Access to credit remains a significant challenge for most India private enterprises, particularly those in the mid-market space. Capital availability is critical for economic growth by financing production, consumption, and capital formation, but India has one of the shallowest banking / finance sectors in both the developed and developing worlds and very low levels of domestic credit to the private sector. What little capital that is available typically gets directed towards large corporates who receive more than 80% of all bank credit.
We understand that mid-market companies often have profitable track records, established brands, strong market positions and excellent growth prospects, but have very limited access to capital to facilitate growth. We seek to provide flexible credit solutions to these companies.
Over the past five years, the team has consistently deployed capital into the Indian mid-market across a broad range of sectors while generating strong yields for our investors.
The most recent fund managed by the team has made 21 loans to successful and growing businesses, and has resulted in almost half of the fund being distributed back to our investors within the first two years of its life.
Our investment strategy is founded on the deeply rooted principles of portfolio construction, risk management and capital preservation. While maintaining the flexibility to allocate capital to the best risk-adjusted opportunities, we seek to construct a diversified portfolio over time to reduce exposure to individual companies, sectors and geographies.
We are active lenders seeking to lend to established, growing mid-market Indian corporates and real estate developers with advanced real estate projects in larger cities. Our target borrowers are stable businesses with proven execution and repayment track record, and run by professional management teams. These companies are typically financially secure but require capital to support the continued growth of their business and are therefore able to offer strong collateral and consistent loan servicing from operating cash flows.
Proprietary origination, solution-based and well-structured debt, and pro-active monitoring are the hallmarks of our investment process as we believe this can significantly improve the risk profile of the fund and provide strong yields to our investors. We underwrite all of our loans in-house while drawing on technical external input as required, and place a strong emphasis on the promoter and the business. We understand Indian markets and have a large local team to underwrite and monitor the loans.
We manage risk during the underwriting process through technical due diligence and by utilizing robust structures that have been successfully employed by the team over the past 23 years. Loans will always have multiple sources of collateral, and amortizing repayment structures with regular income flows help to reduce risk over the life of the investment and minimize currency exposure.