Northern Arc Capital, a well-established name in India’s financial services sector, is set to launch its highly anticipated initial public offering (IPO) on September 16, 2024. This IPO has generated significant buzz among investors, given the company’s solid track record and its role in providing credit to underserved households and businesses across India. In this blog, we will explore the key details of the Northern Arc Capital IPO, its price band, lot size, and other essential aspects you need to know if you are considering investing.
What is Northern Arc Capital?
Northern Arc Capital is a Chennai-based, non-deposit-taking non-banking financial company (NBFC) that has been operating since 2009. Its core focus is providing credit solutions to underserved households and businesses. The company’s business model is diversified, offering financial products across various sectors, including microfinance, micro, small, and medium enterprises (MSME) finance, consumer finance, vehicle finance, affordable housing finance, and agriculture finance.
Since its inception, Northern Arc Capital has facilitated over ₹1.73 trillion in financing, impacting more than 101.82 million individuals across the country by March 31, 2024. This extensive reach into India’s retail credit ecosystem has made it a prominent player in addressing the financial inclusion challenges that many face.
Northern Arc Capital IPO: Key Dates
| Event | Date |
| Anchor Investor Bidding | September 13, 2024 |
| IPO Opening Date | September 16, 2024 |
| IPO Closing Date | September 19, 2024 |
| Allotment of Shares | September 20, 2024 |
| Refund Initiation | September 23, 2024 |
| Credit of Shares to Demat Accounts | September 23, 2024 |
| Listing Date | September 24, 2024 |
Price Band and Lot Size
| Metric | FY 2022-23 | FY 2023-24 |
| Revenue | ₹1,311.2 crore | ₹1,906.03 crore |
| Net Profit (PAT) | ₹242.21 crore | ₹317.69 crore |
| Growth in Revenue (YoY) | N/A | 45% |
| Growth in Profit (YoY) | N/A | 31% |
IPO Structure and Offer Details
The IPO of Northern Arc Capital includes two components:
| Component | Amount |
| Fresh Issue | ₹500 crore |
| Offer for Sale (OFS) | 1.05 crore shares |
| Total IPO Size | ₹777 crore |
The key shareholders participating in the OFS include Leapfrog Financial Inclusion India, Accion Africa-Asia Investment, 360 ONE Special Opportunities Fund, Eight Roads Investments, Dvara Trust, and Sumitomo Mitsui Banking Corporation.
Allocation for Investors
The Northern Arc Capital IPO has set different allocation categories for various investor groups:
| Investor Category | Percentage of Net Offer |
| Qualified Institutional Buyers (QIBs) | 50% |
| Retail Investors | 35% |
| Non-Institutional Investors (NIIs) | 15% |
| Employee Reservation | 5,90,874 shares at ₹24 discount |
This allocation ensures that all investor categories get a fair share of the offering, making the IPO accessible to a wide range of participants.
Financial Performance
| Item | Details |
| Price Band | ₹249 – ₹263 per share |
| Lot Size | 57 shares |
| Minimum Investment Amount | ₹14,193 (for one lot) |
| Maximum Investment (Retail) | ₹1,84,509 (for 13 lots) |
| Face Value | ₹10 per share |
Additionally, Northern Arc Capital has been profitable for several years and has maintained a healthy balance sheet, making it an attractive investment opportunity for those looking to invest in a financial services company with a strong growth potential.
Competitive Landscape
In terms of valuation, Northern Arc Capital’s price-to-earnings (P/E) ratio stands at 11.24 times based on its diluted earnings per share (EPS) for fiscal year 2024 at the upper end of the price band. When compared to its peers, Northern Arc Capital appears to be valued attractively:
| Company | P/E Ratio |
| Five-Star Business Finance Ltd | 26.76 |
| SBFC Finance Ltd | 36.64 |
| CreditAccess Grameen Ltd | 13.12 |
| Fusion Micro Finance Ltd | 6.21 |
| Bajaj Finance Ltd | 30.93 |
| Cholamandalam Investment & Finance | 36.22 |
| Poonawalla Fincorp Ltd | 17.81 |
| MAS Financial Services Ltd | 18.55 |
These comparisons suggest that Northern Arc Capital is priced competitively within its industry, with ample room for future growth.
Use of IPO Proceeds
The proceeds from the fresh issue of shares, amounting to ₹500 crore, will be primarily used to meet Northern Arc Capital’s future capital requirements. These funds will be directed toward onward lending, allowing the company to continue its mission of providing much-needed credit to underserved households and businesses across India.
What Sets Northern Arc Capital Apart?
Northern Arc Capital’s business model is unique due to its diversified approach to lending. It operates across multiple sectors, including microfinance, MSME finance, consumer finance, vehicle finance, affordable housing finance, and agriculture finance. Its reach extends across various geographies and borrower categories, making it a key player in driving financial inclusion in India.
Moreover, Northern Arc Capital’s focus on underserved populations has enabled it to tap into a significant market opportunity. The company’s long-standing relationships with Originator Partners have further strengthened its ability to provide credit to individuals and businesses that may not have access to traditional banking channels.
Conclusion
The Northern Arc Capital IPO is a highly anticipated event in the Indian financial markets, and it offers a promising opportunity for investors looking to capitalise on a company that has demonstrated consistent growth and financial strength. With its diversified business model, strong financial performance, and competitive pricing, Northern Arc Capital is well-positioned to continue its mission of providing credit to India’s underserved households and businesses.
If you are an investor looking to tap into the financial inclusion story in India, the Northern Arc Capital IPO could be a compelling addition to your portfolio. Keep an eye on the subscription dates, and don’t miss out on this opportunity to be part of one of India’s leading financial services platforms.
