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Wed, 27 Mar 2019 | Deal Street Asia
Deal Street Asia

India: Northern Arc raises $130m from IIFL fund, StanChart PE

Northern Arc Capital (formerly IFMR Capital), a debt capital platform for financial institutions serving excluded individuals and businesses, on Tuesday said it had raised ₹910 crore ($130 million) from IIFL Special Opportunities Fund and Standard Chartered Private Equity (SCPE), the company said in a statement.

Affirma Capital, a newly formed, independent private equity firm to be managed by the team at SCPE, also participated in the round, the statement said.

As part of this transaction, early investors Dvara Trust, LeapFrog Investments and Accion will partially sell their stake in the company. Axis Capital, Credit Suisse and ICICI Securities acted as advisers to the transaction.

Established in 2008, Northern Arc connects non-banking financial companies (NBFCs) working among financially excluded households and businesses such as micro-financiers, affordable housing finance companies and small business financiers with investors in existing and emerging debt markets.

With this round of funding, the total equity raised by Northern Arc stands at ₹1,400 crore (around $200 million).

The fresh round of investment will help the company address the debt needs of a growing client base across platforms, including new-age financial institutions in sectors such as consumer finance and fintech, the statement said. It will enable the firm to increase exposure to existing sectors, deepen client relationships and bolster product innovation.

“This is a significant milestone for Northern Arc and testament to the confidence placed by investors in the company. The capital will allow us to significantly scale-up existing business and pursue new opportunities,” said Kshama Fernandes, managing director, and CEO, Northern Arc Capital.

Northern Arc will continue to invest in product development and technology, building on its knowledge, geographical reach, field insights, data-analytics and risk-modelling, she added.

“The fund raising transforms our institutional capability to serve our client partners and further the mission of financial inclusion,,” said Bama Balakrishnan, chief financial officer at Northern Arc Capital.

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

“Over the last decade, Northern Arc has created a strong platform, which enables access to debt capital for emerging sectors. With strong tailwind from these emerging sectors and Northern Arc’s continued focus on execution, we believe the company is poised for rapid growth. We are indeed privileged to partner with them at this inflection point.” said Prashasta Seth, CEO at IIFL AMC.

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