Northern Arc Investments set up a dedicated India-focused Financial Inclusion Credit Fund (“Fund”) with the objective of earning higher risk-adjusted returns by taking exposure in debt securities in India’s financial inclusion sector – microfinance, SME finance, affordable housing finance, commercial vehicle finance and agri-finance.
Attractive market opportunity
- Low credit penetration in sectors like microfinance, small business loans, vehicle finance and affordable housing finance in India presents a large opportunity
- Potential investee pool consists of high quality originators in the retail credit space with substantial track record and addressing the growing sector of financial inclusion in India
Unique value proposition to address market opportunity
- The Fund will focus on debt, where the market opportunity is far larger than equity
- 3.5 year close-ended nature allows the Fund to follow a mix of passively and actively managed debt portfolio
- Investment of 10% of the Fund size by Manager/Sponsor (5% as first loss investment and 5% as co-investment
- Only AMC with rating on fund management quality. Rated for fund management quality as “AMC 2”1 by ICRA, on a scale of 1 to 5, with 1 being the highest
- Low management fee and expense ratio
|The broad contours of the Fund|
|Issuer A Category II Alternative Investment Fund (AIF) registered with SEBI|
|Target size INR 150 crores plus a green shoe option of INR 100 crores|
|Geographic Focus India|
|Tenor and Maturity 3.5 year, close-ended|
|Entity cap 15% of the Fund size or INR 20 crores, whichever is higher|
|Nature of investments Investments will be made primarily in market linked debentures, rated senior secured bonds, unsecured bonds, redeemable preference shares, commercial papers, PTCs, liquid debt funds and other instruments permitted by extant regulations|
|Investment Availability Primary|
Proven track record in sectors that the Fund will focus on
Proprietary underwriting and evaluation guidelines
Active post investment monitoring framework
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