Northern Arc Capital raises $75 million from Dutch Development Bank FMO

Northern Arc Capital Limited, a Chennai-based non-banking financial company (NBFC), has raised $75 million through senior secured non-convertible debentures (NCDs) listed on the BSE. 

The substantial investment comes from the Dutch development bank FMO and has a tenure of five years. The transaction increases FMO's total exposure to Northern Arc to $125 million.

How will the funds be utilized?

The newly acquired capital will be strategically directed towards retail microloans, MSME (Micro, Small, and Medium Enterprises) loans, and green loans.

This allocation aligns with Northern Arc's commitment to fostering inclusive economic growth and promoting environmental sustainability.

The focus on microloans and SME support aims to stimulate entrepreneurship and innovation, particularly in sectors that traditionally face challenges accessing term funding from capital markets.

Leveraging advanced technology platforms

Northern Arc Capital leverages advanced technology platforms, namely nPOS and Nimbus, to enhance its loan processing and debt management capabilities.

nPOS, a cloud-based API-enabled platform, streamlines loan processes for partnership and co-lending businesses.

Meanwhile, Nimbus offers comprehensive end-to-end debt transaction management, facilitating efficient loan processing and ensuring effective debt management. These platforms are integral to Northern Arc's strategy to ensure seamless operations and robust financial services delivery.

Leadership comments

Ashish Mehrotra, Managing Director and CEO of Northern Arc Capital said, "This substantial investment from FMO underscores our unwavering commitment to transforming the financial landscape for underserved individuals and businesses in India."

"By channelling these funds into microloans, SMEs, and green projects, we aim to create a cascading effect that promotes sustainable economic growth and financial inclusion," said Mehrotra.

Huib-Jan de Ruijter, Chief Investment Officer at FMO, said, "We are very pleased to be able to provide long-term funding for MFIs and NBFCs in India, which have limited access to term funding from capital markets. This local currency facility to Northern Arc supports entrepreneurship and innovation and encourages the formalization and growth of SMEs and microenterprises. We want to thank Northern Arc for our partnership, enhancing financial inclusiveness across India."

Northern Arc's recent funding

In April, Northern Arc raised $80 million in funding, equally split between debt and equity components, from the International Finance Corporation (IFC), a World Bank Group member.

Northern Arc handles assets under management (AUM) worth Rs 10,081 crore. The firm is supported by several equity investors, including Sumitomo Mitsui Banking Corporation, LeapFrog, 360 ONE (formerly IIFL), Accion, Augusta Investments (known as Affirma Capital), Dvara Trust, and Eight Roads (a proprietary arm of Fidelity).