Private credit to real estate, UTI Alternatives embarks on a fundraising spree

UTI Alternatives Pvt. Ltd plans to launch its third private credit fund, which at a planned size of ₹1,000 crore will be its largest ever.

The alternative investment platform of UTI AMC is also preparing to build a multi-asset series of funds, for which it has already received commitments of $200 million, said Rohit Gulati, chief executive of UTI Alternatives.

For this series of funds, UTI will scout for investment opportunities in structured equity, performing credit, distressed assets, and real estate. It has so far completed 12 transactions.

Within structured equity, UTI is evaluating venture equity and growth-stage pre-IPO companies, which it hasn’t explored much so far. 

“We have selectively written a few term-sheets and closed one transaction so far,” Gulati said. He did not disclose details on the companies UTI is looking to invest in. 

Gulati explained that as several mid-market companies lack access to flexible financing solutions, UTI also aims to cater to the needs of entities with capital requirements under $25 million.

High returns

While UTI Alternatives plans to complete deploying capital for its third private credit fund by September, its previous funds have generated high returns. 

UTI Alternatives’ ₹700-crore Structured Debt Opportunities Fund I has returned more than 90% of the capital to its investors, while the ₹500-crore SDOF II, which was raised during the pandemic years, is still under investment mode. 

“In the second series of our flagship performing private credit fund, we are currently tracking an IRR (internal rate of return) of 17%,” Gulati said. 

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The underwriting for the private credit fund is largely based on cash flow investing, where a major portion of the internal rate of return (IRR) is serviced through operating cashflows to ensure regular distributions. It may also involve large collaterals such as mortgaging the personal properties of promoters, pledging of shares, and corporate guarantees.

“Currently, the gross commitments to our flagship private credit series have crossed more than ₹1,600 crore, and we have done close to 40 transactions overall across the funds,” Gulati said. 

Multiple opportunities

UTI last year launched a $100-million Real Estate Opportunities Fund I, but expects to close fundraising for it at $250 million, including the green-shoe option. 

Given the rise in demand for residential spaces and the lack of alternative capital, UTI’s real estate fund will primarily oversee residential real estate.

“In real estate, the focus is going to mainly be on last-mile financing. Most of our portfolio will focus on late-stage financing of projects that are largely residential. We will be more on the developmental side of the business,” Gulati said, adding that the company is targeting an IRR of 20% from this fund.  

UTI also recently launched a Credit Opportunities Fund (COF) I and Asset Reconstruction Opportunities Fund (AROF) I to cater to diverse business needs as well as varying risk appetites. 

“COF is a passively managed strategy targeting a gross IRR of 12-14%... while AROF provides investors with an opportunity to target a higher yield of 22-24% and also a higher multiple on invested capital,” Gulati said. 

While IRR is used to gauge the profitability of potential investments, the multiple on invested capital, or MOIC, is to determine how much an investor gets relative to the original investment.

Gulati, who joined UTI Alternatives in 2017, has spent more than two decades in areas such as investment banking, corporate finance, stressed assets management, and investing. He has held various senior leadership positions in companies such as Religare Capital Markets, ICICI Securities, ICICI Bank, PwC and Ballarpur Industries. 

Since he began his tenure at UTI Alternatives, the firm has raised $400 million in commitments.

UTI Alternatives is a wholly owned subsidiary of UTI Asset Management, one of India’s oldest and the country’s second-largest asset manager.  It had handled about $215 billion in assets under management as of 31 December.