Sundaram Alternate Assets Ltd, a step-down unit of Sundaram Finance Ltd, on Wednesday announced the first close of its maiden corporate credit fund at ₹205 crore (about $25 million).
Launched in June 2022, the Sundaram Emerging Corporate Credit Opportunities Fund – Series I (ECCO I), is a six-year close-ended category-II alternative investment fund (AIF) with a target corpus of ₹500 crore, and a greenshoe option of an equal amount.
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 high-yielding debentures and mezzanine securities, a form of high-risk debt that allows the conversion from debt to equity in case of default. The fund will focus on small and mid-market borrowers operating as fintech, manufacturing and services firms, and those that fall either in the micro, small, and medium enterprise (MSME), or small, and medium enterprises (SME) category.
The fund house estimates credit demand in this market at $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 through the combination of our team’s deep market expertise and disciplined approach to investing,” he said.
The investments made through 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% and 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 build its portfolio. Sundaram Finance will be the sponsor to ECCO I.
The firm is looking to deploy the amount raised in the fund’s first close by March, and the rest by the end of the year.
According to Kartik Athreya, Director and Head of Strategy, Alternative Credit, Sundaram Alternates, the corporate credit fund may see its final close by June. He said Sundaram Finance will sponsor about 20% of the fund’s corpus by its final close.Sundaram Alternates launched its first real estate-focused credit vehicle High Yield Secured Real Estate Fund I in 2017, which has been fully deployed.
