Kotak Alternate Asset Managers is shifting its investment strategy toward digital infrastructure, energy transition, and domestic manufacturing, moving away from distressed assets. The firm projects India's private credit market to grow at a 14-15% annual rate until 2032, supported by stronger regulatory oversight. Leadership also highlighted tax barriers that currently discourage domestic investment in infrastructure compared to foreign capital.
Kotak Alternate Asset Managers is realigning its investment focus, moving away from distressed-asset strategies to prioritize growth sectors. The firm has identified digital infrastructure, energy transition, and domestic manufacturing as key areas for its future portfolio. This strategic pivot follows the successful exit from infrastructure projects, such as HKR Roadways to Cube Highways, which demonstrated the firm's ability to turn around and monetize large-scale assets.
The firm remains optimistic about the Indian private credit market, which involves lending to companies by non-bank investment funds. Unlike the global private credit market, which has faced concerns over high leverage, the Indian sector remains largely insulated. The firm attributes this stability to a focus on senior-secured loans rather than high-risk, junior debt models often seen in the United States. Additionally, strengthened regulatory frameworks like the Insolvency and Bankruptcy Code (IBC) and the Real Estate (Regulation and Development) Act (RERA) have brought more discipline to corporate lending, reducing the high-risk practices of the past.
Looking ahead, the firm projects the Indian private credit market to expand at an annual growth rate of 14-15% through 2032. This projection is driven by a structural shift in how Indian companies manage their finances and a consistent demand for capital across the manufacturing sector.
Despite the positive growth outlook, the firm has raised concerns about the ownership of India’s infrastructure assets. A significant portion of Infrastructure Investment Trusts (InvITs) in India is currently held by foreign sponsors. Because these trusts are required to distribute 90% of their income to unit holders, a large share of domestic cash flows is effectively transferred overseas.
Leadership at the firm argues that domestic pension funds and insurance companies have the capacity to hold these assets, which would keep wealth within the country. However, they pointed to a clear tax disparity as a major obstacle. Currently, domestic investors face a tax rate of up to 40% on such income, while foreign entities benefit from a 5% withholding tax. The firm suggests that bridging this gap is essential to encourage more local participation in long-term infrastructure ownership.
Investors may monitor whether policy changes are introduced to harmonize these tax rates, as this could be a key factor in attracting more domestic capital into the infrastructure space. Additionally, the continued performance of senior-secured loans against a backdrop of macroeconomic shifts will be a primary metric for the private credit sector in the coming years.