Northern Arc is a non-banking finance company that launched its second category Alternative Investment fund through its subsidiary, Northern Arc Investment Managers. The company launched the fund with a target corpus of 178.5 million USD including a green shoe option of Rs 500 crore. The startup intends to use these funds to invest in small businesses across six segments including affordable housing, MSME financing, microfinance, vehicle finance, agriculture finance, and consumer finance. The fundraising saw participation from several new and existing investors.
Northern Arc’s Finserv Fund impact on small business
The fund will offer a long-term debt to financial enterprises focused on underserved and unserved segments with a target corpus of Rs 1500 crore. The spokesperson of Northern Arc told inc42 in an interview that this fund will invest in around 45 to 55 companies with an average ticket size of Rs 40 crore per firm. The CEO of Northern Arc, Bhavdeep Bhat mentioned that this fund aims for a gross return of 14.50 percent extended internal rate of return in the four-year tenure with a deployment period of six months from the date of final close.
Northern Arc’s track record in managing investment funds is impressive. The company has completed and exited four funds, delivering returns that exceeded expectations. This strong performance has built investor confidence in the launch of the Finserv Fund which marks the 11th AIF managed by Northern Arc.
Company’s vision and expectation with the Finserv Fund
The non-banking financing company claims to have completed and exited four funds at a higher number than targeted returns to investors. The investment was made to help the companies scale their business while enabling them to achieve their market expansion plans. The CEO and managing director of Northern Arc, Ashish Mehrotra told Businessline in an interview that the Finserv Fund is another huge milestone toward the company’s mission to remove the financial gap between businesses and underserved individuals through the firm’s strength in proprietary data and technology.
The company showed confidence in the Finserv Fund and highlighted that this will deliver high returns. The company believes the fund will enable the enterprises to scale its operations and grow. The fund will help them in economic growth and financial success. Northern Arc manages an AUM of Rs 14,639 crore through a balance sheet and active AIF funds. The non-banking finance company provides business and household loans. The firm offers its services across various areas including market research and fund management. The Chennai-based company uses data analytics and qualitative assessment.
Recent investments and funding
The data intelligence platform, tracxn mentioned that the company has raised around 283 million USD across 18 funding rounds since its inception, including $75 million secured from FMO during its conventional debt funding round. Northern Arc recently secured Rs 229 crore from Marquee anchor investors with the participation of SBI General Insurance Company, Goldman Sachs, Kotak Mahindra Life Insurance Company, and others ahead of its Initial Public Offering. The funds were used to meet the future capital requirements for onward lending. The company provides financial solutions to growth-stage and early-stage companies. The company contributes to and promotes entrepreneurs and startups.
Northern Arc claims to have funded over Rs 18.1 lakh crore for its clients across 671 districts in India. The company offers its services in lending, investments, and placements across multiple sectors. The firm has invested in startups such as Slice, BharatPe, Rebel Foods, ProsParity, and others. The company was listed at a premium of Rs 351 on BSE at an issue price of Rs 263. Northern Arc wants to provide companies with access to finance and long-term debt capital. Earlier this year, the company also raised 80 million USD in its mix of equity and debt funding round from International Finance Corporation, an investment subsidiary under the World Bank Group’s private sector.
Investors and partnerships
The platform offers financial solutions across Finance, business, and other sectors. The data intelligence platform, traxcn mentioned that the company has facilitated around 18 funding rounds. The company has 27 institutional investors including Standard Chartered, Eight Roads Ventures, FMO, AND Leapfrog investments. The development came just when the investor’s interest increased in the Indian startup ecosystem. Inc42 mentioned that around 93 percent of the 50 startup investors see 2024 as a turnaround year in terms of funding for the Indian startup ecosystem. The private equity firm provides investment and finance services to its customers through its online platform.
The Indian startup ecosystem is expected to grow in the next few years with the company’s launching new funds focused on startups. The government of India also launched a scheme to enable all entities and small businesses to join Open Network for Digital Commerce and online product selling. The initiative is taken to help these enterprises compete in the digital market as it reduces the total expenditure due to low commissions in the online marketplace.
Company’s financial results for FY24
Northern Arc reported a 44 percent increase in its revenue to Rs 1,890 crore for FY24. The total profit also increased to Rs 317.69 crore in the same duration. The company had a revenue of Rs 1,304 crore in the last financial year with a profit of Rs 242.21 crore in the same year. The company’s initial public offering was subscribed to 110.91 times with interest from the qualified institutional buyers who subscribed to the public list over 240.79 times.
Government schemes to promote the startup ecosystem
Investment firms and the government have been introducing various funds to support Indian startups. NABVENTURES, a subsidiary of NABARD, has also launched an agriculture-focused fund with an initial amount of Rs 750 crore. Out of this, Rs 250 crore was contributed by the Ministry of Agriculture, and the rest will come from other institutions. The purpose of this fund is to help agriculture startups grow their businesses. It will also improve the value of agricultural products and create better rural connections and infrastructure.
The government is introducing these schemes for clean innovation and its real benefits will be reflected in sectors such as agriculture, technology, and small industry. This helps startups secure funds, scale up businesses, improve productivity, and contribute to the nation’s economy. Such collaboration between the government and the investment firms is very important for creating the future of our country.
Conclusion:
The Non-banking financing company provides housing and business loans while offering financial solutions to growth and early-stage startups. The company launched a fund with a target corpus of around 178.5 million USD including a green shoe option of 59.5 million USD. The company claims to have invested Rs 1.81 lakh crore in various investment rounds across 671 districts of India. The company aims to use these funds across six areas including MSME financing, Consumer finance, vehicle finance, agriculture finance, affordable housing, and microfinance. Northern Arc announced the launch of this second category Alternative investment fund Finserve Fund through its investment arm, Northern Arc Investment Managers.
The investment will be used to back around 45 to 55 entities with an average ticket size of Rs 40 crore per company. The firm focuses on underserved and unserved segments. The startup ecosystem in India is predicted to increase in the next few years this is why the government is also trying to launch various new schemes and the investment firms are also making huge investments in the startups to gain profit. Earlier, this year the government of India launched a fund to promote innovative and tech-driven initiatives in the agriculture market.
This funding round marks the launch of the 11th alternative investment fund by the company along with the two portfolio management services funds that this company already manages. The CEO of Northern Arc Investments, Bhavdeep Bhatt showed his trust in the funding and said that the company has exited four funds at higher return value than expected to their investors. Northern Arc announced the launch of this second category Alternative investment fund Finserve Fund through its investment arm, Northern Arc Investment Managers. The investment will be used to back around 45 to 55 entities with an average ticket size of Rs 40 crore per company. The firm focuses on underserved and unserved segments.
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