The fund marks Northern Arc Investment Manager’s 15th private credit fund. Structured as a sector-agnostic Category II Alternative Investment Fund (AIF), it focuses on performing private credit opportunities. Rated AA (SO) by CareEdge Ratings, the fund has a target corpus of Rs. 1,500 crore, along with an additional greenshoe option of Rs. 500 crore, taking its potential size to Rs. 2,000 crore. With a tenure of five years, the fund targets an XIRR of 16%.
The announcement coincides with the maturity of the Northern Arc India Impact Fund, which channelled global capital into financial inclusion opportunities across India. During its tenure, the fund supported 60 businesses across credit cycles and recorded gross deployment of over Rs. 1,398 crore at the fund level. Its investments were backed by ultra-high-net-worth individuals (UHNIs), family offices, and domestic and global institutional investors.
Commenting on the two developments, Ashish Mehrotra, Managing Director and Chief Executive Officer of 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. 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 Manager has launched 15 funds, of which seven have fully matured, delivering returns to investors at a weighted average XIRR of over 14.5%, in line with targeted returns. The company stated that these matured funds recorded no extensions or principal losses for investors. It has cumulatively distributed over Rs. 10,000 crore in principal and coupon payments since inception and manages private credit funds and investment mandates.
Alongside its investment management milestones, Northern Arc Capital reported strong operating performance in Q2FY27. Its consolidated profit after tax (PAT) increased 41% year-on-year to Rs. 129 crore, while net interest income (NII) rose 32% to Rs. 425 crore.
Lending assets under management (AUM) grew 34% year-on-year to Rs. 19,003 crore. Direct lending AUM recorded 64% growth to Rs. 12,502 crore, accounting for 66% of the overall portfolio. Credit costs improved by 11 basis points year-on-year to 2.66%, reflecting the performance of the company's lending franchise.
The fund's first close, the maturity of the Northern Arc India Impact Fund and the company's Q2FY27 financial performance mark developments across its private credit and lending businesses. The company stated that it remains focused on portfolio quality, disciplined growth, risk management and sustainable value creation.
All figures stated are as of September 30, 2026.
Past performance is not indicative of future results. Target returns are not assured, and investment in AIFs is subject to market, credit, liquidity and other risks, including loss of capital. The announcement is for information only and does not constitute an offer or solicitation. Units are offered only through private placement under the private placement memorandum, which investors should read. CareEdge Ratings does not constitute a recommendation and does not eliminate credit risk.
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