major segment posted YoY gains — pointing to underlying strength in India’s auto market. Dealer sentiment, however, is turning cautious as inventory piles up and consumer enquiries remain tepid.

💬 “Heavy rains and tight market liquidity weighed on footfall and conversion, even as elevated incentive schemes and fresh bookings lent selective support. Some dealers indicated that certain PV OEMs have introduced compulsory billing procedures—such as automatic wholesale debits—to meet volume targets; inventory consequently stands at around 55 days. June thus painted a picture of modest but steadfast PV performance amid varied market cues,” FADA president CS Vigneshwar.

Derivatives Under Fire. Indian market regulator, the Securities and Exchange Board of India (SEBI), is going to continue to keep a watchful eye on derivatives trading. Days after the SEBI banned New York-based hedge fund Jane Street from buying and selling securities in the Indian market, the chairperson of the organisation, Tuhin Kanta Pandey was quoted by Reuters as saying, “There may not be many more such cases.”

Flashpoint: SEBI had also directed the seizure of Rs 4,843.57 crore in alleged unlawful gains by the firm. The crackdown comes after months of warning against derivatives trading, where the SEBI said 93% of retail investors lose their money.

Our Take: On Monday’s edition, The Take pointed out that the system was stacked against retail traders and proved dire for them.

Celebi Clearance Revoked. The Delhi High Court has dismissed Celebi Aviation’s plea against the revocation of its security clearance in India. The Turkey-based firm handled ground operations at nine major airports.

Backdrop: Celebi’s licence was revoked by the Bureau of Civil Aviation Security in May over national security concerns, amid rising India-Turkey tensions after Ankara backed Pakistan and criticised India’s military actions.

Implications: The move signals tougher scrutiny of foreign firms in sensitive sectors. Celebi has denied any political affiliations, asserting its operations are neutral and globally compliant, but its India operations now face uncertainty.

India Balances BRICS Ties: At the BRICS Summit in Rio, PM Narendra Modi took centre stage, urging members to fight terrorism and push for urgent reform of global institutions like the UN, IMF, and WTO. He positioned India as a bridge between the Global South and the world’s major powers.

Backdrop: The summit follows Donald Trump’s threat of a 10% tariff on BRICS nations seen as opposing U.S. interests. Tensions are rising as BRICS expands and gains influence.

Implications: Modi’s assertive pitch signals India’s intent to shape the multilateral order, despite geopolitical headwinds from a more protectionist U.S. stance.

E-Waste Fallout. US air conditioning company Carrier’s Indian unit has sued the Indian government over the hike in prices that producers have to pay recyclers. Previously, Samsung, LG, Daikin and Voltas have also sued the government, according to Reuters. 

Catch Up Quick: India produces the third most e-waste in the world, after the US and China, but only 43% of it is recycled, as per the government.

Pivot: In September of 2024, the Modi government announced that electronics producers must pay 22 rupees per kg to recyclers – rates that are five times lower than what producers pay in the US. In their lawsuit, Carrier argues that shifting the burden to manufacturers is unfair and that this rate is three to four times higher than what they paid earlier.

PODCAST

On Episode 626 of The Core Report, financial journalist Govindraj Ethiraj talks to Kunal Khattar, Founder at AdvantEdge as well as Prashant Vasisht, SVP and Co-Group Head, ICRA Ltd.

• Markets flat as traders calculate tariff impact

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• Adani enters Ambani territory with a PVC plant, how big is the market?

• The rare earth crisis gets real as EV plants stare at shut downs. Are there alternatives?

• Trump threatens additional 10% tariff on BRICS countries

👥 THE TEAM

✍️ Zinal Dedhia, Salman SH, Kudrat Wadhwa | ✂️ Rohini Chatterji | 🎧 Joshua Thomas