Northern Arc Investments exits maiden fund with 15% net returns

Northern Arc Investments, the alternative investment arm of non-banking financial company Northern Arc Capital, today announced the successful maturity and closure of IFMR FImpact Investment Fund with a higher-than-expected return.

Launched in 2015, the IFMR FImpact Investment Fund is the maiden fund from Northern Arc Capital’s investment platform. It was also the first microfinance-focussed private credit fund in India. The fund raised ₹1,000 million in commitments from an investor base, which included banks, insurance companies and HNIs.

In a press release, the company said that the fund’s investment portfolio comprised 13 companies, which, in turn, disbursed over 10 million end-loans to the unbanked and underbanked segments in India.

Volatile phases

During its six-year tenure, the fund witnessed some very volatile phases in India’s financial history, including the government’s demonetisation in November 2016, GST rollout in July 2017, the tightened liquidity conditions afflicting the financial services industry post the NBFC crisis in 2018-19, besides the Covid-19-induced national lockdown in 2020, the company added.

“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,” Kshama Fernandes, MD and CEO, Northern Arc Capital, was quoted in the release.

“This exit is truly reflective of our sectoral expertise and strong underwriting practices, which enabled us to maintain excellent portfolio quality even during challenging times,” she added.

Net returns

Despite 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. Upon final maturity, the fund delivered net returns (pre-tax, post all other expenses) of over 15 per cent (in rupee terms) to its investors, well ahead of its target return of 13 per cent, the company said.

“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,” Ravi Vukkadala, CEO, Northern Arc Investments, was quoted in the release.

In February 2020, Northern Arc Investments also exited from one of its earliest debt funds, IFMR FImpact Medium Term Microfinance Fund, with better-than-expected returns.