Northern Arc Investments provides specialized Alternative Investment Fund (AIF) products that promote financial inclusion while at the same time providing an attractive investment opportunity for investors. Northern Arc Investments’ AIFs provide a unique platform for investors to take part in market opportunities in sectors like microfinance, affordable housing finance, SME finance, commercial vehicle finance, agri-business finance and other sectors.

Funds launched by Northern Arc Investments aim at investing in a select group of high quality institutions in India’s retail finance sector and allow investors to take part in India’s financial inclusion movement.

Investment process focuses on both financial and social due diligence

While Northern Arc Investments’ underwriting norms are specific to each asset class, the broad Framework hinges on the following pillars:

Due Diligence Approach:

Northern Arc Investments adopts a highly interactive and focussed approach in conducting Due Diligences (DD). The team spends considerable time preparing for the diligence which includes background work on the company, its group, its promoters, markets where it operates – geographical and otherwise, which are already available on the public domain. Legal and regulatory checks on the company and directors are also conducted in advance to the extent information is available.

The actual DD process consists of field visits, file and documentation review and meetings with the management and feedback. The entire process is structured around the following:

  • 1Entity Identification

    Annual report, rating report, management, portfolio composition

  • 2Pre-investment Evaluation

    Multi-dimensional evaluation framework
    – Legal, governance and leadership quality
    – Management and systems
    – Stragegy and business plan
    – Client protection and ESG
    – Financial and operational performance

  • 3Detailed Due Diligence

    Field visit and meeting with senior management, promoter, independent, rating agency, and investors
    – Financial and operational due diligence
    – social due diligence

  • 4Post Visit Documentation

    Preparation of due diligence report based on visit and data received

  • 5Entity Appraisal

    Enitity to be appraised across various parameters based on information received as well as insights gathered in filed visits

  • 6Investment Committee

    Based on report and information received, approval of IC is sought

  • 7Investment Approval

    Post-approval by IC, final non-binding term sheets are negotiated and finalized to close the investment decision process

  • 2Pre-investment Evaluation

    Multi-dimensional evaluation framework
    – Legal, governance and leadership quality
    – Management and systems
    – Stragegy and business plan
    – Client protection and ESG
    – Financial and operational performance

  • 4Post Visit Documentation

    Preparation of due diligence report based on visit and data received

  • 6Investment Committee

    Based on report and information received, approval of IC is sought

Post-Investment Monitoring:

The team will periodically assess portfolio entities under various scenarios – both external and internal to detect early warning signals that may have the potential to adversely affect the portfolio. The portfolio is monitored through extensive field visits and desk based research covering both financial and operational performance. Our on-going monitoring efforts evaluate the entities on below principles on a regular basis to ensure continuous adherence to the covenants, post investment.

Our system of continuous post-investment monitoring has a pivotal role to play not only in our investment process, but also in guiding the investee entities towards industry best practices. Through our post-investment monitoring framework, which includes periodical field visits to investees spread across 3-4 days, the origination and risk management system of our investees is expected to evolve considerably. Improvement in internal audit processes in the investee institutions is expected to contribute to better asset quality. System/MIS have been upgraded leading to better reporting systems and ability to track granular details on each borrower.