Northern Arc's diversified debt fund hits first close at over Rs 400 Cr

Northern Arc Investment Managers, the asset management arm of Northern Arc Capital, has announced the first close of its Northern Arc Diversified Debt Fund with commitments of more than Rs 400 crore from institutions, family offices, ultra-high-net-worth individuals (UHNIs) and high-net-worth individuals (HNIs).

The fund is the firm's 15th private credit vehicle. It is a sector-agnostic Category II Alternative Investment Fund (AIF) focused on performing private credit, rated AA (SO) by CareEdge Ratings. It targets a corpus of Rs 1,500 crore, with a greenshoe option of Rs 500 crore that could take it to Rs 2,000 crore. The fund has a five-year tenure and targets a 16% XIRR.

The announcement coincides with the maturity of the Northern Arc India Impact Fund, which channelled global capital into financial inclusion opportunities across India. Over its tenure, the fund supported 60 businesses across credit cycles, with gross deployment of over Rs 1,398 crore at the fund level, backed by UHNIs, family offices, and domestic and global institutional investors.

Commenting on the announcements, Ashish Mehrotra, Managing Director and Chief Executive Officer, Northern Arc Capital, said, "The first close of the Northern Arc Diversified Debt Fund reflects continued investor interest in private credit and its evolving role in sophisticated investment portfolios. The maturity of our Northern Arc India Impact Fund further demonstrates our experience in managing private credit investments across credit cycles. Together, these milestones reinforce our focus on disciplined credit selection, portfolio diversification and risk management.”

He added, “Over the past decade, we have built a diversified private credit platform that has deployed over Rs. 16,500 crores across 15 AIFs and two PMS offerings and served more than 1,500 investors across institutional and wealth segments. As private credit becomes an increasingly strategic allocation for investors, we remain focused on connecting capital with businesses across sectors while creating opportunities for risk-adjusted returns."

Since its inception in 2014, Northern Arc Investment Managers has launched 15 funds, of which seven have fully matured, delivering returns at a weighted average XIRR of over 14.5%, in line with targeted returns, without any extension or principal loss to investors, the company said. It has cumulatively distributed over Rs 10,000 crore of principal and coupon since inception.

Separately, Northern Arc Capital reported a 41% year-on-year growth in consolidated profit after tax to Rs 129 crore in Q2 FY27, while net interest income rose 32% to Rs 425 crore. Lending assets under management grew 34% to Rs 19,003 crore, supported by a 64% rise in direct lending AUM to Rs 12,502 crore, which now accounts for 66% of the overall portfolio. Credit costs improved by 11 basis points to 2.66%."