HNIs and Family Offices Drive Growth in India’s Private Credit Sector
India’s high-net-worth individuals (HNIs) and affluent family offices are increasingly turning to private credit deals as they seek higher and more predictable returns. This trend has contributed to the growth of the private credit market in India, which is projected to reach nearly $13 billion by 2025. The shift is largely driven by changes in regulatory and tax frameworks that have made traditional debt mutual funds less appealing, prompting investors to explore alternative investment fund (AIF) structures that offer greater comfort and scalability.
Understanding Private Credit
Private credit refers to debt financing provided by non-bank lenders to primarily mid-market companies. This investment avenue has gained traction among large family offices, both globally and in India, with reports indicating that 15% to 25% of their portfolios are allocated to alternative investments, of which 25% to 30% is directed towards private credit solutions. Nilesh Dhedhi, MD & CEO at Avendus Finance, highlights that the recent regulatory and tax changes have diminished the attractiveness of debt mutual funds, making private credit a more appealing option for investors seeking stability and returns.
Most private credit platforms in India operate as category II AIF entities, regulated by the Securities and Exchange Board of India (Sebi). According to Prakash Bulusu, joint CEO at IIFL Capital, private credit offers visibility, security, and yield, especially in a market where public equity can be unpredictable, and bond yields may not adequately cover inflation and credit risks. HNIs are particularly drawn to investments backed by tangible assets and strong covenants, which provide additional security for their capital.
The Growth of Private Credit in India
The rise of private credit in India can be attributed to a significant funding gap left by traditional banks, which are unable to meet all financing needs. Dhedhi explains that private credit can provide non-dilutive capital tailored to the specific requirements of borrowers. This flexibility has made private credit an attractive option for companies across various sectors. Amit Dharod, MD of alternative assets at JM Financial AMC, notes that private credit instruments have experienced a remarkable growth rate of 40% to 50% in 2025 compared to the previous year. While foreign capital initially fueled this momentum, domestic investors, including HNIs and family offices, have become the primary drivers of growth.
Vivriti Asset Management has actively participated in this trend, making ten investments across diverse sectors in the past seven to eight months. The outlook for private credit in India remains strong, particularly in the Rs 100-1,000 crore ticket size segment. Bulusu emphasizes that there are numerous active mandates at any given time, with total deal activity amounting to several tens of thousands of crores annually.
Sectoral Opportunities in Private Credit
The private credit landscape in India is characterized by a variety of sectors that are actively seeking funding. Bulusu points out that there is significant activity in manufacturing, renewables, real estate, logistics, financial services, healthcare, and select technology-led businesses. This diverse range of sectors indicates a robust pipeline for private credit opportunities in the coming year. The ability to cater to specific needs and provide tailored financial solutions makes private credit an appealing option for both investors and borrowers.
As the market continues to evolve, the increasing interest from HNIs and family offices in private credit reflects a broader trend towards alternative investments. With the potential for higher returns and the ability to mitigate risks associated with traditional equity and bond markets, private credit is poised to play a crucial role in the investment strategies of affluent individuals and families in India.
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