SUMMARY
- Sundaram Alternates launched its Performing Credit Opportunities Fund (PCOF) – Series I .
- It seeks to provide attractive returns, with risk-management, and a focus on high-yield debentures and mezzanine securities.
- The fund will utilize various security types.
Sundaram Alternates, an entirely owned subsidiary of Sundaram Asset Management Company and Sundaram Finance, launched its Performing Credit Opportunities Fund (PCOF) – Series I on Friday.
This closed-ended category II AIF seeks to provide attractive returns while managing risk by focusing on high-yield debentures (both listed and unlisted) and mezzanine securities.
As per a company statement, the fund will utilize various security types such as strong business cash flows, tangible assets, guarantees, and share pledges to create a strong risk mitigation strategy.
The focus will be on middle-market firms, especially those in MSME, SME, fintech, manufacturing, and services, with revenue ranges from Rs 250 to 5,000 crore. The PCOF-Series I targets portfolio-level returns in the range of 13-16% Internal Rate of Return (IRR), with an estimated investor net return between 12% and 13%.
The fund is set to distribute income quarterly over 4-4.5 years. It plans to operate for five years with the option for a two-year extension.
The strategy prioritizes investments in senior secured credit with a focus on investments in companies that are backed by cash flow, aiming for investments of short to medium-term duration that emphasize “pure credit risks.”
The alternative credit market in India, currently worth around $80 billion, represents a significant opportunity for growth. The private/non-bank credit segment is responsible for adding $10-23 billion annually, expected to grow at a rate of 10-15% compounded annually, according to the firm.
Karthik Athreya, Head of Fund Strategy (Private Credit) at Sundaram Alternates, stated, “We are excited to launch PCOF-I, which builds on our proven track record in private credit investing. The Indian market is at a pivotal point for private credit growth, and we believe our disciplined investment approach and deep market expertise position us to deliver compelling returns for our investors.”
He added, “We anticipate strong interest and exciting deployment opportunities for this strategy, which is well-positioned in this environment.”
