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Tue, 26 Mar 2019 | VCCricle

IIFL fund leads $130 mn investment in Northern Arc Capital

Non-banking financial company Northern Arc Capital Ltd said on Tuesday that it has secured a fresh investment of Rs 910 crore (around $130 million) from a clutch of institutional investors.

IIFL Special Opportunities Fund and Standard Chartered Private Equity (SCPE) -- both existing investors -- along with Affirma Capital contributed to the round, Northern Arc Capital said in a statement. 

The IIFL fund was floated by IIFL Asset Management Ltd while Affirma Capital is a newly-formed, independent private equity firm to be managed by the team at SCPE after British bank Standard Chartered Plc said last December that it was exiting its private equity business.

An IIFL representative told VCCircle that the Special Opportunities Fund had contributed $100 million while Chennai-based Northern Arc said the secondary component of the transaction stood at around $43 million.

The development comes four months after VCCircle reported that Northern Arc Capital was in talks with several private equity firms and strategic investors for fresh funding ahead of a planned initial public offering.

Dvara Trust, LeapFrog Investments and Accion -- all impact investors -- will partially sell their stake in the company as part of the transaction. 

Northern Arc further said that Amit Mehta, principal at IIFL Private Equity, will now join its board. Last week, Northern Arc said that Leo Puri, former managing director of UTI Asset Management Company (or UTI Mutual Fund), had joined its board as the first independent, non-executive chairman.

Taking into account the latest infusion, Northern Arc has raised Rs 1,400 crore in equity overall since it was founded as IFMR Capital in 2008 as a microfinance institution.

The company had rebranded to Northern Arc in 2018 in order to reflect its business proposition of acting as a bridge between capital providers and users of capital across markets.

The fresh round of investment will help the company address the debt needs of client base across sectors, including new-age financial institutions in sectors such as consumer finance and fintech, it added.

“The capital will allow us to significantly scale up the existing business and pursue new opportunities,” said Kshama Fernandes, managing director and chief executive of Northern Arc Capital.   

“We will continue to invest in product development and technology, building on our knowledge, geographical reach, field insights, data-analytics and risk-modelling,” she added.

Axis Capital, Credit Suisse and ICICI Securities acted as advisors to the transaction.

Till date, the company has enabled debt financing of around Rs 70,000 crore, with about 20% from its own balance sheet for its clients across microfinance, small business finance, affordable housing finance, vehicle finance, agriculture finance and corporate finance. 

More than 125 investors including banks, asset managers, insurance companies, and development finance institutions among others have invested in transactions structured and arranged by Northern Arc Capital, which runs a debt capital platform for financial institutions serving excluded individuals and businesses.

Northern Arc Capital has over 160 employees spread across five offices across the country. It has structured and executed over 500 capital market transactions.

The company also has an Alternate Investment Fund vehicle, known as Northern Arc Investment Managers. The three-year-old business has seven funds under its management with a cumulative AUM of Rs 1,200 crore. 

In August 2017, group holding firm IFMR Holdings Pvt. Ltd mobilised nearly Rs 115 crore from emerging markets impact investment firm LeapFrog Investments Ltd and global impact investor Accion International. The transaction involved the exit of French development financial institution Proparco SA and Sarva Capital.

In late-2016, IFMR Capital secured funding from Eight Roads Ventures, the investment arm of Fidelity International Ltd. This was the largest investment for Eight Roads Ventures. LeapFrog, which had invested Rs 175 crore in IFMR in 2014, partially exited the firm. A month later, it raised around Rs 340 crore from Standard Chartered Private Equity.

Last December, Northern Arc Capital raised Rs 200 crore (about $28.5 million) in debt funding from Dutch development bank FMO