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Motilal Oswal Debuts INR3,000 Crore Private Credit Fund Amid India's Credit Gap

  //business-finance.news-articles.net/content/202 .. private-credit-fund-amid-india-s-credit-gap.html
  Published in Business and Finance on Friday, November 28th 2025 at 4:34 GMT by Business Today
      Locale: Maharashtra, INDIA

Motilal Oswal Steps Into the Private‑Credit Arena with a Rs 3,000‑Crore Fund

Motilal Oswal Asset Management Company (MOAMC), a stalwart of India’s mutual‑fund and wealth‑management landscape, has announced the launch of its first dedicated private‑credit vehicle – a ₹3,000 crore (≈ $350 million) private credit fund – as part of its broader strategy to diversify its product suite and tap a rapidly expanding market. The move, disclosed on 28 November 2025, signals the firm’s intent to capture the growing appetite for non‑bank debt instruments among institutional investors and high‑net‑worth households, and to position itself alongside other major Indian asset managers that have begun venturing into the private‑credit space.

Why Private Credit Is a Hot Commodity in India

Over the last decade, India’s banking system has grappled with tightening liquidity conditions, regulatory curbs, and a low appetite for long‑term lending. This has pushed corporates and SME borrowers toward alternative sources of capital. Private credit, which generally refers to debt financing sourced outside of the conventional bank system – often with higher yields and more flexible covenants – has emerged as a key answer to the “credit gap”.

A recent analysis by the Reserve Bank of India (RBI) highlighted that non‑bank financial companies (NBFCs) and specialized lenders are increasingly filling the void left by banks, and that institutional investors are beginning to allocate a larger slice of their portfolios to this asset class. Private credit funds, typically structured as closed‑end or open‑end vehicles, offer attractive risk‑adjusted returns because they can negotiate tailored repayment terms and leverage higher default premiums.

MOAMC’s launch comes at a time when the Indian private‑credit market is projected to reach ₹1.2 trn by 2030, according to a research report by ICICI Capital. The fund’s entry is seen as a timely response to the growing demand from sovereign, pension, and endowment investors who seek diversification beyond equities and government bonds.

Structure and Strategy of the New Fund

The ₹3,000 crore fund will be structured as a closed‑end vehicle with an 8‑year investment horizon, allowing the team to focus on mid‑market corporates and high‑growth SMEs. Key features include:

The fund’s mandate allows for both senior secured loans and subordinated debt placements, giving it the flexibility to capture yield across the capital structure. Moreover, MOAMC intends to use a portion of the capital to acquire niche credit products – such as mezzanine and supply‑chain finance – that offer higher risk premiums.

Management Team and Track Record

The fund will be managed by the newly formed Private Credit Team within MOAMC, headed by Mr. Arun Kumar, a seasoned credit specialist who previously led the firm’s fixed‑income strategy for over a decade. Kumar brings a combined experience of 25 years in senior credit roles at the RBI, Credit Suisse, and J.P. Morgan. He is complemented by a team of senior analysts and relationship managers with a deep understanding of the Indian credit landscape.

MOAMC’s fixed‑income platform has a proven track record of delivering consistent outperformance relative to benchmark indices. The private‑credit unit will leverage the firm’s proprietary risk‑modelling platform, which integrates machine‑learning algorithms with traditional credit assessment techniques. According to a press release, the team has already sourced a pipeline of 120 potential deals, expected to yield a diversified portfolio with a weighted average maturity of 4.5 years.

Investor Appetite and Regulatory Landscape

The launch comes after the RBI relaxed certain regulatory norms that previously restricted non‑bank lenders from acquiring credit portfolios. In a circular issued earlier this year, the RBI permitted certain asset‑management companies (AMCs) to invest in non‑bank credit, provided they meet capital adequacy and risk‑management standards. MOAMC’s move aligns with this new regulatory framework and aims to capture institutional inflows.

Institutional investors are increasingly interested in private‑credit vehicles because they offer a higher yield curve, especially in a low‑interest‑rate environment. According to a survey by the Association of Mutual Funds in India (AMFI), 68% of institutional investors reported an increase in their private‑credit allocations in 2025. MOAMC’s fund is expected to cater to both registered and non‑registered investors, with a minimum investment threshold of ₹10 lakhs.

Competitive Landscape and Market Position

MOAMC’s entry into the private‑credit space will compete with established players such as Edelweiss Asset Management, Kotak Mahindra Capital, and Franklin Templeton, all of whom have launched their own private‑credit funds. However, MOAMC differentiates itself through its strong distribution network, a seasoned credit team, and its reputation for stringent risk controls.

A competitor analysis published by Bloomberg Intelligence highlighted that MOAMC’s private‑credit fund could attract 12% of the total fund‑raised capital within the first 12 months, owing to its hybrid strategy that balances direct lending with secondary market purchases. Additionally, the firm’s existing customer base – over 2 million retail clients – provides an immediate distribution channel.

Expected Impact on MOAMC’s Portfolio and Future Plans

The ₹3,000 crore private‑credit fund is poised to become a cornerstone of MOAMC’s alternative‑investment strategy. By diversifying its asset‑allocation mix, the firm aims to reduce correlation with traditional equity and debt markets. Management projects that the fund could generate an internal rate of return (IRR) of 12–15% over its lifespan, subject to market conditions.

Looking ahead, MOAMC has outlined a roadmap to launch a second private‑credit vehicle – a global credit fund – in 2026. This fund would target cross‑border opportunities in Southeast Asia and the Middle East, leveraging the firm’s global partnerships. Furthermore, MOAMC plans to introduce a fixed‑income platform that integrates ESG (environmental, social, and governance) metrics into credit assessments, aligning with the growing emphasis on sustainable investing.

Conclusion

Motilal Oswal’s launch of a ₹3,000 crore private‑credit fund marks a significant milestone in the firm’s evolution from a conventional asset manager to a diversified investment powerhouse. By tapping into India’s fast‑growing private‑credit market, the fund not only offers institutional and high‑net‑worth investors a new source of yield but also positions MOAMC at the forefront of a segment that is reshaping the country’s capital‑raising ecosystem.

With a seasoned management team, a robust risk‑management framework, and a clear go‑to‑market strategy, the new private‑credit vehicle is expected to deliver competitive returns and broaden MOAMC’s product portfolio. As the Indian credit landscape continues to evolve, the firm’s proactive stance in launching this fund demonstrates its commitment to capturing emerging opportunities and serving the changing needs of its clients.