Mumbai: Reliance AIF Asset Management Co. Ltd is raising its first credit fund of Rs1,000 crore called Reliance Yield Opportunity AIF Scheme 1, a company executive said.
Reliance AIF, a unit of Reliance Nippon Life Asset Management Ltd, expects the new fund to achieve its first close in March. A first close is the point at which a fund in the process of raising money starts investing.
“We are seeing a lot of interest for this fund. We are hoping to reach a first close by mid March. We have already got a strong pipeline of deals in place and we are looking to consummate a couple of transactions around the first close,” said Shahzad Madon, head of portfolio management services and alternative assets at Reliance Nippon Life Asset Management Ltd.
The fund manager is targeting to raise Rs250 crore, with a greenshoe option of Rs750 crore. A greenshoe option refers to additional money raised that a fund may choose to retain.
The fund will target investment opportunities such as holding company financing, loans against shares and acquisition financing. It will also be looking to invest in debt instruments of microfinance lenders and other niche non-banking finance companies, or NBFCs.
Madon said the fund is targeting a segment not tapped so far. “At one end, you have the very high investment-grade credit, primarily catered to by products such as mutual funds and others; and then you have the upper end where you have mezzanine credit. The entire space in between is untapped in the funds space. This is a very fertile space in which there is a lot of opportunity. Through this fund, we intend to cater to this space,” he said.
Falling interest rates are another reason for launching the new credit fund, Madon added.
“This has become extremely important in an environment where interest rates are low. So, investors are in a way compelled to look for a slightly higher yield. This product is an answer to that need of the investors,” he explained. The fund is targeting 11.5-13.5% returns. The Reliance AIF plan to raise a credit fund comes at a time when structured credit financing has picked up.
On 6 February, Mint reported that Baring Private Equity Asia is raising a new India-dedicated credit fund of Rs500 crore with a greenshoe option of Rs250 crore.
The private equity firm is also planning to raise a new offshore credit fund of around $500 million which will co-invest with the India fund apart from making independent investments of its own.
Avendus Capital, backed by global private equity firm Kohlberg Kravis Roberts & Co. Lp, is also raising a credit fund of almost Rs500 crore, Mint reported on 20 January. KKR itself raised Rs1,100 crore to pre-close the first portion of its dedicated India credit fund, the second such fund from the American private equity firm, reported the Economic Times on 9 January. It raised a Rs1,500 crore corpus in November 2013 for its first credit fund.
Also in January, Mint reported that Centrum Capital Ltd has formed a dedicated alternative asset unit—Centrum Asset Management—under which the financial services firm will raise various AIFs including one for structured credit.
In the past Reliance Capital’s fund business has been active on the real estate side.
On 30 January, Mint reported that Reliance AIF is raising a Rs1,000 crore rental yield fund, the fund manager’s first such fund to buy and own office projects. Reliance AIF is currently also raising a Rs1,000-crore residential fund from Indian and overseas investors, Mint reported. The fund, launched last year, will invest through structured debt in mid-income housing projects across cities.
Reliance Group companies have sued HT Media Ltd, Mint’s publisher, and nine others in the Bombay high court over a 2 October 2014 front-page story that they have disputed. HT Media is contesting the case.