Private credit funding, in which lenders and borrowers directly negotiate financing without engaging an intermediary, is increasing in size and complexity, as companies look to diversify their source of funding, Pramod Kumar, chief executive officer and head of investment banking – India at Barclays Plc.
Barclays, which has been quite active in the private credit space over the past few years, is looking at big-ticket transactions. The UK-based bank recently closed a funding deal for Hinduja Group’s acquisition of the bankrupt Reliance Capital.
“In the private credit space, we do see that the share of larger deals, that is, $100 million-plus is now close to 50%. It is evident that there is an increasing trend of larger and complex transactions. And as you see more competition coming in smaller transactions, we obviously graduate ourselves to focus more on larger transactions, handle more complexity, and therefore make better returns for us,” he said.
Shifting market dynamics
Kumar said that various financing opportunities are emerging, as stock markets reel under selling pressure and public listing takes a hit. He said that 2025 will see a more balanced mix of equity and a combination of debt – that could be private credit, debt capital markets, or market borrowings – as raising equity is not certain and doesn’t come cheap as was the case in 2024. Valuations have cracked and fallen a fair bit, he said.
“A mix of increased sponsor activity, delayed exits because of relatively weaker IPO markets, and third being a robust domestic M&A activity by some of the large industrial houses who feel comfortable taking on some incremental risks to consolidate the business or get into newer segments. So, those are the three factors that will drive financing activity,” he added.
Kumar claimed that Barclays was number 2 in the M&A (mergers and acquisitions) league table last year, as it closed a few large-ticket deals like Bharti Group’s $4 billion investment in UK’s telecom company BT Group, and EQT and Temasek’s sale of 4.7 gigawatt of renewable assets to JSW. The bank was also active in rupee financing space as it funded Mankind Pharma’s acquisition of Bharat Serum.
“TMT, healthcare, pharma, infrastructure, renewables, financial institutions, and industrials are the sectors where we are focused on and continue to see M&A as well as financing activity. I envisage this as a year where you’ll see more consolidation activity across all the sectors, not necessarily only growth capital. But if you wish to call out, we certainly will see more consolidation and activity in healthcare delivery, domestic pharma and financial services may go through a little bit of challenge,” said Kumar.
“Tech, which was very active until two years ago, will see a pick up this year, with valuations improving a bit. There will continue to be more consolidation and capital raising activity in renewables,” he added.
Barclays deepens India commitment
Earlier this week, Barclays announced capital infusion of ₹2,300 crore into its India operations. The capital infusion is expected to enable the bank to expand its reach to a wider client base, including corporate and financial sponsor clients and ultra-high-net-worth individuals in India.
The latest capital commitment follows a significant injection of over ₹3,000 crore (£300 million) in 2021. With this additional infusion, the bank’s total invested capital in India will increase to over ₹12,400 crore, reflecting a steady and sustained growth strategy.
In FY24, Barclays’ India operations reported net profit of ₹785 crore, against ₹669 crore in FY23. Its assets stood at ₹53,910 crore at the end of FY24. According to India Ratings, a major portion of Barclays India’s loans as of FY24 consist of term loans (49.2%), bill discounting (35%) and working capital loans (15.8%).
