Northern Arc Capital IPO
Northern Arc Capital Limited is launching an initial public offering (IPO) to raise Rs 777.00 crores through a combination of fresh issue and offer for sale. The IPO will open for subscription from September 16-19, 2024 with a price band of ₹249 to ₹263 per share. The company offers retail loans to underserved households and businesses in India across sectors like MSME finance, microfinance, consumer finance, and more.
RI
by RA ALOK DAIYA SEBI Reg. INH000011468
About Northern Arc Capital Limited
MSME Finance
Northern Arc Capital Limited offers retail loans to underserved households and businesses in India.
Microfinance (MFI)
The company's business model is diversified across different offerings, sectors, products, geographies, and borrower categories.
Consumer Finance
As of March 31, 2024, the company has facilitated over Rs. 1.73 trillion worth of financing, reaching out to over 101.82 million people across India.
Vehicle Finance
The company has expertise in lending across various focus sectors in India, especially in:
Affordable Housing Finance
The company has expertise in lending across various focus sectors in India, especially in:
Agriculture Finance
The company has expertise in lending across various focus sectors in India, especially in:
IPO Structure and Timeline
The Northern Arc Capital IPO consists of:
- Fresh issue of 1.9 crore shares aggregating to Rs 500.00 crores
- Offer for sale of 1.05 crore shares aggregating to Rs 277.00 crores
Key dates:
- IPO opens: September 16, 2024
- IPO closes: September 19, 2024
- Basis of allotment: September 20, 2024
- Initiation of refunds: September 23, 2024
- Credit of shares to demat: September 23, 2024
- Listing date: September 24, 2024 (tentative)
1
IPO Opening
The Northern Arc Capital IPO opens for subscription on September 16, 2024.
2
IPO Closing
The IPO closes on September 19, 2024. The cut-off time for UPI mandate confirmation is 5 PM on this date.
3
Allotment and Listing
Basis of allotment is expected on September 20, with shares credited to demat accounts on September 23. The tentative listing date is September 24, 2024.
IPO Details and Lot Size
Price band
₹249 - ₹263 per share
Minimum Lot
57 shares
Shares offered
2,90,06,785
The IPO offers 2,90,06,785 shares in total, with reservations for different investor categories:
- QIB: 58,01,354 shares (20%)
- NII: 43,51,016 shares (15%)
- Retail: 1,01,52,384 shares (35%)
- Anchor investors: 87,02,031 shares (30%)
Business Model and Technology
Northern Arc Capital serves the retail lending market through a multi-channel approach that includes:
Lending
Extending financing from the company's balance sheet to originator partners and directly to underserved households and businesses, with AUM of Rs. 117,100.19 million across 671 districts, 28 states and seven union territories in India, as of March 31, 2024.
Placements
Enabling loans to originator partners through various financing products with a total AUM of Rs. 1,019,038.92 million as of March 31, 2024.
Fund Management
Managing debenture funds and providing portfolio management services with a total volume of Rs. 120,785.58 million spread across 10 alternative investment funds (AIFs) and three portfolio management service funds (PMS) as of March 31, 2024.
The company also has an end-to-end integrated technology product suite customized to multiple sectors, including Nimbus, nPOS, Nu Score, and AltiFi.
Financial Information and Key Performance Indicators
Northern Arc Capital Limited's financial performance shows growth between the financial years ending March 31, 2023 and March 31, 2024:
- Revenue increased by 45%
- Profit after tax (PAT) rose by 31%
Key Performance Indicators as of March 31, 2024:
- Market capitalization: Rs 4242.86 Cr
- Debt/Equity: 3.9
- RoNW: 13.32%
- P/BV: 1.49
IPO Objectives and Lead Managers
The company proposes to utilize the Net Proceeds to meet future capital requirements toward onward lending.
The lead managers for the Northern Arc Capital IPO are:
- ICICI Securities Limited
- Axis Bank Limited
- Citigroup Global Markets India Private Limited
Kfin Technologies Limited is the registrar for the IPO.
ICICI Securities
Lead manager with expertise in investment banking and financial services.
Axis Bank
One of India's leading private sector banks managing the IPO process.
Citigroup Global Markets
International financial services firm providing IPO management expertise.
IPO Review
Northern Arc is a niche player on diversified financial services platforms. The company has demonstrated steady growth in both its revenue and profits over the reported periods. Based on FY24 earnings, the IPO appears to be reasonably priced. Northern Arc is well-positioned for future growth, leveraging its sector expertise, digital platforms, and a strong partner ecosystem to tap into India's underpenetrated credit markets. Its diversified funding sources and improved credit rating support sustainable expansion, despite high operational costs.The company is valued at a P/E & P/BV multiple of 13.4 times & 1.5 times respectively based on the upper price band on the post-issue capital. Northern Arc is one of India’s leading diversified non-banking financial companies in terms of assets under management (AUM). The company has honed its expertise in facilitating credit across targeted sectors in India.
Therefore, this IPO can be opted by both Traders & Investors for Listing & Capital Gain, respectively.