Sundaram Alternates has launched Performing Credit Opportunities Fund (PCOF) - Series I, a closed end category II AIF.
The scheme aims to generate attractive risk-adjusted returns by targeting high-yielding debentures (both listed and unlisted) and mezzanine securities. The fund focuses on mid-market companies, particularly in the MSME, SME, fintech, manufacturing, and services sectors, with revenues ranging from Rs.250 to Rs.5000 crore.
Sundaram Alternates will contribute up to 15% of the fund size as skin in the game. The fund will distribute quarterly income to investors, providing a steady cash flow. The fund will recycle principal repayments during the investment period to enhance returns for investors, with the goal of commencing capital distributions from fourth year.
In a press release, Karthik Athreya, Head of Fund Strategy (Private Credit) at Sundaram Alternates, said, "We are excited to launch PCOF-I, which builds on our proven track record in private credit investing. The Indian market is at a pivotal point for private credit growth and we believe our disciplined investment approach and deep market expertise position us to deliver compelling returns for our investors. We anticipate strong interest and exciting deployment opportunities for this strategy, which is well-positioned in this environment.”
Sundaram Alternates has successfully raised Rs. 3,100 crore across five Category II AIFs and invested Rs. 3,500 crore across 65 deals, achieving zero capital losses and closing in on approximately 17% gross investor returns.
India’s alternative credit market, currently valued at approximately USD 80 billion, presents a significant growth opportunity, with the private/non-bank credit segment contributing USD 10-23 billion annually and growing at 10-15% CAGR.
Key features of PCOF-Series I:
- Investment Focus: Mid-market companies in India with sales / revenues between Rs. 250 - 5000 crore
- Target Returns: Portfolio level ~13-16% target IRRs; investor net returns ~12-13%
- Distribution: Quarterly income distributions, amortising portfolio for ~4-4.5 years duration
- Tenor: 5 years (extendable by 2 years)
- Investment Strategy: Senior secured credit portfolio, diversified, cash-flow backed, growth-oriented, and short-medium duration
- Focus: Pure credit risks for risk-adjusted returns, mid-sized investees, strong Sundaram Finance franchise support