Neo Alternative Asset Managers (NAAM), the alternative asset management arm of Neo Wealth and Asset Management, has raised ₹6,200 crore through its second special credit opportunities strategy, exceeding its initial fundraising target of ₹5,000 crore.
The fund, Neo Special Credit Opportunities Fund-II (NSCOF-II), will provide structured financing to mid-market Indian companies for requirements such as capital expenditure (CapEx), refinancing and last-mile funding.
Speaking to CNBC-TV18, Rubin Chheda, Managing Director and Head – Special Situations Credit, NAAM, said the fund would provide short-term solution capital to companies, with individual deal sizes ranging from ₹150 crore to ₹500 crore.
The financing will be structured through a combination of non-convertible debentures (NCDs), optionally convertible debentures (OCDs) and compulsorily convertible debentures (CCDs).
NSCOF-II builds on the foundation of our first fund, with an unwavering focus on rigorous underwriting and downside protection. India’s mid-market special situations credit segment offers a large and underserved opportunity to finance businesses seeking capital beyond conventional lending channels. Our selective, collateral-backed approach enables us to pursue this opportunity while staying true to our underwriting standardsRUBIN CHHEDA, MANAGING DIRECTOR AND HEAD – SPECIAL SITUATIONS CREDIT, NAAM
What will the fund invest in?
The strategy will focus on established businesses with operating cash flows.
Apart from CapEx requirements, refinancing and last-mile funding, it will cover acquisition financing, growth capital and special situations where conventional lending structures may not adequately meet a company’s requirements.
Puneet Jain, Co-Founder and Chief Investment Officer, NAAM, said the fund plans to build a diversified portfolio of approximately 35-40 investments.
The investment approach will involve structured transactions, collateral-backed security and an assessment of the borrower’s ability to generate cash flows.
The fund is a SEBI-registered Category II Alternative Investment Fund (AIF).
What is special situations credit?
Special situations credit is a form of private lending in which funds provide customised financing to companies facing specific funding requirements. These could include refinancing existing borrowings, financing acquisitions, meeting capital expenditure needs or bridging a temporary funding gap.
Such financing may be used when conventional bank loans are not suitable for the borrower’s requirements, whether because of the nature of the transaction, the timeline involved or the structure of the funding.
Unlike standard loans, special situations credit deals can have customised terms, repayment structures and security arrangements. Depending on the transaction, lenders may use instruments such as NCDs, OCDs and CCDs.
For investors, returns are linked to the terms of the financing and the borrower’s ability to meet its obligations.
However, these investments carry credit risk, including the possibility of delayed repayments or defaults, as well as risks associated with collateral valuation and recovery.
How does the second fund compare with the first?
NSCOF-II follows NAAM’s maiden private credit strategy, Neo Special Credit Opportunities Fund-I (NSCOF-I), which closed in June 2024 with commitments of ₹2,575 crore.
Since inception, the first fund has recorded gross deployment exceeding 150% of its corpus, completed 35 investments and achieved 17 exits, according to the company.
The ₹6,200 crore raised for the second strategy is around 2.4 times the commitments secured for the maiden fund.
What does Neo Wealth and Asset Management do?
Founded in 2021, Neo Wealth and Asset Management provides wealth and asset management services to family offices, ultra-high-net-worth individuals (UHNIs), high-net-worth individuals (HNIs), institutions and corporates.
The company has approximately ₹1.40 lakh crore in total client assets across assets under advice and management. It has a presence in 17 Indian cities and two international locations.
Its alternative asset management business, NAAM, manages more than ₹31,000 crore across four strategies covering private equity, private credit and real assets, including infrastructure and real estate.
Neo is backed by Peak XV Partners, TVS Capital, Japan’s MUFG and New York-based Euclidean Capital.
FAQs: What investors should know about private credit funds, returns and risks
What is a private credit fund?
A private credit fund raises capital from investors and lends it directly to companies through privately negotiated financing arrangements. Unlike bonds traded on public markets, these loans are generally not publicly listed or traded.
What is a Category II AIF?
A Category II Alternative Investment Fund is a SEBI-regulated pooled investment vehicle that invests in assets such as private equity, private credit and debt securities. It generally does not undertake leverage or borrowing except as permitted under SEBI regulations.
How is private credit different from a bank loan?
Bank loans are provided by regulated banks under their lending policies and applicable regulations. Private credit involves financing from alternative investment funds and other private lenders, which can negotiate customised terms, security arrangements and repayment structures with borrowers.