Northern Arc exits from first impact credit fund and delivers 15 pc return to investors

Northern Arc Investments has faced significant headwinds from demonetisation, GST rollout, the NBFC crisis, and the COVID-19-induced national lockdown.
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Northern Arc Investments, the private debt fund and subsidiary of Northern Arc Capital with a focus on lending to microfinance institutions, have announced the successful maturity and exit of its first fund – IFMR FImpact Investment Fund.

On the exit, Ravi Vukkadala, CEO – Northern Arc Investments, said, “This is a very significant and satisfying milestone for us. This is our second consecutive timely exit from our investment platform in the last two years, reinforcing our track record as an experienced private credit fund manager from India.”

Kshama Fernandes, MD & CEO, Northern Arc Capital

Kshama Fernandes, MD & CEO – Northern Arc Capital, said, “This is a great outcome for our funds' platform, as it continues to establish a strong track record by consistently delivering superior risk-adjusted returns to investors. At the time of its launch, the IFMR FImpact Investment Fund was an untested play in the financial inclusion space in India, and has since served as a powerful proof-of-concept for private credit funds to successfully operate in this segment. “

Launched in 2015, the fund raised Rs 100 crore in commitments from banks, insurance companies and HNIs. Upon final maturity, it delivered net returns (pre-tax, post all other expenses) of over 15 percent in rupee terms to its investors and it said it was ahead of its target return of 13 percent.

The fund’s investment portfolio comprised 13 companies that, in turn, have disbursed over 10 million end-loans to the unbanked and underbanked segment in India.

According to Northern Arc Investments, during this fund’s six-year tenure, it faced significant headwinds from decisions like demonetisation, GST rollout, NBFC crisis and the COVID-19 induced national lockdown.

However, the financial services company said despite these significant external headwinds, the fund maintained excellent portfolio quality and delivered consistent cash flow payouts to investors throughout its tenure, with no instances of shortfall or delay.

Northern Arc Investments has over $300 million in investor commitments across nine funds.

Edited by Saheli Sen Gupta