Unlisted shares of Northern Arc Capital Ltd are trading Rs 158 higher in the grey market, signalling a 60.08 per cent listing gain from the public issue.
Northern Arc Capital IPO: The initial public offering of non-bank financial institution Northern Arc Capital Ltd has been opened for public subscription on Monday. The price band of the Rs 777-crore IPO has been fixed at Rs 249 to Rs 263 per share for the public issue. Till 11:43 am on the first day of bidding on Monday, the IPO received a 0.70 times subscription garnering bids for 1,41,91,746 shares as against the 2,03,04,754 shares on offer.
The category for non-institutional investors received 0.78 times subscription, while the portion for retail individual investors (RIIs) got subscribed 1.05 times.
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Northern Arc Capital IPO: Key Dates
The IPO will remain opened for public subscription between September 16 and September 19. The share allotment of the Northern Arc Capital IPO will likely be finalised on September 20, while its shares will be listed on both BSE and NSE on September 24.
Northern Arc Capital IPO: Price Band
The price band of the Rs 777-crore much-awaited IPO has been fixed at Rs 249 to Rs 263 per share for the public issue.
Northern Arc Capital IPO: GMP Today
According to market observers, unlisted shares of Northern Arc Capital Ltd are trading Rs 158 higher in the grey market than its issue price. The Rs 158 grey market premium or GMP means the grey market is expecting a 60.08 per cent listing gain from the public issue. The GMP is based on market sentiments and keeps changing.
‘Grey market premium’ indicates investors’ readiness to pay more than the issue price.
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Northern Arc Capital IPO: Analysts’ Recommendations
Most brokerage houses have given a ‘subscribe’ recommendation to the IPO.
Brokerage firm Anand Rathi in its report said, “Over the past 15 years, North Arc Capital Limited have significantly contributed to the Indian retail credit market, facilitating financing of more than ₹1.73 trillion since 2009, impacting over 101.82 million lives. As of March 31, 2024, they have established an ecosystem that includes 328 originator partners, 50 retail lending partners, and 1,158 investor partners. Their multi-channel offerings encompass lending, placements, and fund management, supported by proprietary technology solutions and a robust data repository containing over 35.17 million data points.”
At the upper price band company is valued at P/BV of 1.4X with a market cap of Rs 42,428.6 million post issue of equity shares. “Thus, we recommend an ‘SUBSCRIBE’ rating to the IPO,” Anand Rathi said.
Another brokerage firm Nirmal Bang in its report said Northern ARC is well-positioned for growth, leveraging sector expertise, digital platforms, and a strong partner ecosystem to access India’s underpenetrated credit markets. Its diversified funding sources and improved credit rating support sustainable expansion, despite high operational costs, said Nirmal Bang Securities.
“Northern Arc has respectable ROA and ROE along with loan growth of 28 per cent CAGR over FY22-24. Its asset quality is impressive with low GNPA and NNPA. The price-to-book value (1.8 times) indicates the company is undervalued compared to peers. Thus, we recommend subscribing to the issues,” Nirmal Bang stated.
SBI Securities also recommended the subscribe the IPO. It said, “Northern Arc has a robust ecosystem of 328 originator partners, 50 retail lending partners and 1,158 investor partners. The issue appears to be fairly valued when compared with close peers on most valuation and financial matrices. We recommend subscribing to the issue for a long-term investment horizon.”
Northern Arc Capital IPO: Anchor Investment
Northern Arc Capital collected Rs 229 crore from anchor investors, days before the opening of its share-sale for public subscription.
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 are among the anchor investors.
According to a circular uploaded on BSE’s website, the company has allotted 87.02 lakh equity shares to 15 funds at Rs 263 apiece, which is also the upper end of the price band. This aggregates the transaction size to Rs 229 crore.
Northern Arc Capital IPO: More Details
The IPO is a combination of a fresh issue of equity shares valued at Rs 500 crore and an Offer For Sale (OFS) of up to 10,532,320 equity shares worth Rs 277 crore, at the upper end of the price band, by investor shareholders. This aggregates the issue size to Rs 777 crore.
Those offering shares through the OFS are Leapfrog Financial Inclusion India (II) Ltd, Accion Africa-Asia Investment Company, Eight Roads Investments Mauritius II Ltd, Sumitomo Mitsui Banking Corporation, 360 ONE Special Opportunities Fund (formerly known as IIFL Special Opportunities Fund), and Dvara Trust.
Proceeds from the fresh issue would be used to meet future capital requirements of the company towards onward lending.
“The price band for the offer is at Rs 249 to Rs 263 per equity share,” Northern Arc Capital said in a statement.
Investors have the option to bid for a lot size of 57 equity shares and in multiples thereafter.
Registered with the RBI as a systemically important, the company is a non-deposit taking non-banking finance company (NBFC) and has been operating in the financial inclusion space for over a decade.
Northern Arc is a leading player amongst the country’s diversified NBFCs, with a business model diversified across offerings, sectors, products, geographies and borrower segments. It provides access to credit to under-served households and businesses directly and indirectly through Originator Partners.
Northern Arc Capital filed draft papers with Sebi in July 2021 to float its maiden public issue. It got the regulator’s nod to float the public issue in September same year. However, it didn’t go ahead with the launch.
ICICI Securities, Axis Capital and Citigroup Global Markets India are the book-running lead managers to the issue.
