Northern Arc Capital IPO: In the primary market on Monday, Northern Arc Capital IPO saw full subscription on the first day, with non-institutional investors taking the lead, followed by retail investors, amidst various issues.
On Friday, the non-bank financial institution announced that it received ₹229 crore from anchor investors, just a few days before its shares were made available for public subscription.
Anchor investors in the company 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.
The offer's price band is from ₹249 to ₹263 per equity share, and investors can choose to bid for a lot size of 57 equity shares and in multiples after that.
Northern Arc Capital IPO has reserved not more than 50% of the shares in the public issue for qualified institutional buyers (QIB), not less than 15% for non-institutional Institutional Investors (NII), and not less than 35% of the offer is reserved for retail investors. Eligible employees participating in the employee reservation portion will receive a discount of ₹24 per equity share, and this segment has up to 590,874 equity shares allocated to it.
The company was established primarily to address the diverse retail credit requirements of underprivileged households and businesses in India. This platform offers a variety of financial services. Their approach over the last fifteen years has been to create a distinct and comprehensive play on the retail credit ecosystem in India across several businesses. Since entering the financial inclusion space in 2009, they have impacted over 101.82 million individuals in India and had facilitated financing of over ₹1.73 trillion as of March 31, 2024.
The initial public offer of Northern Arc Capital has been subscribed 9.99 times on the second day of subscription today, as per BSE data.
The initial share sale received bid for 21,45,88,014 shares against 2,14,78,290 shares on offer, according to BSE data.
The portion for retail investors received 10.84 times subscription while the quota for non-institutional investors got subscribed 21.72 times. The QIBs part is booked 20%. The employee portion has been subscribed 2.25 times.
On Monday, the first day of the share sale, the initial public offer of non-bank financial institution Northern Arc Capital was subscribed 2.87 times.
The non-institutional investors' quota received 4.48 times subscription, while the portion for retail investors was subscribed 3.87 times. The QIBs part saw 2% subscription, and the employee portion was booked 92%.
Northern Arc Capital Limted is one of the top diverse NBFC platforms with a reliable financial track record, according to the brokerage, in terms of AUM. Strong network effects are produced by the company's extensive ecosystem of partners, data, and technological platform. With robust risk management based on domain expertise, unique risk models, and a data repository driving asset quality, they are a technology-driven financial services platform supported by in-house technology solutions and architecture creating a scalable and sustainable business model. The company, however, appears to have a lot of development potential. From the standpoint of long-term investments as well as listing gains, the brokerage advised a "SUBSCRIBE" to the problem.
In its analysis, the brokerage claimed that Northern ARC is well-positioned for expansion, taking use of digital platforms, industry knowledge, and a robust partner network to get access to India's underserved credit markets. Despite high operating costs, its enhanced credit rating and diverse funding sources allow for sustainable development. Northern Arc has respectable ROA (3.0%) and ROE (14.5%) coupled with loan growth of 28% CAGR over FY22-24. With low GNPA (0.5%) and NNPA (0.1%), its asset quality is remarkable. The company's price-to-book ratio of 1.8x suggests that it is undervalued in comparison to its rivals, with the closest peer, MAS Financial, trading at 2.6x, and the industry average of 3.0x. Therefore, the brokeragehasadvisedsubscribing to theissue.
In addition to an offer for sale (OFS) of up to 1.05 crore shares by existing shareholdersand promoters, valued at ₹277 crore at the upper price band, the IPO also includes a new issuance of ₹500 crore. The offering is worth ₹777 crore in total.
The company plans to use the net proceeds for meeting future capital needs related to lending in the future.
The book running lead managers of the Northern Arc Capital IPO are ICICI Securities Ltd, Axis Bank Ltd, and Citigroup Global Markets India Private Ltd. The registrar of the issue is Kfin Technologies Ltd.
Northern Arc Capital IPO GMP today is +178. This indicates Northern Arc Capital share price were trading at a premium of ₹178 in the grey market, according to investorgain.com.
Considering the upper end of the IPO price band and the current premium in the grey market, the estimated listing price of Northern Arc Capital shares was ₹441 apiece, which is 67.68% higher than the IPO price of ₹263.
'Grey market premium' indicates investors' readiness to pay more than the issue price.
Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.
