Northern Arc Capital IPO Launch: Key Information and Investment Insights

Northern Arc Capital, a prominent non-banking financial company (NBFC) focused on retail loans, has announced the launch of its initial public offering (IPO). The IPO opened for public subscription on Monday, September 16, 2024, and will remain open until Thursday, September 19, 2024. Through this public issue, the company aims to raise ₹777 crore, comprising a fresh issue of ₹500 crore and an offer for sale (OFS) of ₹277 crore.

Prior to the IPO launch, Northern Arc Capital successfully garnered ₹229 crore from anchor investors. The allocation involved 87.02 lakh shares distributed to 15 different funds at a price of ₹263 per share. Some of the notable anchor investors include SBI General Insurance Company, SBI Life Insurance Company, Reliance General Insurance Company, Kotak Mahindra Life Insurance Company, Goldman Sachs (Singapore) Pte, Societe Generale, and Quant Mutual Fund. As of the first day of subscription, the IPO was subscribed 0.84 times, with retail investor interest surpassing expectations at a subscription rate of 1.27 times.

Stock market sources indicated that the current grey market premium (GMP) for Northern Arc Capital shares stands at ₹158, suggesting a positive investor sentiment, as shares are likely to list at a premium of 60.08% at ₹421. The IPO price band is set between ₹249 to ₹263 per share, and the minimum lot size is 57 shares, requiring an investment of at least ₹14,991.

Northern Arc Capital’s official registrar for the IPO is Kfin Technologies Limited, with ICICI Securities, Axis Bank, and Citigroup Global Markets India serving as the lead managers. The IPO allotment is expected to be finalized on Friday, September 20, 2024, with shares likely to be credited to investors’ demat accounts by Monday, September 23, 2024. The company’s shares are anticipated to debut on the BSE and NSE on Tuesday, September 24, 2024.

The proceeds from the IPO are intended to bolster Northern Arc Capital’s capital requirements for its onward lending initiatives. The company’s business model emphasizes providing credit to underserved households and businesses in India, using diversified channels such as lending, placements, and fund management. Over the years, Northern Arc Capital has demonstrated robust financial growth, with profits increasing from ₹181.94 crore in FY22 to ₹317.69 crore in FY24.

Investment experts have generally given a positive outlook on the IPO. Prathamesh Masdekar from StoxBox recommended a ‘subscribe’ rating, citing the company’s strong asset quality and consistent returns. Meanwhile, Anshul Jain from Lakshmishree Investment and Securities highlighted Northern Arc’s strategic position in the Indian credit market and its attractive valuation at a price-to-book value (P/BV) ratio of 1.49 times.

Established in 2009, Northern Arc Capital has steadily grown its reach and influence in the micro, small, and medium enterprises (MSMEs) sector as well as in microfinance and consumer finance, facilitating financing of over ₹1.73 trillion to 101.82 million individuals as of March 2024. Despite competitive pressures from larger NBFCs and banks, Northern Arc Capital’s diverse loan portfolio and continued focus on innovation and partnerships position it favorably for potential investors seeking to participate in this IPO.