Northern Arc targets Rs 1,000 crore through innovative alternate investment fund

Northern Arc, a prominent non-bank lender, has announced its ambitious plan to raise Rs 1,000 crore through an alternate investment fund (AIF). This initiative is spearheaded by its subsidiary, Northern Arc Investment Managers (NAIM), and aims to bolster financial inclusion and stimulate economic growth across various sectors as detailed in a report by the Press Trust of India.

Investment strategy focused on growth

The report further stated that, the newly launched "Finserv Fund" is classified as a category II AIF, with the potential to raise an additional Rs 500 crore via a green shoe option. According to an official statement from the company, the fund will strategically allocate resources to six key sectors: small businesses, affordable housing, vehicle finance, agriculture finance, microfinance, and consumer finance.

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NAIM's Chief Executive Bhavdeep Bhatt highlighted that the AIF will target investments in approximately 45 to 55 entities over a four-year cycle. The fund aims to deliver an internal rate of return ranging between 14 per cent and 14.50 per cent for its investors. This approach not only focuses on higher risk-adjusted returns but also ensures regular cash flows for investors by investing in a diversified pool of debt securities from financial institutions.

Robust asset management framework

As of June 30, 2024, Northern Arc boasts assets under management amounting to Rs 14,639 crore through its balance sheet and active AIF funds. The company has achieved notable success in fund exits, with returns ranging from 11.72 per cent to 15.77 per cent post-expense pre-tax.

Northern Arc's Managing Director and Chief Executive Ashish Mehrotra emphasized the importance of their extensive network in managing this portfolio effectively. The company collaborates with 328 originator partners, 50 retail lending partners, and over 1,000 investor partners. This robust framework is expected to enhance the fund's performance while supporting its mission of increasing financial access across diverse sectors.

Northern Arc's initiative comes at a crucial time when financial inclusion remains a significant challenge in India. By targeting sectors that are often underserved, such as small businesses and affordable housing, the Finserv Fund aims to bridge the gap in access to finance for millions of individuals and enterprises.

The company's strategic focus aligns with broader economic goals aimed at fostering growth and stability within the financial ecosystem. As Northern Arc embarks on this fundraising journey, it seeks not only to generate attractive returns for investors but also to contribute positively to the economy by empowering various sectors that drive growth.

Hence, Northern Arc's launch of the Finserv Fund marks a significant step towards enhancing financial inclusion while offering lucrative investment opportunities. With a clear focus on diverse sectors and a strong asset management strategy, the company is poised to make a meaningful impact in the evolving landscape of India's financial services industry.