FUNDING
Northern Arc raises over Rs 400 crore in first close of diversified debt fund
The sector-agnostic Category II fund targets a total corpus of up to Rs 2,000 crore including a greenshoe option.
Northern Arc Investment Managers Private Limited has secured commitments of over Rs 400 crore for the first close of its sector-agnostic Northern Arc Diversified Debt Fund. The fund targets a base corpus of Rs 1,500 crore, alongside a greenshoe option of Rs 500 crore that takes its total potential size to Rs 2,000 crore.
Institutional investors, family offices, ultra-high-net-worth individuals, and high-net-worth individuals participated in the first close. The vehicle marks the firm's 15th private credit fund and is structured as a Category II Alternative Investment Fund (AIF) aimed at performing private credit opportunities in India.
Fund structure and investor backing
The Northern Arc Diversified Debt Fund holds an AA (SO) rating from CareEdge Ratings and is structured with a five-year tenure. The investment manager has set a targeted internal rate of return (XIRR) of 16% for the fund.
| Fund parameter | Specification |
|---|---|
| Targeted corpus | Rs 1,500 crore |
| Greenshoe option | Rs 500 crore |
| Total potential size | Rs 2,000 crore |
| Rating | AA (SO) by CareEdge Ratings |
| Tenure | 5 years |
| Target XIRR | 16% |
| Structure | Category II AIF |
The timing of the announcement coincides with the full maturity of another vehicle, the Northern Arc India Impact Fund. That fund channelled international capital into Indian financial inclusion projects, deploying over Rs 1,398 crore in gross capital across 60 businesses throughout its life.
Track record across private credit funds
Since entering the fund management market in 2014, Northern Arc Investment Managers has launched 15 funds. Seven of those vehicles have reached full maturity, returning capital with a weighted average gross XIRR exceeding 14.5%.
According to the company, all seven matured funds achieved their targeted performance benchmarks without requiring tenure extensions or suffering principal losses. Over its operating history, the investment manager has distributed more than Rs 10,000 crore in combined principal and coupon distributions to its capital partners.
Across its broader platform, Northern Arc has deployed over Rs 16,500 crore through 15 AIFs and two Portfolio Management Services (PMS) structures over the past decade, serving more than 1,500 investors across wealth and institutional channels.
"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," said Ashish Mehrotra, Managing Director and Chief Executive Officer of Northern Arc Capital. "The maturity of our Northern Arc India Impact Fund further demonstrates our experience in managing private credit investments across credit cycles."
Financial performance in Q2 FY27
Alongside the fund announcement, parent company Northern Arc Capital disclosed its financial results for the quarter ending September 30, 2026. Consolidated profit after tax (PAT) rose 41% year-on-year to Rs 129 crore, while net interest income (NII) increased 32% year-on-year to Rs 425 crore.
| Financial metric | Q2 FY27 figure | Year-on-year growth |
|---|---|---|
| Consolidated PAT | Rs 129 crore | 41% |
| Net interest income | Rs 425 crore | 32% |
| Total lending AUM | Rs 19,003 crore | 34% |
| Direct lending AUM | Rs 12,502 crore | 64% |
| Credit costs | 2.66% | Improved by 11 bps |
Northern Arc Capital's total lending assets under management (AUM) reached Rs 19,003 crore, representing a 34% expansion from the previous year. Direct lending comprised Rs 12,502 crore of that total—or 66% of overall AUM—following a 64% expansion in that segment. Credit costs during the period stood at 2.66%, improving by 11 basis points year-on-year.
What happens next
Northern Arc Investment Managers will continue raising capital toward its final target of Rs 1,500 crore, with the ability to exercise the Rs 500 crore greenshoe option as institutional and private wealth commitments progress over the fund's tenure.