Northern Arc exits IFMR FImpact with 13% returns

Narayanan V

Northern Arc Investments, the alternative investment arm of Northern Arc Capital, on Wednesday announced that it has successfully closed and exited from one of its earliest debt funds, IFMR FImpact Medium Term Microfinance Fund, with better-than-expected returns.

“This is actually the third fund we had launched and the first one to mature. We had about 10 debt investments in micro finance companies in the rating space of BBB and BBB, and we have exited all of them successfully,” Ravi Vukkadala, CEO, Northern Arc Investments, told BusinessLine.

Northern Arc Investments has so far launched seven debt funds with more than ₹1,600 crore under management. The microfinance fund has invested in North East Small Finance Bank, Annapurna Microfinance, Svasti Microfinance, Asirvad Microfinance, and Satin Creditcare.

Volatile phases

Launched in June 2016, the microfinance fund witnessed some of the most-volatile phases in the form of demonetisation in November 2016 and the GST in July 2017. Despite these external headwinds, the fund maintained excellent portfolio quality and delivered consistent cash flow payouts to investors throughout its tenure, the company said in a press statement.

The three-and-a-half-year- tenured fund, which matured in December 2019, delivered net returns (pre-tax, post all other expenses) of over 13 per cent to investors, well above its target return of 11.5 per cent. “Our track record of having delivered consistent and superior risk-adjusted returns to investors throughout the fund life, especially during a time when the industry experienced sustained turmoil, is a testament to our strength as a fund manager,” Vukkadala was quoted in the statement.

The microfinance fund had a mix of high networth individuals and institutional investors such as Reliance General Insurance, and NBFCs such as Hinduja Leyland Finance and Sundaram Finance. Northern Arc Investments was established to raise capital from domestic and offshore markets and investing in sectors that work in the financial inclusion space.

In addition to microfinance, the company also focuses on a few other impact-focussed sectors such as small business loans, vehicle loans, affordable housing, agri business finance, and corporate finance.

“Microfinance continues to be a strong component of our funds, but we have seen the benefits of diversification. Post demonitisation, even within NBFCs, microfinance or vehicle finance, the asset classes behaved differently. Lots of alternative funds do not offer this level of diversification in terms of ticket size or sectors,” added Vukkadala.