The main investment objective of PCOF is to generate attractive risk adjusted returns pointing high yield obligations (both listed and unlisted) and mezzanine securities. The fund focuses on middle market companies, particularly in the MSMESMEs, Fintech, Manufacturing and Services, with revenues ranging from Rs 250 to Rs 5,000 crore.
The investments will be backed by a variety of security structures, including strong commercial cash flows, hard assets, collateral and equity pledges, ensuring a robust risk management framework.
A hallmark of the PCOF is the commitment of sponsors, who will contribute up to 15% of the fund size, demonstrating confidence in the fund’s success. The fund will distribute quarterly income to investors, providing steady cash flow. The fund will recycle principal repayments over the investment period to improve returns for investors, with the goal of commencing capital distributions beginning in year 4, according to a press release.
“We are excited to launch PCOF-I, which builds on our proven track record in private credit invest. The Indian market is at a crucial point for private credit growth and we believe our disciplined investment approach and deep market experience position us to deliver attractive returns to our investors. We anticipate strong interest and exciting implementation opportunities for this strategy, which is well positioned in this environment,” said Karthik Athreya, head of fund strategy (private credit), Sundaram Alternates.
The target IRR at the portfolio level is around 13-16% and the net return to investors is around 12-13%. The term is five years (extendable for two years). He investment strategy is a senior secured, diversified, cash flow-backed, growth-oriented, short-medium duration credit portfolio, according to the statement. India’s alternative credit market, currently valued at approximately $80 billion, presents a significant growth opportunity, with the private sector/non-bank credit segment contributing between $10 billion and $23 billion annually and growing at a CAGR of 10-15%. In this prosperous environment, private credit funds as PCOF-Series I are uniquely positioned to capitalize on the market potential, according to the release. Sundaram Alternates is a wholly owned subsidiary of Sundaram Asset Management Company Limited and Sundaram Finance Limited.
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