Ravi Vukkadala, CEO, Northern Arc Investments, said, “Risk-adjusted credit spreads in the financial services space are very attractive and we are aiming to invest well over Rs 1,000 crore of long-term capital in financial institutions over the near term, especially those focusing on the under-served and under-penetrated segments in India."
Over a tenure of five years, the fund will invest in a number of debt instruments including senior and subordinated debentures, commercial paper, and other permissible market instruments. In the next 12-18 months, the fund targets to make 15-20 investments with average deal sizes of $3-5 million across its focus sectors of microfinance, small business finance, vehicle finance and agro-business finance.
The fund has been rated AA+ (SO) Equivalent by Crisil on capital protection and offers a strong risk-return value proposition to investors. Reflective of its track record in generating superior risk adjusted returns, all of the firm’s past funds have had strong investor participation (including re-ups) and have exercised the green shoe option, a feat the firm hopes to replicate in the current fund, added the investment firm.
The fund will draw support from parent company Northern Arc Capital’s experience in financial inclusion sectors in spanning proprietary lending, investing and structured finance. Northern Arc Capital
has already developed stringent underwriting guidelines as well as built significant capital market and credit history for the fund’s target sectors, it added.