Northern Arc Capital IPO: NBFC mobilises ₹229 crore from anchor investors ahead of subscription

Northern Arc Capital IPO: Northern Arc Capital IPO Limited has raised ₹229 crore from anchor investors ahead of its IPO subscription opening for bidding. The non-banking financial company (NBFC)'s initial public offering (IPO) is all set to hit the D-Street for its three-day subscription on Monday, September 16, 2024 which will remain open for investors till Thursday, September 19, 2024.

Northern Arc Capital allotted 87.02 lakh equity shares to 15 funds at ₹263 apiece -- the upper end of the price band of the issue. This aggregates the transaction size to ₹229 crore. 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.

Also Read: Northern Arc Capital IPO: Price band set at ₹249-263 per share; check issue size, key dates, more.

Northern Arc Capital IPO Details

The ₹777-crore IPO of the Chennai-based company will open for subscription on September 16 and conclude on September 19. The price band has been fixed in the range of ₹249 to ₹263 per equity share of the face value of ₹10.

The floor and cap prices are 24.90 times and 26.30 times the face value of the equity shares, respectively. The price to earnings ratio based on diluted EPS for fiscal 2024 at the upper end of the price band is 11.24 times, compared to the average industry peer group PE ratio of 23.28 times. The IPO lot size is 57 equity shares, and thereafter, it will be in multiples of 57 equity shares.

The IPO is a combination of a fresh issue of equity shares valued at ₹500 crore and an offer for sale (OFS) component of up to 10,532,320 equity shares worth ₹277 by investor shareholders. This aggregates the issue size to ₹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.

Also Read: Northern Arc Capital IPO: From financials to GMP, here are 10 things you should know from the RHP before subscribing

Northern Arc Capital IPO has reserved not more than 50 per cent of the shares in the public issue for qualified institutional buyers (QIB), not less than 15 per cent for non-institutional Institutional Investors (NII), and not less than 35 per cent 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.

Tentatively, Northern Arc Capital IPO basis of allotment of shares will be finalised on Friday, September 20, and the company will initiate refunds on Monday, September 23, while the shares will be credited to the demat account of allottees on the same day following refund. Northern Arc Capital share price is likely to be listed on BSE and NSE on Tuesday, September 24.

The company plans to use the net proceeds to meet future capital needs related to lending. ICICI Securities Ltd, Axis Bank Ltd, and Citigroup Global Markets India Private Ltd are the book-running lead managers of the Northern Arc Capital IPO. The issue registrar is Kfin Technologies Ltd.

Also Read: Northern Arc Capital files DRHP with SEBI to raise ₹500 crore via IPO

Northern Arc Capital IPO Company Details

Registered with the RBI as a systemically important NBFC, Northern Arc has been operating in the financial inclusion space for over a decade. It 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. The firm was founded to meet the various retail credit needs of India's underserved families and companies. It is a diversified financial services platform. 

Over the past 15 years, their strategy has been to develop a unique and all-encompassing play on India's retail credit ecosystem across many industries. As of March 31, 2024, they had facilitated financing of over ₹1.73 trillion, impacting over 101.82 million people throughout India since they joined the financial inclusion field in 2009.

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As per the red herring prospectus (RHP), the company's peers are Five-Star Business Finance Ltd (with a P/E of 26.76), SBFC Finance Ltd (with a P/E of 36.64), CreditAccess Grameen Ltd (with a P/E of 13.12), Fusion Micro Finance Ltd (with a P/E of 6.21), Bajaj Finance Ltd (with a P/E of 30.93), Cholamandalam Investment and Finance Company Ltd (with a P/E of 36.22), Poonawalla Fincorp Ltd (with a P/E of 17.81), and MAS Financial Services Ltd (with a P/E of 18.55).

Northern Arc Capital filed draft papers with the capital markets regulator, the Securities and Exchange Board of India (SEBI), in July 2021 to float its maiden public issue. It got the regulator's nod to float the public issue in September of the same year. However, it didn't go ahead with the launch. Between March 31, 2024, and March 31, 2023, Northern Arc Capital's profit after tax (PAT) climbed by 31 per cent, and revenue increased by 45 per cent.