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Non-banking financial company (NBFC) Northern Arc has launched its performing credit AIF fund (Category II)—‘Finserv Fund’—through its subsidiary, Northern Arc Investment Managers (NAIM).

The fund aims to raise a target corpus of Rs 1,500 crore, including a greenshoe option of Rs 500 crore, the company said in a statement.

The Finserv fund aims to fuel financial inclusion and economic growth across six sectors—MSME, affordable housing, vehicle finance, agriculture finance, microfinance, and consumer finance.

Northern Arc looks to provide long-term debt capital to financial intermediaries focused on lending to underserved and unserved segments through the fund.

According to Ashish Mehrotra, Managing Director and CEO of Northern Arc, through NAIM, the company has invested over Rs 10,050 crore, largely in financial institutions.

It has a network experience of 328 originator partners, 50 retail lending partners, 1,000+ investor partners and ‘deep sectoral expertise’, which “allows us to manage a diverse portfolio effectively, while our robust risk management philosophy promotes the protection of our investor interests,” he said in a statement.

“The Finserv Fund is the 11th AIF launch from our fund management platform apart from the 2 PMS funds we manage… This Finserv Fund will invest in a meticulously curated portfolio of companies with proven performance and governance standards. It will invest in a well-diversified portfolio across 45-55 entities within our key sectors. This fund targets gross returns of 14-14.50% XIRR over,” said Bhavdeep Bhatt, Chief Executive Officer of Northern Arc Investments.

Northern Arc manages an AUM of Rs 14,639 crore through its balance sheet and active AIF funds as of June 30, 2024. NAIM has had four successful fund exits that have provided net fund returns of 11.72%-15.77% post-expense pre-tax, without any delays and defaults, the company said.