Are Alternative Investment Funds Coming Of Age In India?

A rival, Kotak Mahindra AMC, is planning to raise ₹2,000 crore through its first private credit AIF (called Kotak Credit Opportunities Fund), in the January to March quarter. This fund targets to raise ₹1,000 crore, plus an additional ₹1,000 crore through a greenshoe option.

“Investments will be identified based on themes of solving private capital needs of promoters towards their strategic, opportunistic and growth objectives. The fund’s investment strategy will revolve around secured transactions, bespoke solutions and established business models,” Saurabh Tripathi, CIO, private credit at Kotak Mahindra Asset Management Company, tells Forbes India.

Favourable Opportunity

The Sebi data aside, Tripathi sees India as a growth opportunity. “Economic growth is a key driver of increased M&A [mergers and acquisitions] and sponsor-level activities in the country. We can expect fund raises and deployments from both local and international investors, often in collaboration. This influx of capital will likely create a larger pool of funds for companies and will lead to innovative credit underwriting structures.”

“When we see deal activity, the volume of transactions is still dominated by global credit players, but domestic players lead in quantity of transactions. Similarly, co-investment activities between domestic and global credit players now dominate the deal activity chart,” he says.

In this competitive landscape, players with strong in-house credit underwriting capabilities, significant sponsor investments and a solid local presence will stand out.

EAAA India Alternatives has taken top position among AIFs, in terms of assets under management (see table). Others such as ICICI Venture and Kotak Alternate Asset Managers have grown as have private equity-focussed Kedaara Capital and the Carlyle Group in India.

Also read: Debt: More profitable than equity in 2025

Fragmented Market

Though several of these alternatives business houses are gaining in size, the industry in India is fragmented, with several small alternatives fund houses setting up shop. “It is true that the alternatives industry in India has a handful of large domestic players. But when you look through the data, the AIF market has increased fourfold since the advent of AIF regulations in 2012,” says Tripathi. “It is a demand and supply phenomenon. With regulations in place, financialisation of savings and a quest of interesting investment strategy, we have witnessed many funds being launched with differentiated strategies. On the other hand, limited partnerships [LPs] are also ideating with their capital allocation thesis. Put both of these together and we have a larger number of players in the alternatives market,” he says.

“While consolidation in any industry with a heavy influx of players is expected, I believe the gap between larger and smaller players will increase gradually, leading to both operating in different orbits in terms of deal size and structure of deals. The alternatives market is like a rising tide that will lift all boats,” Tripathi adds.

Since its inception, EAAA has focussed on creating value for institutional clients and family offices in India and globally, with differentiated investment strategies centred on income and yields.

In the last three financial years and the six months ended September 30, 2024, EAAA funds raised capital commitment aggregating ₹25,973 crore, deployed investments aggregating ₹23,212 crore and realised investments aggregating ₹25,482 crore. EAAA funds have invested in 199 companies, exiting 97 with success. It has only lost money in two investments, according to the company’s DRHP data.

“This achievement highlights EAAA’s effective investment strategy, robust asset management and focus on realisation,” says Venkat Ramaswamy, MD and CEO of EAAA Alternatives.

Ramaswamy uses a cricket analogy that investment folk within EAAA is discouraged from “trying to hit fours or sixes”. He says: “Clients have entrusted us with their capital with the expectation that we will be conservative in taking risks and maintain a steadfast focus on capital preservation. The risk of losing money increases significantly when one takes undue risks [trying to hit a six].” Similarly, in our growing real assets practice, our strategy of building strong operating teams upfront has allowed for reducing risks in delivering timely returns to our clients, he adds.

“Another key area of focus for EAAA is the responsibility of managing someone else’s money. This philosophy drives the company focus on establishing effective processes to ensure prudent investments, exercising vigilance in asset management and risk management, avoiding conflicts of interest and continuously nurturing leadership and developing a strong talent pool,” Ramaswamy says.

It is learnt that EAAA is exploring entering the private equity alternatives space over the next two to three years, but Ramaswamy declined to comment about the same.