Northern Arc Capital raises Rs 200 crore from the Dutch development bank
Coimbatore: Non-banking financial company (NBFC) Northern Arc Capital has raised Rs 200 crore from the Dutch development bank FMO through an issuance of rupee-denominated non-convertible debentures (NCDs). The NCDs, issued in two tranches of Rs 100 crore each, are rated A+ by ICRA.
One tranche has been structured as a “green bond” and will be utilised exclusively for green purposes on lending. “This is the first ever green bond issued in the Indian impact investing space. Northern Arc Capital will dedicate the Rs 100 crore tranche to fund NBFCs that in turn finance the purchase of solar lamps, clean cooking stoves, electric and cleaner fuel vehicles, and for the financing of water and sanitation loans,” the NBFC said.
“This transaction marks an important milestone in opening up the green bond market to smaller, non-bank issuers. Significantly, this will also encourage lending by NBFC-MFIs (micro-finance institutions), NBFC-affordable housing finance companies and housing finance companies for green end uses,” it said. “Northern Arc and FMO closely engaged to structure an instrument that will enable green financing to retail borrowers, with the aim of catalysing this sector and encouraging the purchase and installation of assets that are beneficial to the environment,” the company said.
“The bond issuance is very timely, the proceeds of which will enable us to further deepen access to debt for underserved households and small enterprises in India,” said Kshama Fernandes, Managing Director and CEO of Northern Arc Capital. “The overall average tenure of 3 years and 6 months of the bond issuance creates access to stable, long term financing for Northern Arc and the sectors it serves,” he said. “Green bonds were conceptualised and created to fund end uses that have positive environmental and/or climate benefits, with the majority of green bonds issued having green ‘use of proceeds’ or being asset-linked bonds, as reported by the ‘Climate Bonds Initiative’,” the NBFC said. “This market kicked off in 2007 with AAA-internationally rated issuances by large multilateral institutions including the European Investment Bank and the IFC, among others,” it said.
“This green bond is particularly interesting as the on-lending is in the financial inclusion area of under banked end clients,” said Linda Broekhuizen, Chief Investment Officer FMO. “This is breaking new ground and complementary to earlier green bonds that FMO has invested in, which ultimately support large-scale renewable energy projects. Both are vital to address the huge climate challenges of global warming and air, soil and water pollution,” Linda stated.