Key Takeaways
- • Rishi Aswani of Houlihan Lokey characterizes the recent slowdown in Indian private credit deployment as a healthy transition from a episodic, niche phase to a mature, structural market rather than a retreat.
- • The record $15.6 billion deployed in 2025 was skewed by outsized transactions such as the $3.6 billion Shapoorji Pallonji issuance, according to Aswani.
- • Private credit's share of Indian deals rose from one in five in 2024 to one in four in 2025, and the market's AUM has doubled to roughly $25 billion over five years, with forecasts of $80 billion to $90 billion within five years.
- • Less than 1% of Indian borrowing is financed by private credit, versus nearly 4% in developed economies such as the U.S., which Aswani cites as a long runway for growth.
- • Returns above the 17%-18% threshold increasingly come from structured, higher-risk situations, with valuation requiring explicit modelling of embedded features and stress-testing of stale underwriting assumptions.
Summary
In a Q&A published by Houlihan Lokey, Rishi Aswani addressed the recent moderation in capital deployment in India's private credit market. He argued that the slowdown reflects a shift from rapid, headline-grabbing growth toward a more mature and structural market rather than a loss of momentum. He pointed to the record $15.6 billion deployed in 2025, which he described as an outlier skewed by several large-ticket transactions, including the $3.6 billion Shapoorji Pallonji issuance. The market has doubled its AUM to roughly $25 billion over the past five years and is expected to reach between $80 billion and $90 billion within five years, according to consensus forecasts cited by Aswani. Private credit accounted for one in four Indian deals in 2025, up from one in five in 2024.
Aswani described the "complexity premium" as return earned from structuring capital solutions rather than simply lending for a coupon and paydown. He noted that 18%-plus yields on straightforward senior debt are largely gone, and that such yields that remain are likely short-term bridge financing. Lenders are increasingly targeting India's ambitions to reach a $5 trillion and then $8 trillion economy, with deployment shifting from replacement capital toward growth capital, particularly in the middle market. Returns above the 17%-18% threshold are typically sought through higher-risk strategic situations, including shareholder management, tax-efficient financing, turnarounds and amend-and-extend structures.
On valuation, Aswani said institutional-grade analysis requires understanding the underwritten events, the instruments held, and the durability of any additional return, not just running embedded features through a model. He identified stale assumptions as the most critical risk that standard credit analysis may fail to stress-test, citing tariffs as an example of a largely unexpected shock. He also warned that deferring modelling of complex instruments until maturity is a significant omission.
Comparing markets, Aswani said the U.S. private credit market, which has faced recent turbulence tied to open-ended fund redemptions, is structurally different from India's. Indian funds are predominantly closed-end and barred from fund-level leverage, and the market features more bilateral and fewer syndicated deals. Almost all Indian private credit deals are priced well above investment-grade levels, so valuation focuses more on asset-level credit risk. Regulatory changes, including the liberalisation of External Commercial Borrowings and a new acquisition finance framework, were described as tailwinds that enable more complex, multi-tranche capital structures.
Aswani described the "complexity premium" as return earned from structuring capital solutions rather than simply lending for a coupon and paydown. He noted that 18%-plus yields on straightforward senior debt are largely gone, and that such yields that remain are likely short-term bridge financing. Lenders are increasingly targeting India's ambitions to reach a $5 trillion and then $8 trillion economy, with deployment shifting from replacement capital toward growth capital, particularly in the middle market. Returns above the 17%-18% threshold are typically sought through higher-risk strategic situations, including shareholder management, tax-efficient financing, turnarounds and amend-and-extend structures.
On valuation, Aswani said institutional-grade analysis requires understanding the underwritten events, the instruments held, and the durability of any additional return, not just running embedded features through a model. He identified stale assumptions as the most critical risk that standard credit analysis may fail to stress-test, citing tariffs as an example of a largely unexpected shock. He also warned that deferring modelling of complex instruments until maturity is a significant omission.
Comparing markets, Aswani said the U.S. private credit market, which has faced recent turbulence tied to open-ended fund redemptions, is structurally different from India's. Indian funds are predominantly closed-end and barred from fund-level leverage, and the market features more bilateral and fewer syndicated deals. Almost all Indian private credit deals are priced well above investment-grade levels, so valuation focuses more on asset-level credit risk. Regulatory changes, including the liberalisation of External Commercial Borrowings and a new acquisition finance framework, were described as tailwinds that enable more complex, multi-tranche capital structures.
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