Northern Arc aims to raise Rs 1,000 cr alternate investment fund

Non-bank lender Northern Arc announced that one of its subsidiaries plans to raise Rs 1,000 crore in an alternate investment fund (AIF). The Category II AIF aims to raise Rs 1,000 crore and can raise an additional Rs 500 crore through the green shoe option. The "Finserv Fund" launched by the recently listed NBFC's subsidiary Northern Arc Investment Managers (NAIM) will use the money to lend to six varied sectors, including small businesses, affordable housing, vehicle finance, agriculture finance, microfinance, and consumer finance. The AIF is targeting to invest in 45-55 entities across its four-year cycle and deliver an internal rate of return of 14-14.50 percent to the investors.

The investment strategy focuses on higher risk-adjusted returns and regular investor cash flows by investing in a diversified pool of debt securities of financial institutions to support their growth. As of June 30, 2024, the NBFC has Rs 14,639 crore of assets under management through its balance sheet and active AIF funds, while NAIM has had four successful fund exits that have provided net fund returns of 11.72 percent - 15.77 percent post-expense pre-tax. Northern Arc's managing director and chief executive, Ashish Mehrotra, mentioned that its network of 328 originator partners, 50 retail lending partners, and over 1,000 investor partners will allow it to manage the portfolio effectively.