Northern Arc, Gawa Capital raise $15m fund for on-lending to Indian NBFCs

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Northern Arc Capital, a debt platform for non-banking finance companies, has structured and co-invested in a Rs 106-crore (about $15 million) pooled bond issue with Spanish impact investment fund Magallanes Impacto for on-lending to small and mid-sized businesses across India.

The fund, which is being advised and managed by Gawa Capital Partners, will give the investors exposure to financial inclusion-focused NBFCs in India, across education finance, commercial vehicle finance and MSME finance, per a statement.

The pooled bond was issued by ASA International India, Aye Finance, Kanakadurga Finance Limited and Thirumeni Finance. Northern Arc has provided the common guarantee for Magallanes.

Northern Arc Capital CEO Kshama Fernandes said, “It [the investment] comes at a time when there has been a slowdown in liquidity to financial institutions in the Indian debt markets. It is also testament to the confidence of investors in the governance and business models of these NBFCs.”

Established in 2008, Northern Arc connects NBFCs working among financially excluded households and businesses such as micro-financiers, affordable housing finance companies and small business financiers with investors in existing and emerging debt markets.

In March, Northern Arc had raised about $130 million from IIFL Special Opportunities Fund and Standard Chartered Private Equity (SCPE). The company has raised $200 million in equity funding till date.

Meanwhile, Gawa Capital advises three impact investing funds including Magallanes Impacto, that invest in financial inclusion and MSME financing. It has investments in countries such as Chile, Columbia, Peru and India. This is GAWA’s first debt investment in the sub-continent.

Luca Torre and Agustin Vitorica, co-CEOs and co-Founders of Gawa Capital said, “Debt investments in the India NBFC market represent a great opportunity for our advised fund Magallanes Impacto FIL in terms of both financial returns and social impact.”