Apollo seeks to double India assets to US$4 billion in credit boom
'India is a big opportunity for global private credit funds like us as traditional banks cannot fund the entire economic growth story,' Matthew Michelini, head of Apollo's Asia-Pacific business, said.
The New York-based asset manager, which has about US$2 billion assets in India, mainly in private credit, is targeting sectors including infrastructure, financial services, leading industrials and supply chain finance. Local firms are also tapping it to help finance overseas acquisitions, Singapore-based Michelini said.
While the potential is huge in the world's fastest-growing major economy, as mainstay lenders and non-bank firms scale back funding due to tougher regulation, competition for both deals and talent is intensifying. Investors such as Cerberus Capital Management, Davidson Kempner Capital Management, and Ares Management are expanding rapidly in India.
At the same time, the sizzling market is raising concerns about the potential weakening of lending standards. Some asset managers, including KKR, previously faced challenges during the shadow-banking crisis that rippled through India's financial system before the Covid-19 pandemic.
Apollo, which had US$840 billion of global assets under management by the end of June, plans to double its investment headcount in India to about 50 over the next three years, focusing mainly on expanding its credit and supply-chain finance groups. 'We need this team to help analyse local business models, provide local India market context, and maintain day-to-day relationships with our investment partners,' Michelini said.
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He said that the alternative asset manager expects the vast majority of its investments in the country to be focused on credit and senior equity as deals pick up. Underscoring the boom, Indian real estate and construction conglomerate Shapoorji Pallonji Group completed a US$3.4 billion private financing in May, the largest ever in India, led by a long line-up of foreign investors.
Overall, bank lending to the non-banking finance sector in India grew just 6.7 per cent in 2024, down from 15 per cent in 2023, the slowest pace in four years, according to a March report by PwC. The ratio of risk-weighted assets to total assets for banks fell from 74 per cent to 58 per cent over the 10 years to December 2023, highlighting an opportunity for alternative lenders to finance lower-rated corporates and mid-sized borrowers, it said.
The domestic private credit industry has also been boosted by a US$1 trillion government infrastructure push over the past five years. 'Infrastructure is super interesting in India that will yield several lending opportunities,' Michelini said. Apollo led a US$750 million debt refinancing for conglomerate Adani Group's Mumbai international airport from investors in June, besides backing the likes of JSW Cement and Hero FinCorp.
Like many other international firms, Apollo also relies on its Mumbai-based staff of about 800 to cater to an array of global functions such as technology, investment support and operations. In terms of employment, India is Apollo's second-largest country where it opened a new office spanning 88,000 square feet over multiple floors in late 2022 in the financial capital. Overall, the firm employs about 1,000 people across Asia-Pacific.
However, despite the growth potential in the market, Michelini cautioned that there was still an element of resistance over the entry of foreign capital. 'Rather than restricting non-bank capital, we believe policymakers would benefit from bringing more of it into the system,' he said. BLOOMBERG
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