Avendus PE Investment Advisors Pvt. Ltd. is launching its third private credit fund to meet investor demand for high-yielding debt in India as well as a growing need for finance among medium-sized enterprises.

The 25-year-old Mumbai-based financial services firm hopes to raise up to Rs 4,000 crore ($466 million) through the fund, which would invest in the debt of mid-sized enterprises in the country, according to Anshul Jain, executive director of Avendus Structured Credit Funds, in a media statement.

The launch adds to a burgeoning pipeline of transactions that saw India's private credit sector raise close to a record $10 billion last year. Prime Minister Narendra Modi's quest for huge infrastructure projects has created economic prospects for many mid-sized enterprises, resulting in increased demand for finance. Given the difficulty they have in obtaining bank loans, bespoke financing options provided by private credit funds have proven to be ideal for them.   

Avendus' most recent fund will last roughly seven years and aim to provide investors with a gross return of 16-18%, according to Jain.

In example, a 10-year government bond yields approximately 7%, while equity indices Sensex and Nifty have earned less than 10% over the last year.

"We will invest in secured credit transactions, with deal sizes between Rs 200 crore to Rs 500 crore," Jain stated, adding preference would be for enterprises in the pharmaceutical, manufacturing, chemicals, healthcare, and technology industries.

Avendus' first private credit fund, launched in October 2017, yielded 18% for investors, while the second, launched in January 2022, earned approximately 17%, according to Jain. The latest offering will complete its first round in a month.

"This asset class is bridging a critical financing gap between traditional debt and equity, making it one of the fastest growing asset classes," Nilesh Dhedhi, managing director of Avendus Finance Pvt. Ltd., said during the event. "Mid-market enterprises are increasingly leveraging private credit as a powerful financing," he stated.