Private debt fund manager Northern Arc Investments announced the first closing of its latest fund, Northern Arc India Impact Fund, raising $23 million in comitments from international investors.
This is the eighth debt fund from the Northern Arc platform and the first to onboard international investors. It targets an overall corpus of $100 million (including greenshoe of $50 million).
Key investors in the first close included PG Impact Investments, a leading global impact investment firm backed by global private markets investment manager Partners Group, Anthos Fund and Asset Management from the Netherlands and Calvert Impact Capital, an institutional impact investor based in the United States.
Ravi Vukkadala, CEO, Northern Arc Investments, said, “Risk-adjusted credit spreads in the financial services space are very attractive and we are aiming to invest well over Rs 1,000 crore of long-term capital in financial institutions over the near term, especially those focusing on the under-served and under-penetrated segments in India."
Over a tenure of five years, the fund will invest in a number of debt instruments including senior and subordinated debentures, commercial paper, and other permissible market instruments. In the next 12-18 months, the fund targets to make 15-20 investments with average deal sizes of $3-5 million across its focus sectors of microfinance, small business finance, vehicle finance and agro-business finance.
The fund has been rated AA+ (SO) Equivalent by Crisil on capital protection and offers a strong risk-return value proposition to investors. Reflective of its track record in generating superior risk adjusted returns, all of the firm’s past funds have had strong investor participation (including re-ups) and have exercised the green shoe option, a feat the firm hopes to replicate in the current fund, added the investment firm.
The fund will draw support from parent company Northern Arc Capital’s experience in financial inclusion sectors in spanning proprietary lending, investing and structured finance. Northern Arc Capital has already developed stringent underwriting guidelines as well as built significant capital market and credit history for the fund’s target sectors, it added.