Northern Arc Capital is a diversified financial services platform focused on catering to the diverse retail credit needs of under-served households and businesses in India. Established with a mission to enhance the retail credit ecosystem, Northern Arc Capital has a significant presence across various sectors. Their IPO is a Book Built Issue amounting to ₹777.00 Crores, which includes a Fresh Issue of 190.11 Lakh Shares worth ₹500.00 Crores and an Offer for Sale of 105.32 Lakh Shares totaling ₹277.00 Crores.

The IPO is open for subscription from September 16, 2024, to September 19, 2024. Allotment is expected to be finalized by Friday, September 20, 2024, with a tentative listing date set on or about Tuesday, September 24, 2024.

The share price band for the Northern Arc Capital IPO is set between ₹249 to ₹263 per equity share. The minimum lot size is 57 shares, requiring a minimum investment of ₹14,991 for retail investors. For High-Net-Worth Individuals (HNIs), the minimum investment is 14 lots (798 shares), amounting to ₹209,874.

Subscription Status and Anchor Investors

As of September 16, 2024, the Northern Arc Capital IPO has been subscribed 1.44 times on its first day. This indicates a positive response from investors, though it is below the oversubscription seen in other recent IPOs.

The company has also raised ₹25.77 Crore from Anchor Investors at the upper end of the price band, ₹263 per share. The allocation to Anchor Investors includes 979,887 equity shares, reflecting a degree of institutional confidence in the IPO.

Grey Market Premium (GMP)

The Grey Market Premium for Northern Arc Capital Limited IPO is reported to be between ₹135 to ₹145, indicating potential listing gains of approximately 50% - 55%. While GMP provides an indication of investor sentiment, actual price discovery will only occur upon listing.

Objectives of the IPO

The net proceeds from the IPO will be utilized primarily for:

Meeting future capital requirements for onward lending, supporting the company's mission to expand its credit offerings and services.

Financial Performance and Valuation

Northern Arc Capital has shown strong financial performance with revenue for Fiscal 2024 reaching ₹19,060.33 million, compared to ₹13,112.00 million in Fiscal 2023 and ₹9,165.45 million in Fiscal 2022. The company’s EBITDA for Fiscal 2024 is ₹11,635.65 million, and the Profit after Tax stands at ₹3,083.34 million.

For this IPO, the company is offering shares with a pre-issue EPS of ₹22.40 and a post-issue EPS of ₹19.04. The pre-issue P/E ratio is 11.74x, while the post-issue P/E ratio is 13.81x, against the industry P/E ratio of 23.38x. The company's ROE for FY24 is 13.32%. These metrics suggest that the IPO is reasonably priced.

Investment Recommendation

Given the relatively high GMP and the company’s robust financial metrics, the Northern Arc Capital IPO presents a favorable investment opportunity. It is attractive for both potential listing gains and long-term investment, especially for investors looking to tap into the growing retail credit sector.

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