Sundaram Alternates Assets Ltd has just completed raising ₹1,100 crore for its Emerging Corporate Credit Opportunities fund. The fund is meant to provide debt finance to small and medium enterprises, of ₹200 crore-1,000 crore turnover.
Sundaram Alternates is a wholly owned subsidiary of Sundaram Assets Management Company Ltd, which is a subsidiary of Sundaram Finance Ltd, a leading non-banking finance company.
Sundaram Alternates announced the launch of ECCO-I in June 2022, when it said that the fund would invest “via high yielding debentures and mezzanine securities in a portfolio of companies across MSME, SME, Fintech, Manufacturing and Services.”
It had then noted in a statement that many companies in these sectors “find it relatively cumbersome to raise capital from banks and the equity markets. The fund will try to benefit from this opportunity by being a differentiator in the marketplace.” It had further added that ECCO-I had “started to evaluate interesting high-yielding credit deals in the market.”
Today, Karthik Athreya, Head – Fund Strategy (Private Credit), told a media round table that ECCO-I had been closed in October, after getting ₹1,100 crore into its kitty from investors.
In GIFT City soon
Athreya also said that Sundaram Alternates was working towards opening a branch in the GIFT city in Gandhinagar, in order to attract foreign capital. (The GIFT city is a region deemed to be outside the jurisdiction of India; companies incorporated there are subjected to a different tax and repatriation regime than in the rest of the country.)
Real Estate funds
Sundaram Alternates is in the process of putting together its fourth real estate fund and expected to close it with a pool between ₹1,000 crore and ₹1,500 crore. So far, ₹250 crore has been collected from investors — high networth individuals, family offices and institutional investors such as pension funds.
Athreya, who expects to garner another ₹250 crore soon, said, “We have more deals than we have money for.”
The fourth real estate fund is the largest. The first collected ₹400 crore in 2017-18 (“just after demonetisation and before GST and the IL&FS” imbroglio); the second collected ₹435 crore in February 2022 and the third closed with ₹570 crore in October 2022. These funds were able to make a portfolio level return of 18-20 per cent; the investors got 17 per cent.
Though Sundaram Alternates raised ₹1,405 crore across the first three funds, because of re-deployment of returned capital, it was able to deploy ₹2,200 crore across 43 deals in the residential real estate space, Athreya said.
Real estate developers are hungry for debt from funds like Sundaram Atlernates’, even though they are costlier than banks, simply because due to a myriad of regulations banks cannot lend to them. For example, banks are not allowed to finance land purchases or acquisition of properties. “Without the regulatory arbitrage, this industry would not have existed,” Athreya said, noting that the arbitrage would not go away.
The real estate debt finance market in India is about $25-30 billion, of which that segment of the market that is finance-able only by funds is about $10 billion — growing at 10-15 per cent. Since only about $3-4 billion is going into this segment, there is a huge headroom for growth, Athreya said.