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Market-bound Northern Arc Capital raises debt from Japanese bank SMBC
Photo Credit: VCCircle

Debt financing platform Northern Arc Capital, which filed for an initial public offering (IPO) this year, has received fresh debt capital of Rs 100 crore ($13.5 million) from its equity partner Sumitomo Mitsui Banking Corporation (SMBC) which is one of Japan’s largest banks. 

“Northern Arc Capital will use the proceeds to cater to the credit demands of small enterprises and agri-businesses. The transaction aligns with the company’s ESG (environmental, social and governance) goal of creating sustainable impact by providing efficient and reliable debt finance to under-served businesses,” the non-bank lender said in a statement. 

The investment supports SMBC’s sustainable development goals in India, it added. 

Two years ago, SMBC had picked up a 5.4% minority stake in Northern Arc Capital through a primary capital infusion of Rs 60 crore and a secondary purchase of shares from some existing investors for Rs 80 crore. 

In a recent interview with VCCircle, Bama Balakrishnan, chief operating officer at Northern Arc Capital, said the digital debt financing platform has begun sharpening its focus on financing early-stage startups, mid-market companies and retail businesses. 

Over the last year, Chennai-based Northern Arc Capital (formerly IFMR Capital Finance) has attracted debt financing from many global developmental financial institutions and impact investors including the US International Development Finance Corporation, Asian Development Bank, Calvert Impact Capital and Dutch development Bank FMO. 

Last month, the debt financier raised $50 million in external commercial borrowing (ECB) from Japanese International Cooperation Agency. 

Northern Arc Capital’s IPO will issue fresh equity shares of up to Rs 300 crore and do an offer for sale (OFS) of up to 36.52 million equity shares by shareholders and promoters. 

The lender is backed by investors including LeapFrog, IIFL, Accion, Augusta Investments (known as Affirma Capital), Dvara Trust, Eight Roads and SMBC.

Since its inception in 2009, the firm has raised close to about Rs 95,000 crore in financing for customers and closed the year ended March 2021 at about Rs 5,200 crore of assets under management including the alternatives business.

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