In 2022, personal loans reached new highs in volatile markets | Jobs Vox


Mumbai Personal credit deals peak in 2022, with high volatility in the public and private markets prompting companies to look at alternative financing sources. The year to November-end saw over 83 transactions worth $3.85 billion, a 47% increase over the same period last year, EY India said. By comparison, cumulative deal value in 2021 stood at about $2.61 billion with 85 deals, only up from the 2020s’ $2.56 billion with 74 deals, he said.

Industry experts said that apart from the volatility of the market, Indian companies are taking loan funds to expand their production capacity. Another key factor in the startup ecosystem is the valuation asymmetry between what investors are willing to give and what founders or startups are willing to accept, which leads to private loan requests.

Vivek Soni, head of private equity at EY India, said: “As of December, we estimate the aggregate value of private loan deals to reach $4 billion by 2022, indicating that this year will be a record year for private loan deals.

In recent months, international investment firms such as Värde Partners, KKR with Mubadala and others have opened private debt funds. Domestic firms such as Edelweiss, Kotak Alternatives and IIFL AMC have also launched or are in the middle of floating their credit funds.

Private credit includes capital provided by private funds, venture debt, development finance institutions, special funds, but excludes loans from banks and non-banking finance companies (NBFCs). Typically, companies tap into personal credit when banks or NBFCs cannot underwrite certain transactions. Usually this relates to acquisitions or promotional financing or acquisitions and contains certain drivers and repayment limits.

In one of the biggest credit deals this year, Apollo Global Management has funded Mumbai International Airport Ltd for $750 million. Subsequently, the Cholamadalam Investment and Finance Corporation was given a financing of USD 350 million from the World Bank arm International Finance Corporation.

“We see strong growth in the private equity market in India as debt funds and long-term capital fill gaps in the bond market and look to replace NBFCs and mutual funds,” said Utsav Baijal, partner and head of India private equity at Apollo.

In recent years, the share of startups in the broader credit market has also expanded. Of the $3.85 billion so far, the market share of the venture debt market for startups will be $1-1.1 billion, said Ishpreet Gandhi, founder and managing partner, Strouds Ventures.

The ‘funding winter’ in the startup ecosystem has prompted many startups, especially late-stage ones, to hold off on raising equity for as long as possible.

Stride Ventures, which has a 30-35% share of the venture debt market (mainly catering to startups), saw the demand. 1,000 crore per month. However, this year it has been closed due to twice monthly price cuts. Gandhi cited an increased awareness among founders of finding ways to monetize their working capital.

“Furthermore, startups are now less distracted by equity funding. They know and their understanding of different loan structures has increased,” he said.

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