TVS Capital Enters Private Credit Space with Launch of TVS Alts

TVS Capital Funds (TCF), a marquee investment firm founded by Gopal Srinivasan, is expanding its operations beyond private equity as it enters its 20th year. The firm has launched 'TVS Alts' as a natural extension of its investment journey, marking its foray into private credit.

TVS Alts has secured internal approvals for a Category II Alternative Investment Fund and has filed applications with the Securities and Exchange Board of India (SEBI). The firm expects to receive the necessary regulatory approvals in the coming weeks.

According to Shyam Srinivasan, Co-founder and Executive Chairman of TVS Alternatives, the firm is initially targeting a fund of ₹750 crore with a green-shoe option of ₹500 crore. The strategy will focus on secured lending to companies with ticket sizes ranging between ₹40 crore and ₹100 crore, targeting returns in the range of 16 to 17 percent.

The private credit strategy is built on domestic capital, with potential investors expected to include insurance companies, bank treasuries, and corporates looking to diversify their portfolios. TCF owns 90 percent of TVS Alts, while Shyam Srinivasan holds the remaining 10 percent.

The investment approach will be sector-agnostic, focusing on performing companies that feature sound credit profiles and adequate security. TVS Alts will consider various financing requirements, including bridge financing, pre-IPO financing, and M&A-related funding. The firm hopes to complete its first close within six months of receiving regulatory approval, and anticipates a final close within 12 to 14 months.

Although active deal origination will commence following regulatory approval, the investment team has already evaluated 42 potential opportunities, with two or three currently under consideration against underwriting and pricing requirements. The core team brings collective experience across commercial banking, private equity, investment banking, and recovery.

Manish Makaria serves as the Managing Partner. The board of TVS Alts includes Prasad Gopalan from IFC, banking veteran Ashutosh Khajuria, former SIDBI executive Mani Krishna Iyer, and industrialist Srilalitha Gopal.

Srinivasan noted that credit quality in the country's mid-market is holding up well, and the private credit space could receive a further boost if banks become more selective in lending to mid-sized businesses. Over its life, the initial fund is expected to make roughly 14 to 15 investments. As the strategy gains traction, TVS Capital may raise additional private credit funds over the next three to five years.

This development follows TCF's recent closure of its fourth private equity fund with a corpus of nearly ₹4,000 crore, as the firm explores long-term avenues in financial services, including wealth management and asset management.

"The expansion of established private equity players like TVS Capital into private credit marks a significant evolution in India's financial ecosystem. By targeting performing mid-market companies with secured lending models, firms are addressing a crucial funding gap as traditional lenders adjust their risk appetites. Utilizing domestic capital from institutional and corporate sources provides a stable foundation for this alternative asset class, offering mid-sized businesses viable growth capital while opening new avenues for portfolio diversification." — Dr. Shishir Gupta, Founder & CEO, StartupLanes