According to Kotak Alternate Asset Managers Ltd.'s CEO, the company plans to raise up to $2 billion for a new private credit fund to meet India's growing demand for such products.

The fund will provide a variety of financing options, including acquisition funding, equity-backed loans, and annuity assets that generate consistent cash flow, according to Lakshmi Iyer. 

"We're seeking an investment return in the 18 per cent-20 per cent range," she told me. "Structured credit instruments will be the underlying, with tenors ranging from four to seven years." The firm's Strategic Situation Fund I, for example, has delivered more than 20% compound annual growth rate in local currency terms since its inception in 2019, she added.

Kotak Alternate manages approximately $20 billion, with more than $6 billion spread across 14 private credit funds, according to Iyer. The vast majority of the assets are owned by foreign investors, including family offices and wealthy individuals.

Ernst & Young reports that India's private credit market is expanding, with investments totaling $9.2 billion across 163 deals last year. However, the report warns that increased competition makes it more difficult to execute deals and may have an impact on credit quality.

According to Iyer, Kotak's proposed fund will be open for subscription by both offshore and local investors.