After Bajaj Housing Finance, another leading player from India's fast-evolving financial sector – Northern Arc Capital – is set to launch its initial public offering on Monday, September 16. The firm is a diversified non-banking finance company (NBFC), catering largely to underserved households and businesses across India.
The company's ₹ 777 crore IPO offers a chance to bet on a sector integral to supporting small businesses and low-income households. The public issue is a mix of a fresh issue worth ₹500 crore and an offer for sale of ₹277 crore. The IPO is priced in the range of ₹249 to ₹263 per share.
Key Details of Northern Arc Capital IPO
| IPO Date | 16 Sept - 19 Sept |
| Price Band | ₹249 to ₹263 per share |
| Issue Size | 29,543,727 shares (up to ₹777 crore) |
| Lot Size | 57 shares |
| Listing At | BSE, NSE |
| Tentative Listing Date | 24 Sept |
The company plans to use the funds raised via the fresh issue to finance lending in focused sectors, such as MSME financing, microfinance (MFI), consumer finance, and affordable housing finance.
Northern Arc Capital IPO: Business Overview
Founded in 2009, Northern Arc Capital is an NBFC focused on meeting the diverse credit needs of underserved households and businesses across India. The company has built expertise in several key areas, including financing for micro, small, and medium enterprises (MSMEs), microfinance (MFI), consumer finance, vehicle finance, affordable housing finance, and agricultural finance. Northern Arc Capital has been active in the MSME and MFI sectors for over 14 and 15 years, respectively, and in consumer finance for nine years.
The company employs a multi-channel strategy that encompasses:
Lending: Northern Arc Capital engages in Intermediate Retail Lending, wherein it lends to and guarantees the borrowings of a broad network of financial institutions, fintech platforms, and other business correspondents. Additionally, it offers direct-to-customer lending through a 'phygital' approach, combining physical and digital methods to reach underserved households and businesses.
Placements: Using its technology platform, Nimbus, the company connects with a wide array of investors, allowing them to invest in underserved sectors in India.
Fund Management: Managed through its subsidiary, NAIM, Northern Arc Capital oversees debt funds and offers portfolio management services. As of March 31, 2024, it manages ₹12,078.55 crore across 10 alternative investment funds (AIFs) and three portfolio management services (PMS).
According to a CRISIL Report, the company had one of the lowest gross non-performing assets (GNPA) and net non-performing assets (NNPA) as of Fiscal 2024.
| Company | GNPA (%) | NNPA (%) |
| Cholamandalam Investment and Finance Company Limited | 3.54% | 2.32% |
| Five Star Business Finance Limited | 1.38% | 0.63% |
| Poonawala Fincorp Limited | 1.16% | 0.59% |
| Bajaj Finance Limited | 1.05% | 0.46% |
| Credit Access Grameen Limited | 1.18% | 0.35% |
| Northern Arc Capital | 0.45% | 0.08% |
Source: RHP
A look at the financials suggests strong growth of 45% year-on-year in the company's revenue and 31% in its profit in Fiscal 2024.
| Parameter | FY 24 | FY 23 | Growth (%) |
| Revenue (₹ crore) | 1,906.03 | 1,311.20 | 45.37% |
| PAT (₹ crore) | 317.69 | 242.21 | 31.16% |
Strengths & Risks of Northern Arc Capital IPO
Strengths
- India has a low credit penetration compared with other developing countries, with rural areas accounting for only 9% of the overall banking credit. Given Northern Arc's sectoral expertise, it has the potential to tap a large addressable and underpenetrated market.
- Investing in Northern Arc Capital’s IPO provides an opportunity to benefit from the company's well-established ecosystem of partners and data and technology platform. Over the past 15 years, Northern Arc Capital has built a comprehensive network by facilitating financing of over ₹1.73 trillion, impacting more than 101.82 million lives. The company has developed a strong community of 328 Originator Partners, 50 Retail Lending Partners, and 1,158 Investor Partners as of March 31, 2024.
- The company has a well-diversified funding profile, including banks, offshore financial institutions and NBFCs. This, along with a strong credit rating and proactive liquidity management provides the company with a strong base for increased funding.
Risks
- The company's business is spread across multiple offerings, sectors, products, geographies and borrower segments. This exposes it to multiple risks. Any inability to manage these risks could adversely affect the cash flows and financial performance of the company.
- Northern Arc Capital operates in a highly competitive industry and faces competition from various types of lenders including private and public sector banks, NBFCs, and development financial institutions. The inability to effectively maintain its competitiveness could impact the business and operations of the firm.
- If borrowers fail to repay their loans, it could lead to more bad loans and higher costs for the company. This would negatively affect its business and operations.
How to Apply for Northern Arc Capital IPO?
To apply for the Northern Arc Capital IPO via INDmoney, follow these steps:
- Download the INDmoney app and create a free account by completing the KYC process.
- Click on the INDstocks tab, followed by IPOs.
- In the 'Explore IPOs' section, find 'Live IPOs.'
- Click 'Apply' to view the key details of the IPO.
- Choose the number of lots you wish to apply for and continue with the application.
- Place your order via UPI. The funds for your IPO application will be held in your bank account until the shares are allocated.
FAQs
What are the dates for Northern Arc Capital IPO?
The Northern Arc Capital IPO will open for subscription on September 16 and close on September 19.
What is the lot size of Northern Arc Capital IPO?
Northern Arc Capital IPO has a lot size of 57 shares. The retail investors can purchase one lot for ₹14,991.
What is the purpose of Northern Arc Capital IPO?
The company plans to use the funds raised via IPO to meet future capital requirements towards lending.