Performing Credit

A segment that is underrated and poised for explosive growth

India’s corporate bond markets are crowded with AA and AA rated bonds. These may be considered safe, but only return sub-inflation yields. Unlike Western capital markets, a junk bond segment does not exist in India.

For investors seeking higher returns, without the volatility inherent in equity, commodity, crypto and other alternate assets, the Performing Credit space offers a compelling opportunity. This space is uncluttered and under-exploited today, offering far superior risk adjusted returns than the mainstream bond markets can.

What is Performing Credit?

This space is identified by operating companies that could be unrated, going all the way to a domestic ‘A’ rating. Such companies lack easy access to capital markets. Returns for investors are invariably disproportionately high relative to the risk carried.

So how big is this Performing Credit opportunity?

India has over 3 million registered enterprises, of which less than a tenth have a credit rating and/or raised debt of any kind. These enterprises amount to under 10% of corporate bond market issuances.

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India’s top 10 issuers occupied 40% of corporate bond markets over the last decade.

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In FY 21, 96% of corporate bond market volumes came from issuances larger than INR 1 billion.

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Credit rating agency CRISIL forecasts that India’s corporate bond market will double to USD 900 billion by FY 2025.

So why isn’t everyone investing in these companies?

It’s not that simple.

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DISCOVERY IS TOUGH

It takes extensive outreach to identify the right companies. Acquiring detailed, updated information on such companies is harder.

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PERCEIVED RISK IS HIGHER

Since these companies are not AAA, not listed and not necessarily in urban centers, outsized concerns on governance and risk persist.

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SCALE IS A PROBLEM

These companies require credit of the order of US$ 1-25 million, too small for large investors to take the effort to diligence and monitor.

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TRACKING PERFORMANCE

Monitoring far flung, private companies is a challenging task. This needs expertise, field diligence and technology investments, quite unlike mainstream debt investments.

The tide is turning for the credit market now

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Universal individual identity (Aadhar) revolutionises KYC.

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Our thorough, Vivriti way

We take an uncompromising, diligent approach to address the complexity of the Performing Credit space. We bring together our technological prowess, deep sectoral expertise and rigor of diligence to build high quality products.

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Sourcing

We spend two days with each potential portfolio company at their place of work to understand them better. This is supplemented by the tech capabilities to entirely capture their online footprint.

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Structuring

At Vivriti, the funds are structured with the right incentive alignment for the manager. Every fund tightly limits the concentration in a single enterprise or segment, so that the risk is sharply reduced

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Risk Management

Consistent, stringent post-transaction monitoring, coupled with digital early warning signals, ensures that we stay on top of any emerging situation.

There’s a Vivriti fund that fits your need

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