EvolutionX Debt Capital Pte Ltd, a joint venture between Temasak Holdings Pte Ltd and DBS Bank, is shifting its investment focus to India from China, aiming to capture a bigger share of the South Asian nation’s expanding private credit market.

The Singapore-based debt financing platform plans to allocate as much as 70% of its US$500 million  private credit fund to India, Rahul Shah, a partner at the company said in an interview. The firm is targeting high double-digit returns with an investment horizon of three to four years, he said.

“India’s deployment share of our tech-focused growth debt fund will continue to rise as macro concerns in China prompt us to do so,” he said. “The scene could change later once China concerns ebb.” 

Private credit is gaining traction in India despite global warnings about risks in the direct lending market, which has seen explosive growth. While India’s world-beating economic growth is drawing investors, China is grappling with a sluggish economy. 

EvolutionX launched the fund in 2021 with an aim to invest in tech and tech-enabled companies in India, China and Southeast Asia. It had initially planned to allot 40% of the assets in India and an equal proportion in China. The fund has invested about US$300 million through seven companies and several of these are from India. 

The company is planning a second fund as the investment limit for the first will get exhausted over the next two years, Shah said. It is also looking at new modes for funding, including companies’ tax-related payouts, buy-back of employee stock options, and mergers and acquisitions, he said.

  - Bloomberg