Why 46% of India's private credit deals in 2024 were refinancing — and why the opportunity is bigger in 2026

The 2020-2022 lending environment in India was characterised by capital scarcity for mid-market borrowers. Banks had elevated NPAs and were cautious about new exposure. NBFCs faced their own liquidity constraints. Private credit was available — but at a premium that reflected the risk environment of the time.

The businesses that borrowed through this period paid for access. Rates of 15-20% were common for real estate developers and MSME borrowers. Security packages were aggressive. Covenants were restrictive. Tenures were short, forcing businesses into a cycle of refinancing at whatever terms were available rather than terms that made financial sense.

By 2024, three things had changed. India's private credit market had deepened significantly — more domestic funds, more competition among lenders, more capital chasing quality mandates. The businesses that had survived 2020-2022 and continued operating had demonstrated their resilience, giving lenders a track record to underwrite. And the interest rate environment, while still above pre-2020 levels, had stabilised — creating predictability in the economics of refinancing.

The result: businesses that could demonstrate three years of clean debt service on their 2021-2022 vintage debt became the most attractive refinancing candidates in the market — strong credit history, proven management, and the ability to access better terms than they currently held.

The refinancing calculation is straightforward but requires honest input numbers.

A business carrying ₹75 crore in NBFC debt at 17% per annum is paying ₹12.75 crore annually in interest. Refinancing at 13% reduces this to ₹9.75 crore — a saving of ₹3 crore per year. If the remaining tenure is 4 years, the gross saving is ₹12 crore. Subtract the prepayment penalty on the existing facility (typically 1-3% of outstanding — ₹75-225 lakh), the arrangement fee on the new facility (1-2% — ₹75-150 lakh), and the legal and structuring costs (₹20-40 lakh). Net saving over the remaining tenure: ₹8-10 crore. That is a refinancing that makes clear economic sense.

The second dimension is structural improvement beyond rate reduction. Businesses that borrowed under stressed conditions often hold debt with covenant packages that restrict expansion decisions — limits on additional capex without lender consent, restrictions on subsidiary borrowing, aggressive cash sweep requirements. Refinancing can remove these restrictions even when the rate saving alone does not fully justify the transaction cost. The value of restored operational flexibility is real but harder to quantify.

The scale of India's refinancing activity is demonstrated by the transactions that made it into public records. One of the larger logistics and warehousing companies raised more than USD 600 million to fund the refinancing of its debts. At the mid-market level, real estate developers have been the most active refinancing borrowers — Century Real Estate Holdings raised ₹850 crore ($101 million) in NCDs at 10% coupon/11% redemption premium, and Suruchi Properties raised ₹450 crore in 4-year NCDs from Edelweiss Alternative Funds.

These transactions represent the larger end of the mid-market. For the ₹30-150 crore segment where Eone Capital operates, the same refinancing logic applies at smaller scale — the economics are proportionally identical, and the lender market for this segment is active and competitive.

Five categories of business should be actively evaluating refinancing in 2026:

First, any business carrying NBFC or private credit debt originated in 2020-2022 at rates above 15% where the current business performance would support better terms.

Second, businesses with multiple small loan facilities from different lenders — the consolidation into a single well-structured facility at a better rate and with simplified covenants is frequently worth the transaction cost.

Third, real estate developers who completed projects and have clean completion records but are carrying construction finance debt that was priced for construction-stage risk at a point when the risk has materially reduced.

Fourth, manufacturers who borrowed for specific equipment or expansion capex and whose asset is now de-risked relative to when the loan was originated.

Fifth, healthcare operators who borrowed for facility expansion and are now generating operating cash flows from the completed facility that support better terms than the pre-revenue construction stage warranted.