The NCDs, issued in two tranches of Rs 1 billion each, are rated A+ by ICRA.
One tranche has been structured as a “green bond” and will be utilised exclusively for green on lending.
This is the first green bond issued in the Indian impact investing space.
Northern Arc Capital will dedicate the Rs 1 billion tranche to fund NBFCs that in turn finance the purchase of solar lamps, clean cooking stoves, electric and cleaner fuel vehicles, and financing of water and sanitation loans.
This transaction marks an important milestone in opening up green bond market to smaller, non-bank issuers, the NBFC said.
This will also encourage lending by NBFC-MFIs, NBFC-Affordable Housing Finance Companies, and Housing Finance Companies for green uses. Northern Arc and FMO closely engaged to structure, an instrument that will enable green financing to retail borrowers, with an aim of catalysing this sector and encouraging the purchase and installation of assets that are beneficial to the environment.
The bond issuance is timely, the proceeds of which will enable us to further deepen access to debt for underserved households and small enterprises in India.
The overall average tenure of three years and six months of bond issuance creates access to stable, long-term financing for Northern Arc and the sectors it serves. “We are proud to have issued our first green bond in partnership with FMO in the sustainable development goals of the United Nations,” said Kshama Fernandes, managing director and CEO, Northern Arc Capital.