Image: Private Debt Vs Public Debt: What Should Indian Businesses Choose In 2025?

06Jun

By editor Blog, Financial Advisors, Financing Stratrgy, Loans 0

Private Debt Vs Public Debt: What Should Indian Businesses Choose In 2025?

In a rapidly evolving Indian economy, businesses—especially mid-sized and growing enterprises—face a crucial question when it comes to raising capital: Should we choose private debt or public debt?

With liquidity tightening globally and interest rates normalizing, Indian companies must make strategic choices that align with their growth, risk appetite, and compliance capacity. This blog explores the key differences between private debt and public debt, current market conditions in India (2025), and how businesses can choose the right funding option.

Understanding The Basics: Private Debt vs Public Debt

What is Private Debt?

Private debt refers to loans or debt instruments that are not issued or traded on public exchanges. These are usually negotiated directly between a company and a private lender like:

Non-Banking Financial Companies (NBFCs)
Private credit funds
Family offices or institutional investors

What is Public Debt?

Public debt is raised through publicly listed instruments such as:

Non-convertible debentures (NCDs)
Bonds listed on stock exchanges (e.g. NSE, BSE)
Commercial papers (CPs) open to broader investor bases

In India, public debt instruments must follow stricter disclosure, credit rating, and listing norms as per SEBI and RBI regulations.

Key Differences: Private Debt Vs Public Debt

Parameter	Private Debt	Public Debt
Speed of Execution	Faster (less regulatory hurdles)	Slower due to compliance & listing process
Customisation	Highly negotiable terms	Fixed structures and coupon terms
Transparency	Lower disclosure requirements	High transparency mandated by SEBI
Cost of Borrowing	Usually higher interest rate	Lower due to broader investor base
Investor Access	Limited to private funds & institutions	Open to mutual funds, public investors
Regulatory Oversight	Minimal compared to listed instruments	Requires full regulatory compliance

Current Market Trends (2025)

Rise of Private Credit

Private credit in India has grown 3x in the last 5 years.
Attractive for mid-sized businesses looking for fast capital.
Used for acquisition finance, growth capital, and bridge funding.

SEBI Push for Transparency in Public Debt

From 2024, SEBI mandates use of Electronic Book Platforms (EBPs) for all private placements above ₹20 Cr.
Increased regulatory scrutiny has added friction but improved trust.

SME Preference for Private Debt

For many SMEs, public debt is still cost-prohibitive due to listing costs, rating requirements, and disclosure norms.
Private lenders offer flexibility but at higher cost.

Private Debt: Pros

Quick access to funds
Flexibility in structure
Relationship-based lending

Private Debt: Cons

Higher interest cost
Lack of pricing transparency
Reputation risks if not negotiated well

Public Debt: Pros

Lower cost of capital (if rated well)
Wider investor participation
Enhances brand credibility

Public Debt: Cons

Regulatory compliance burden
Longer time-to-market
Reduced privacy in financial disclosures

What Should Indian Businesses Choose: Private Debt vs Public Debt?

Choose Private Debt if:

You need quick, short-term capital
Your business is not yet ready for regulatory scrutiny
You’re looking for structured or mezzanine financing

Choose Public Debt if:

You have a strong credit rating and compliance systems in place
You’re looking to raise larger sums at competitive rates
Your long-term strategy involves institutional visibility or listing

Final Thoughts

There’s no one-size-fits-all answer. Your debt strategy should be guided by:

Cost of capital
Speed of funding
Long-term business goals
Your team’s ability to manage investor communication and compliance

In 2025, a hybrid approach is also emerging—raising private debt first, then moving to public markets as credibility improves.

If you’re a business navigating India’s evolving capital markets, choosing the right debt route can be the game-changer between growth and stagnation.

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