Sumitomo Mitsui Banking Corporation picks up 5.4% stake in Northern Arc

Japanese bank Sumitomo Mitsui Banking Corporation (SMBC) has acquired a 5.4 per cent stake in Northern Arc Capital Limited (formerly known as IFMR Capital Finance Limited) for an undisclosed amount. With this round of funding, Northern Arc has this year raised a total of over Rs 1,000 crore (around $650 million). Northern Arc is a debt capital platform catering to the under-banked individuals and businesses in the country, 

SMBC will make investments in transactions structured and executed by Northern Arc as well as provide on-balance sheet lending to Northern Arc’s partners. The collaboration will fuel Northern Arc’s global ambitions, strengthen its profile among foreign investors and provide an opportunity to explore global markets. The investment will also help it to better address the debt needs of companies in various sectors including new-age sectors such as consumer finance and fintech.  

“The investment by SMBC, one of the world’s largest financial services institutions, is a vote of confidence in Northern Arc’s business model, pioneering capabilities and corporate governance. We hope to leverage on the potential synergies of this partnership to further our mission of financial inclusion and widen our impact on the livelihoods of under-banked individuals and businesses,” Kshama Fernandes, managing director and CEO, Northern Arc Capital said.

Bama Balakrishnan, CFO, Northern Arc Capital, said: “While there has been active business collaboration between Northern Arc and SMBC over the past few years, the investment will enable both institutions to reap strategic synergistic benefits. Northern Arc’s global visibility, access and profile will receive a massive boost with this transaction.”

“This partnership will also allow us to contribute meaningfully towards women empowerment, financial inclusion for the underserved Indian population and the sustainability of the Indian economy,” Masahiko Oshima, deputy president, SMBC, added. 

So far, Northern Arc has enabled debt financing of over Rs 75,000 crore (around $10.5 billion) to 200 plus financial institutions catering to unbanked and under-banked customers, impacting the lives of over 43 million customers across more than 580 districts of India. It has also structured and executed over 500 capital markets transactions.