India remains in early phase of private credit cycle: UTI Alternatives CEO

Private credit is fast becoming a core funding source for India's mid-market firms, bridging gaps left by banks and bonds, says UTI Alternatives CEO Rohit Gulati

Private credit has quietly emerged as a core financing channel for India’s mid-market companies, filling a structural gap left by banks and a still-shallow corporate bond market, says Rohit Gulati, chief executive officer of UTI Alternatives. In an email interview with Samie Modak, Gulati says the asset class has seen rapid growth driven initially by domestic family offices and high-networth individuals (HNIs), with institutional capital following. Edited excerpts: 

Private credit has grown rapidly in India over the past few years. What has underpinned this growth, and will the momentum be sustained? 

Eight years ago, when we launched our first series of the mid-market performing credit strategy, there was a healthy dose of scepticism in every conversation with prospective investors. Since then, the market has evolved into a core financing channel for India’s mid-market economy. This evolution has been shaped not by global institutional capital but largely by domestic family offices and HNIs, with Indian and global institutions now following. 

From both domestic and global perspectives, India still remains in an early phase of the private credit cycle. Despite all the hype, I can probably count on my fingers the private credit managers that truly matter. The market still has room for many more players. 

What structural gaps are private credit funds filling today that banks and traditional non-banking financial companies cannot? 

Banks have been the mainstay of credit in the country forever, but structurally, they cannot be the solution for every need. In developed economies, the corporate bond market addresses gaps in the credit system. 

In India, despite several efforts by the central bank and the government, the corporate bond market remains shallow — limited to sovereign issuances, banking, financial services and insurance, and only the largest AAA-rated corporates. Private credit funds are therefore a natural bridge to the evolution of a deeper corporate bond market in the country.

 

Your second structured debt fund was tested across real stress events — from credit tightening to the pandemic. Which aspects helped you tide over the stress? 

UTI Alternatives is one of the few mid-market-focused private credit asset managers in India with an operating track record of over eight years and two structured debt funds that have completed a full life cycle with capital returned to investors. Both funds navigated multiple stress events, including Infrastructure Leasing & Financial Services and the pandemic, yet exited with double-digit internal rates of return at the portfolio level.

 

Our rigorous underwriting process, focus on access to cash flows and hard collateral, and robust monitoring mechanism helped us generate strong risk-adjusted returns for our investors.

 

How do you decide between structured credit, special situations, and pure yield strategies? Has that mix changed recently? 

At UTI Alternatives, we have built a multi-strategy alternatives platform that allows us to deploy capital across market conditions and provides investors the ability to allocate across strategies.

 

Our private credit capabilities span performing structured credit, which remains our flagship strategy; real estate, where we focus on late-stage project-specific exposure; structured equity, where downside protection is paired with equity upside; and distressed and special situations, where deep collateral cover exists but cash flows are lacking.

 

One of our clearest lessons is that single-strategy rigidity increases risk. Capital should move with cycles, not fight them.

 

Given the competition among private credit funds, is there pressure on yields? 

Even though competition has increased, the market is large enough to absorb it. Most funds have formed their niches or focus areas, and within deals that fit those niches, competition is limited.

 

At UTI, we are not starved of deals — in fact, in the latest series of our flagship performing credit fund, we have called 50 per cent of commitments at the application itself.

 

What are investors prioritising today — higher yields, capital protection, or liquidity visibility? 

Across investor segments, priorities have converged. Capital protection comes first, followed by yield and low volatility. The attractiveness of private credit is that it offers attractive yields while reducing portfolio volatility.

 

Private credit has finally come of age because domestic investors have matured markedly. Family offices and HNIs are no longer focused solely on headline yields; they now value diversification and seek new asset classes, with yields measured against volatility. This mirrors global trends, where private credit is viewed as a core allocation rather than an opportunistic trade.

 

What could derail the private credit growth story in India? 

The biggest risk is weakening underwriting standards in pursuit of rapid growth. India’s private credit market is still evolving, and its long-term success will depend on managers who can responsibly steward both domestic and global capital.