Companies

Sumitomo Mitsui Banking picks up 5.4% stake in Northern Arc

Our Bureau Chennai | Updated on December 16, 2019 Published on December 16, 2019

The debt capital platform has raised over ₹1,000 cr in equity this year

Japanese multinational bank Sumitomo Mitsui Banking Corporation has picked up a 5.4 per cent equity stake in Northern Arc Capital, a debt capital platform that caters to un-banked and under-banked individuals and businesses, for an undisclosed amount.

With this, Northern Arc Capital (formerly IFMR Capital Finance Ltd) has raised over ₹1,000 crore in equity this year.

The total deal size through primary and secondary transactions in December is ₹482 crore, with investment by IIFL, Affirma Capital and Sumitomo Mitsui coming in as the new investor.

Existing shareholders IIFL and Affirma Capital are completing their follow-on investment as part of a deal announced in March. Some of the existing investors partially sold their stakes.

According to a Northern Arc press release, Sumitomo Mitsui Banking Corporation (SMBC) will invest in transactions structured and executed by Northern Arc and provide on-balance sheet lending to Northern Arc’s partners.

Sumitomo Mitsui Banking Corporation has been working with Northern Arc for a while and has participated in securitisation deals and investments in NBFCs in the country.

This deal will further increase Sumitomo’s participation in India.

Northern Arc Capital has enabled debt financing of over ₹75,000 crore for financial institutions that deal with the target population.

Deal to fuel global ambitions

The release said for Northern Arc, the deal with Sumitomo Mitsui Banking Corporation would fuel the company’s global ambitions, strengthen its profile among foreign investors and also provide an opportunity to explore new geographical markets. The Japanese bank had introduced Northern Arc Capital to quite a few investors in the country.

The release quoted Kshama Fernandes, Managing Director and CEO, Northern Arc Capital, as saying that SMBC’s investment was a vote of confidence in Northern Arc’s business model. Northern Arc hoped to use this deal to further its mission of financial inclusion and widen its impact on the livelihoods of under-banked individuals and businesses.

Earlier pact

This round of equity raise by Northern Arc follows an agreement signed in March when Northern Arc Capital raised ₹910 crore from IIFL Special Opportunities Fund and Affirma Capital. The IIFL Special Opportunities Fund acquired a large stake in Northern Arc Capital by investing across primary and secondary deals.

At that time, some of the early investors in Northern Arc — Dvara Trust, LeapFrog and Accion — had partial exits. Standard Chartered Private Equity, an existing investor, also participated in that funding round.

Published on December 16, 2019
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