Northern Arc reaches first close on India debt fund
Northern Arc Investments, an India-focused private debt investor, has achieved a first close of $23 million on its Northern Arc India Impact Fund.
The fund has a full target of $100 million with an overallotment option of $50 million. LPs that have committed so far include Partners Group, Anthos Fund & Asset Management and Calvert Impact Capital. The firm has also received private equity backing: IIFL Asset Management (IIFL AMC) and Affirma Capital, a spin-out of Standard Chartered Private Equity (SCPE) invested INR9.1 billion ($131.9 million) in the firm last year. Japan’s Sumito Mitsui Banking Corporation (SMBC) is another investor.
Northern Arc, previously known as IFMR Investment Managers, raised INR1 billion ($15 million) for a similar vehicle in 2014. Aside from the two impact debt funds, the firm has raised six other funds. The latest vehicle will issue loans to support micro and small businesses, help finance the purchase of vehicles and support agri-businesses. It typically invests in debt instruments like senior and subordinated debentures, commercial paper and other permissible market instruments issued by debt originators like microfinance institutions working in rural and urban India.
The GP is part of Northern Arc Capital, a financial services firm founded in 2008 initially as IFMR Capital. Over the years, the non-banking financial company claims to have managed $10.5 billion in assets, helping more than 200 companies with their funding needs across 580 districts in India. It primarily targets businesses that cannot avail financing from the formal banking channels and supports affordable housing projects and corporate funding requirements
“Risk-adjusted credit spreads in the financial services space are very attractive and we are aiming to invest well over INR10 billion ($134 million) of long term capital to financial institutions over the near term, especially those focusing on the under-served and under-penetrated segments in India,” said Ravi Vukkadala (pictured), CEO of Northern Arc Investments.
Northern Arc plans to make more than 15 investments in the coming year with deal sizes of $3-5 million. Other firms that offer private debt in the country include Alteria Capital, which closed a $140 million venture debt fund last year, and InnoVen Capital India, the venture debt arm of Singapore’s Temasek Holdings. The latter also operates in Southeast Asia. Unlike Northern Arc, however, the two firms primarily contribute to the debt financing needs of Asia-based start-ups.
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