{"id":15,"date":"2024-04-17T14:07:59","date_gmt":"2024-04-17T14:07:59","guid":{"rendered":"https:\/\/iqeq.com\/in\/2024\/04\/17\/structuring-debt-investments-in-indias-booming-market-through-mauritius\/"},"modified":"2024-08-07T12:55:36","modified_gmt":"2024-08-07T12:55:36","slug":"structuring-debt-investments-in-indias-booming-market-through-mauritius","status":"publish","type":"post","link":"https:\/\/iqeq.com\/in\/insights\/structuring-debt-investments-in-indias-booming-market-through-mauritius\/","title":{"rendered":"Structuring debt investments in India\u2019s booming market through Mauritius"},"content":{"rendered":"
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In recent years, India\u2019s private debt market has enjoyed a significant boom, emerging as one of the largest in Asia. As of December 2022, India-focused assets under management (AUM) in private debt almost doubled to US$15.5 billion<\/a> from a year earlier, according to Preqin. Some estimates indicate this figure could double by the end of 2024, more so given the significant economic growth prospect of India \u2013 with GDP set to surge by 7%<\/a>, it\u2019s the fastest-growing economy worldwide.<\/strong><\/p>\n

Amidst this unprecedented growth of private debt in India, investors looking to gain a foothold in this emerging market face a crucial question: where best to structure their debt investments? Some of the most common jurisdictions considered by fund managers for setting up India-focused Funds pooling offshore investors include Mauritius, Singapore, Netherlands, UAE and GIFT City. While Singapore remained a top source of FDI into India with about 32%<\/a> of FDI flows during April 2022 \u2013 December 2023, Netherlands is emerging as a prominent jurisdiction for fund formation accounting for around 6%<\/a> of FDI inflows during same period. Both the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) in UAE represent interesting structuring options through a flexible and business-friendly ecosystem prone by the regulators. Finally, in GIFT City, India aimed at onshoring the \u201coffshore\u201d transactions having an Indian nexus, and is certainly one to follow, especially post the upcoming general elections in India.<\/p>\n

In this article, we\u2019ll deep dive on why Mauritius is an ideal jurisdiction for structuring debt investments in India.<\/p>\n

The rise of India\u2019s private debt market<\/h2>\n

In an atmosphere of economic uncertainty and market fluctuations, international investors are increasingly looking to alternative investments. Private debt has become an attractive alternative<\/a> for both borrowers and lenders in India, as the traditional banking sector faces challenges such as regulatory constraints, asset quality issues and liquidity crunch. With the demand for capital from mid-market and growth-oriented companies remaining strong, and the supply of capital from traditional sources still constrained,<\/a> the private debt market in India is expected to grow significantly.\u00a0It is thus no surprise that, according to Preqin<\/a>, India\u2019s private debt markets are at the same stage today as equity markets were in the 1990s.<\/p>\n

The Indian private debt market, constituting primarily of investment in direct lending, distressed debt and mezzanine financing, is now regarded as one of the largest in Asia and serves as a viable alternative to traditional banking channels for financing purposes. Globally, Preqin<\/a> expects private debt AUM to increase at a compound annual growth rate of 10.8%, reaching an all-time high of $2.3 trillion<\/a> in 2027.<\/p>\n

Why Mauritius stands out as an investment route<\/h2>\n

Aside its historical ties with India which transcends political and economic considerations, Mauritius has long been a significant source of foreign direct investment (FDI) into India, accounting for a substantial portion of FDI inflows. A cumulative FDI worth US$170 billion<\/a> from Mauritius to India over two decades (2000-2023), accounting for 26% of total FDI inflows into India, shows a long-standing and trusted investment relationship \u2013 a relationship which has been further consolidated with the coming into operation of the Comprehensive Economic Cooperation and Partnership Agreement (CECPA), the first trade agreement signed between India and an African country.<\/p>\n

Mauritius has built a solid reputation of being a jurisdiction of substance internationally. The prominence of Mauritius as a favored gateway for structuring investments into India are driven essentially on the following tenets:<\/p>\n