The asset management arm of Avendus group has announced the launch of its third private credit fund, with a larger corpus of ₹4000 crore compared to its previous two funds.

The fund, which includes a greenshoe option of ₹2000 crore, is expected to achieve its first close in a month or so, said Anshul Jain, Executive Director, Avendus Structured Credit Funds.

Proceeds of the fund, which has a tenor of 6 years, 9 months from the first close, will be deployed across 12-18 transactions with deal sizes of ₹200-500 crore and a target gross internal rate of return of 16-18 per cent.

While the focus will be to invest in growing, established companies with a good track record, the targets would likely generate EBITDA of ₹70-80 crore, Jain said. The investee companies would have a vintage of 5-7 years, sound track record, and in the case of start-ups the presence of credible multiple PE investors and nothing less than a unicorn, he added.

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The funds will be deployed through structured credit solutions in both operating and holding companies. It will be a sector agnostic fund with a focus on sectors such as pharmaceuticals, healthcare, manufacturing, consumer, chemicals, technology, B2B businesses, among others.

Jain said there was high interest among HNIs and family offices as well as non-bank institutions to participate in such products.

Avendus had launched its first credit fund in 2018 with a small corpus of ₹135 crore and deployed it in 9 investments, all of which it has exited with a portfolio return of 18 per cent. The second fund, launched in 2022, had a larger corpus of ₹1055 crore and it has made 14 investments and had one exit and was tracking return of 17 per cent.

India’s private credit market is still minuscule in size with around $18 billion of AUM in 2023, though it is growing at 25 per cent annually. It now has a 16 per cent share in the total alternatives asset class from 5 per cent around six year back.