Sundaram Alternate Assets Ltd, a step-down subsidiary of Sundaram Finance Ltd, announced the first close of its debut corporate credit (debt) fund at Rs 205 crore (about $25 million), on Wednesday.
The Sundaram Emerging Corporate Credit Opportunities Fund – Series I (Ecco I), launched in June last year, is a 6-year close-ended category-II alternative investment fund (AIF) with a target corpus of Rs 500 crore (about $61.2 million) and a greenshoe option of Rs 500 crore. For its first close, it received commitments from marquee family offices, corporate treasuries and high-net-worth individuals (HNIs).
The credit fund will invest in debentures and mezzanine securities, a form of high-risk debt that allows the conversion from debt to equity in case of a default. It will focus on small and mid-market borrowers operating as fintech, manufacturing, services players.
The fund house estimates this market’s credit demand at around $4-7 billion.
“Private credit in India is at an inflection point and we see this asset class evolving significantly similar to global markets. We are well-positioned to capitalize on new opportunities created by the current economic environment,” said Vikaas M Sachdeva managing director, Sundaram Alternates.
“We are confident in our ability to continue driving compelling returns for our investors.”
The investments made via Ecco I will be backed by the investee firms’ tangible assets and “comfort from the promoters of the investee to enhance capital protection”. The AIF’s returns are targeted between 16- 18% with periodic current yield to investors, as per the product note.
The credit fund will also focus on climate, environmental, social and governance (CESG) intervention as part of its investment evaluation framework to construct its portfolio. ECCO I will be backed by Sundaram Finance as a sponsor.
Sundaram Alternate Assets launched its first real estate-focused credit vehicle High Yield Secured Real Estate Fund I in 2017, which has been fully deployed. The second fund High Yield Secured Real Estate Fund II was launched in late 2019. Between the two funds, the alternative asset manager has raised ₹750 crore across these two funds through onshore and offshore routes.