BUY Recommendation – Franklin India Credit AIF – Scheme I Target IRR: 11–14%

BUY Recommendation – Franklin India Credit AIF – Scheme I

Category II – Close-Ended Private Credit AIF | Target IRR: 11–14% | Contracted IRR Achieved:

~13%

Executive Summary

We recommend a BUY on Franklin India Credit AIF – Scheme I based on its strong portfolio construction, high-quality governance, diversified NBFC/HFC exposure, and predictable quarterly cashflows. The fund has already completed deployment into 10 senior-secured debt positions with a contracted weighted average IRR of ~13.0% as per the investor update dated September 2025. 

This aligns well with investor demand for stable, high-yield, low-volatility private credit in India’s strengthening financial ecosystem.

 

Investment Thesis – Why BUY

1.  100% Deployment into Senior-Secured Debt | High Visibility of Cashflows

The fund has fully deployed ₹205 crore across 10 senior-secured NCDs, diversified across MSME finance, housing, green finance, personal loans, school financing etc. The portfolio is constructed with:

•       Fully secured exposures (9 out of 10 companies)

•       Quarterly coupon payouts

•       No call options / prepayment protection

•       Aligned cashflow dates

As per the fund deck, this portfolio is expected to yield ~13% contracted IRR. 

 

2.  Exposure to India’s “Missing Middle” Credit Opportunity

India has ~7,150 CRISIL-rated companies, of which ~3,500 lie in the BBB/A category — an under-served segment with attractive risk-reward.

The fund taps this segment by lending to emerging, well-governed institutions with strong capitalisation and digital underwriting models. 

This segment offers:

•       Higher spreads

•       Better structural protections

•       Low correlation with listed debt markets

•       Secular growth due to NBFC-led credit expansion

 

3.  Strong Underwriting Framework – CRAMEL Model

FT uses a robust due-diligence framework centred around:

•       Capital adequacy

•       Resource diversification

•       Asset quality

•       Management quality

•       Earnings & Profitability

•       Liquidity & ALM

 

Every investment is covenant-protected across leverage, liquidity, NPA thresholds & capitalraise triggers.

 

 

4.  India Macro Tailwinds Support Credit Quality The investor update notes:

•       India remains the fastest growing major economy.

•       Sovereign rating upgraded to BBB (Stable) by S&P in 2025.

•       Inflation at a multi-year low (1.54% in Sep 2025).

•       NBFC sector CRAR at 25.7%, GNPA trending down to 2.23%. 

This creates a favourable backdrop for private credit performance and reduces systemic risk.

 

5.  Franklin Templeton’s Global Alternatives Expertise

•       $258 billion alternatives AUM globally

•       29-year presence in India

•       Deep fixed-income DNA and credit research capabilities

•       Sponsor commitment: USD 10 million invested into the fund (strong skin-in-the-game)

The fund is run by an experienced team led by Santosh Kamath (33+ years experience) and a strong investment & research bench.

 

         

Portfolio Snapshot (As of Sept 2025)

10 Companies | 100% deployed | 95% secured | Diversified across geographies & business models

Segment	Companies	Rating Profile	Key Strength
Secured MSME Finance	Aye Finance, MS Fincap, Namdev, Sarvagram, Shri Ram Finance	A-/BBB+	Granular lending, strong profitability
Personal Loans	Early Salary	A-	Scaled digital underwriting
Affordable Housing	Easy Home, Unico Housing	BBB+/BBB	Deep retail demand
Green Finance	Ecofy	BBB+	EV & solar financing
School Finance	Varthana	BBB	Strong niche with social

impact

Rating upgrades in the last quarter for Shri Ram Finance, Unico Housing & Varthana confirm improving fundamentals.

 

Key Advantages to Investors

✓   Quarterly Income Distribution

Two cash distributions totaling ₹9.51 crore have already been made to investors within the first six months.

✓   Attractive Yield (11–14% Target; ~13% Achieved) Higher than public debt and traditional credit funds.

✓   Lower NAV Volatility

Private credit is insulated from daily market movements.

✓   Structural Protections

All deals senior-secured, with collateral, escrows, covenants.

✓   Short Tenor (4 years + 2 year extension) Allows faster recycling of capital.

 

         

Risks & Mitigations

Risk         Mitigation (as per PPM/Deck)

Credit risk        Senior-secured structures, covenants under CRAMEL

Illiquidity (closed-end AIF) Quarterly cashflows reduce duration risk

Concentration	Minimum 10 issuers; currently 10 diversified deals
Refinance risk	Deals aligned with amortising cashflows
Valuation risk	Hold-to-maturity model; low mark-to-market risk

 

Wallet Wealth Recommendation

BUY

We recommend allocating 5–10% of the alternate portion of an investor’s portfolio to this AIF for:

•       predictable high-yield income

•       strong downside protection

•       exposure to high-quality NBFC/HFC credit

•       global-grade governance and underwriting

•       skin in the game (As per SEBI regulations, the skin in the game is 5Crs where as they have already been invested 85Crs)

This strategy fits well for HNIs, business owners, and family offices seeking stable debt-like returns with premium yields.

 

For more details and Investing

 

S.Sridharan, Founder, https://www.walletwealth.co.in/ 

For portfolio guidance, contact your advisor at 99401 16967

Wallet Wealth LLP | SEBI Registered Investment Advisor

2nd Floor, No.8A, 2nd Main Road, Nanganallur, Chennai – 600 061

Phone: 044-48612114

 

Disclaimer

This document is confidential and intended solely for clients. Information is believed reliable but not guaranteed. Views are subject to change without notice and do not constitute investment advice without consultation.