Northern Arc Capital Limited, established to address the retail credit needs of underserved households and businesses, has become a prominent player in India’s financial services ecosystem over the last 15 years. With a differentiated model that spans across various sectors, the company has positioned itself as a key enabler of financial inclusion.

The Northern Arc Capital IPO, a Book Built Issue, amounts to ₹777 crores, consisting of a fresh issue of 190.11 lakh shares worth ₹500 crores and an Offer for Sale of 105.32 lakh shares totaling ₹277 crores. The subscription period for the IPO runs from September 16, 2024, to September 19, 2024. The price band is set between ₹249 and ₹263 per share, and the minimum lot size is 57 shares. Retail investors are required to invest a minimum of ₹14,991, while High-Net-Worth Individuals (HNIs) must invest a minimum of ₹209,874 (14 lots or 798 shares).

The book-running lead managers for the issue are ICICI Securities Limited, Axis Capital Limited, and Citigroup Global Markets India Private Limited. KFin Technologies Limited is serving as the registrar for the IPO.

Financial Performance

Northern Arc Capital has demonstrated solid financial growth over the past few years. In Fiscal Year 2024, the company reported ₹19,060.33 million in revenue, a notable increase from ₹13,112 million in 2023 and ₹9,165.45 million in 2022. The company’s EBITDA for FY24 was ₹11,635.65 million, compared to ₹8,907.18 million in FY23 and ₹6,686.37 million in FY22. Similarly, the Profit After Tax (PAT) rose to ₹3,083.34 million in FY24, up from ₹2,300.11 million in FY23 and ₹1,725 million in FY22.

For the IPO, the pre-issue Earnings Per Share (EPS) stands at ₹22.40, while the post-issue EPS is expected to be ₹19.04. The company’s pre-issue Price-to-Earnings (P/E) ratio is 11.74x, and the post-issue P/E ratio is 13.81x, which compares favorably to the industry P/E of 23.38x. Northern Arc’s Return on Equity (ROE) for FY24 is 13.32%, making the IPO fairly priced compared to its peers.

Grey Market Premium (GMP)

The Grey Market Premium (GMP) for Northern Arc Capital is expected to be in the range of ₹140 to ₹150, which translates to a potential listing gain of 55% to 57%. However, it’s important to note that the Grey Market Premium is speculative and should not be the sole factor in making investment decisions.

Subscription Status

As of 12:24 PM on September 19, 2024, the Northern Arc Capital IPO has received substantial interest, with the issue being subscribed 32.05 times on the final day of the subscription period. This strong demand reflects the company’s attractive financials and positive market sentiment. The subscription breakdown is as follows:

Qualified Institutional Buyers (QIBs): Subscribed 44.53 times

Non-Institutional Investors (NIIs): Subscribed 14.32 times

Retail Investors: Subscribed 9.18 times

Anchor Investors

Northern Arc Capital raised ₹25.77 crores from anchor investors at a price of ₹263 per share. A total of 979,887 equity shares were allocated to these institutional investors. This indicates confidence from large investors and sets the tone for the IPO’s success.

Allotment and Listing Details

The allotment date for the Northern Arc Capital IPO is scheduled for September 20, 2024. Investors can check their allotment status through the registrar’s website by following these steps:

Visit the Registrar’s IPO Allotment Status page.

Select Northern Arc Capital IPO from the dropdown menu.

Enter your application number, PAN, or DP Client ID.

Submit the information to view your allotment status.

The shares are expected to be listed on both the BSE and NSE on September 24, 2024.

Objectives of the IPO

The primary objective of the Northern Arc Capital IPO is to raise capital for onward lending, which will allow the company to continue its mission of providing financial services to underserved sectors. A portion of the proceeds will also go towards general corporate purposes.

Conclusion

Northern Arc Capital is a well-established player in the Indian financial services sector, with a strong focus on retail credit for underserved segments. With a solid track record of financial growth, attractive pricing, and positive Grey Market Premium (GMP) signals, the IPO presents a compelling investment opportunity.

The company’s strong fundamentals, combined with favorable market sentiment, make it a viable option for both listing gains and long-term investment. Investors looking to participate in the growth of the Indian financial ecosystem, particularly in underserved markets, may find Northern Arc Capital a worthwhile addition to their portfolios.

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