Investors are increasingly turning to unrated debt instruments in search of higher yields, with borrowings reaching ₹1.5 lakh crore in the current fiscal year. Private credit funds and family offices are driving this trend, attracted by potential returns ranging from 12-20% compared to AAA-rated corporate bonds at around 7.7%. Smaller and mid-sized companies are leveraging these unrated structures to avoid complex regulatory requirements and listing procedures. The market has seen 1,783 issuers tap into this alternative funding mechanism, highlighting a growing preference for flexible debt financing. While traditional financial institutions face regulatory constraints, alternative investment funds are emerging as key players in this segment.
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