Capital Stack positions itself around debt, structured capital, credit solutions and stressed assets rather than a single lending vertical. What gap in India’s financing landscape led to building a firm around this specific combination rather than specialising in one segment?
Capital doesn’t come in boxes and borrowers don’t stay put in one place. A growing NBFC or an MSME might need term loans and NCDs in year one. By year three it could be looking at securitisation/direct assignment, co-lending or any other kind of finance. If market cycles turn sour, it might need restructuring or special-situations capital. Most financial intermediaries in India are built around one part of this journey. That means borrowers end up piecing together advice from different sources, each of whom sees only part of the balance sheet.
We built Capital Stack to focus on the overall capital structure of an enterprise because that’s where real risk gets priced. Understanding how a transaction behaves under stress makes you a better structurer when it is performing. Our stressed-assets work isn’t a separate business line bolted on. It informs how we set covenants, cash-flow waterfalls and security packages on every performing deal we arrange.
In practice, that means we map the entire liability side before we approach a single lender. We look at what the borrower has raised, what it will need to raise, how each layer ranks against the others, and what happens to the whole structure if one piece moves. Only then do we decide which instrument, which lender and which structure make sense.
The lender side has also fragmented. Banks, NBFCs, private credit funds, family offices and development finance institutions all have different risk appetites, return thresholds and documentation standards. Matching a borrower to the lender with the right instrument has become a specialised skill. A firm that does one product ends up pushing that product, no matter what the borrower truly needs.
Simply put, the gap was an advisor who could see the whole capital structure and give a straight, honest view of what it should be, not just what can be closed that quarter.
NBFCs remain a critical bridge between formal capital markets and underserved borrowers, yet their own access to capital fluctuates with market conditions. How does Capital Stack view the evolving role of NBFCs within India’s broader lending ecosystem today?
NBFCs remain the most effective last-mile credit channel India has, particularly for MSMEs, self-employed borrowers, affordable housing and rural credit. That role isn’t shrinking. What has changed is the level of expectations for NBFCs and the standard they are held to.
After the IL&FS crisis, the market stopped rewarding asset growth on its own. Scale-based regulation, periodic changes to bank risk weights on NBFC exposure, and the revised co-lending framework have all pushed the sector towards bank-like discipline in governance, liquidity management and disclosure. That is healthy, but it has widened the gap between the top tier and everyone else.
The real challenge is that many mid-sized NBFCs have a good ability to originate high-quality assets but not diversified sources of capital to support them. They still rely on a small group of lenders for their funding requirement. When market sentiment turns, that lender concentration becomes the binding constraint on their growth.
The NBFCs that will do well over the next cycle will treat the liability franchise as seriously as the asset franchise. That means building a diversified lender base, using securitisation and direct assignment as regular funding tools rather than emergency ones, putting co-lending partnerships to work, and accessing the bond market as ratings mature.
Our role is to help NBFCs build that funding architecture early, before they need it. Diversification is cheapest to build when you don’t urgently need the money.
Borrowers navigating complex financing requirements often face a mismatch between what they need and what’s readily available in the market. What are the most common gaps Capital Stack sees between borrower expectations and what lenders are actually willing to offer?
The first gap is pricing. Borrowers often anchor to what the best-rated peer in their segment paid, not to what their own rating, vintage and portfolio performance justify. That gap can be several hundred basis points, and it is where many conversations stall.
The second gap is structure. Borrowers want larger ticket-size loans with long maturities and minimal covenants. Lenders, especially newer players in private credit, want cover, covenants, cash-flow controls and step-up protections. Neither side is wrong. The skill lies in finding structured products like partial guarantees, pooled offerings, securitised tranches or customised repayment profiles that can give lenders confidence without making it hard for the borrower to run their business.
The third gap is tenor. Many companies need three to five years (in some cases, even longer) of funding to match their assets/business needs. A large part of the lender market is only comfortable with short to medium term exposures. This mismatch is structural. It’s one of the reasons why instruments like PTCs, DAs and co-lending arrangements have become more common among NBFCs.
The fourth gap, and the most avoidable, is readiness. Borrowers often go to the market with incomplete MIS, inconsistent portfolio data or unaudited numbers, and often only when the need is urgent. Lenders price uncertainty and urgency very heavily. A well-prepared borrower with transparent data who raises money well in time will often raise on better terms than a stronger borrower who arrives unprepared and in haste.
A lot of our work happens before we even talk to a lender. We look closely at the financials and operations, help reset expectations honestly and prepare the credit story, so the market sees exactly what it needs to see.
As private credit funds scale up their India allocations, competition for quality deal flow has intensified. How does Capital Stack differentiate its advisory offering in a market where more players are chasing the same borrower opportunities.
More capital chasing deals is good for borrowers, but it has made advice more important, not less. When ten lenders are willing to fund a transaction, the question is no longer whether you can raise. It becomes which capital, on what terms, with what consequences three years out.
We differentiate in three ways.
First, we underwrite before we advise. Our team has spent years on the lending side in credit, risk and structured finance, so we assess a borrower the way a credit committee would. Lenders know that a transaction coming through us has been stress-tested, which shortens their diligence and improves execution certainty.
Second, we cover the full instrument set and the full lender universe. That includes banks (our partnership with YES BANK is one example), private credit funds, mutual funds, NBFCs, family offices and development finance institutions. Because we aren’t tied to a product, we can recommend the structure that fits rather than the one we happen to sell.
Third, we work through the cycle. Our stressed-assets practice means we stay with clients when conditions deteriorate, which is when most intermediaries go quiet.
Private credit funds aren’t only competitors for deal flow. They are also counterparties we work with regularly. Our value to them is quality origination and structured paper. Our value to borrowers is candour, including telling a client when the right answer is not to raise at all.
What does Capital Stack believe the next phase of India’s debt and credit market will look like, and what will separate the players who lead it?
The next phase will be defined by depth, not by volume. We expect three shifts.
First, private credit will deepen and broaden. Domestic AIFs, family offices, and eventually HNI capital through wealth management platforms will become meaningful participants, bringing longer-tenor capital and better structuring. That will close the funding gap for mid-market borrowers who fall between bank appetite and listed bond market eligibility. For us, that means the borrower base we serve gets deeper, not just wider. More mid-market companies that previously got priced out of longer-tenor capital become fundable.
Second, securitisation, direct assignment and co-lending will move from tactical tools to core balance sheet strategy. As investors become familiar with these instruments and data quality improves, originators will separate origination from balance sheet ownership more often. That fundamentally changes how credit is created and distributed in India.
Third, there will be credit cycles. Small-ticket unsecured lending has scaled rapidly, and in some pockets origination incentives have run ahead of underwriting capacity. When stress shows up, the market will need capacity for restructuring, special situations and resolution, not just fresh lending. That is precisely why we built the stressed-assets practice alongside the performing-deal business, rather than treating it as something to add later.
The players who lead will not be defined by the size of their balance sheet or their deal count. They will be the ones who keep their underwriting discipline when capital is abundant, and who remain active when it is scarce. The next downturn will separate firms that priced risk properly from those that only had access to capital. We intend to be firmly in the first group.
