Northern Arc Unveils INR 1,500 Cr Fund To Back 45-55 Entities

SUMMARY

The new fund will also have an additional green shoe option of INR 500 Cr

A Northern Arc spokesperson said that the fund will back around 45-55 entities with an average ticket size of INR 40 Cr

The fund will invest across six segments – MSME financing, affordable housing, vehicle finance, agriculture finance, microfinance and consumer finance

Non-banking financial company (NBFC) Northern Arc announced the launch of its category-II alternative investment fund (AIF) Finserv Fund, with a target corpus of INR 1,500 Cr (around $178.5 Mn).

In a statement, the financial services company said that the fund will also have an additional green shoe option of INR 500 Cr (around $59.5 Mn).

Introduced via its subsidiary Northern Arc Investment Managers (NAIM), Finserv Fund will offer long-term debt to financial intermediaries which are primarily focussed on “underserved and unserved” segments.

A Northern Arc spokesperson told Inc42 that the fund will back around 45-55 entities with an average ticket size of INR 40 Cr per company. The new fund will target financial intermediaries across six segments – micro, small, and medium enterprises (MSME), affordable housing, vehicle finance, agriculture finance, microfinance and consumer finance.

“… It will invest in a well-diversified portfolio across 45-55 entities within our key sectors. This fund targets gross returns of 14.00-14.50% XIRR (extended internal rate of return) over its four-year tenure, with a deployment period of approximately six months from the final close,” Northern Arc Investments CEO Bhavdeep Bhatt said.

He added that the latest fund marks the launch of 11th AIF by the company, besides the two portfolio management services (PMS) funds that the NBFC already manages. “We have successfully closed and exited four funds at higher-than-targeted returns to our investors,” Bhatt said.

Founded in 2009 by Dvara Holdings initially, Northern Arc is an NBFC, which offers a suite of solutions including lending, placements and investments across multiple sectors. It has backed startups such as Rebel Foods, ProsParity, slice, BharatPe, among others, so far.

Since 2009, Northern Arc claims to have cumulatively financed over INR 1.81 Lakh Cr for its clients across 671 districts of India.

The development comes close on the heels of Northern Arc Capital making a strong debut on the bourses on September 24. The NBFC listed at a premium of INR 351 on BSE against an issue price of INR 263.

Its IPO was oversubscribed 110.91X, with significant interest from qualified institutional buyers (QIBs), who subscribed the public issue over 240.79X.

Prior to that, the NBFC secured INR 229 Cr (around $27.4 Mn) from marquee anchor investors last month in the run up to the IPO. The non-banking lender then said that it plans to deploy the fresh proceeds to meet its future capital requirements towards onward lending.

Earlier this year, the company raised $75 Mn from Dutch FMO and an additional $80 Mn in a mix of equity and debt from World Bank Group’s private-sector investment arm International Finance Corporation (IFC).

On the financial front, Northern Arc clocked a revenue of INR 1,890 Cr in the financial year 2023-24 (FY24), up 44% from INR 1,304 Cr in the previous fiscal year. Meanwhile, it reported a profit of INR 317.69 Cr during the fiscal under review as against INR 242.21 Cr in FY23.