NORTHERN ARC CAPITAL IPO: SHOULD YOU SUBSCRIBE TO THIS RS 777 CRORE ISSUE?
The initial public offer (IPO) of Northern Arc Capital will open for subscription today and will be available for investors to bid until September 19. The company has raised Rs 228 crore from anchor investors ahead of the issue.
The public offering includes an offer for sale of up to Rs 277 crore and a fresh issue of up to Rs 500 crore.
Northern Arc Capital IPO price band
The company has fixed a price band of Rs 249-263 per share, where investors can bid for 57 shares in one lot.
Northern Arc Capital IPO review
Analysts advised investors to subscribe to the IPO as the company is well-positioned for growth, leveraging sector expertise, digital platforms, and a strong partner ecosystem to access India’s underpenetrated credit markets.
"The issue is valued at a P/BV of 1.49x on the upper price band based on FY24 book value, which is fair. We, therefore, recommend a Subscribe rating for the issue on the back of a differentiated credit underwriting process, which keeps their asset quality strong and risk-adjusted returns consistent across business cycles," said BP Wealth.
"Its diversified funding sources and improved credit rating support sustainable expansion, despite high operational costs. Northern Arc has a respectable ROA (3%) and ROE (14.5%) along with loan growth of 28% CAGR over FY22-24. The price-to-book value (1.8x) indicates the company is undervalued compared to peers. Thus we recommend subscribing to the issue," said Nirmal Bang.
Other details
The company plans to use the net proceeds to meet future capital needs for onward lending. Northern Arc is a diversified financial services platform established to address the varied retail credit needs of under-served households and businesses in India.
Its business model is diversified across various offerings, sectors, products, geographies, and borrower categories. As of March 2024, the company has facilitated over ₹1.73 trillion in financing, reaching more than 100 million people across India.
Northern Arc uses a tailored risk management system across all sectors and channels, supported by its extensive data repository of over 35.17 million data points. These data-driven insights, combined with secondary sources and on-field monitoring, enhance the company’s risk models.
According to a CRISIL report, the company had one of the lowest gross non-performing assets (GNPA) of 0.45% and net non-performing assets (NNPA) of 0.08%, as of FY24.
In FY24, the company's net interest income (NII) rose 67% year-on-year (YoY) to Rs 986 crore, while net profit increased 31% YoY to Rs 318 crore.
ICICI Securities, Axis Bank, and Citigroup Global Markets India are the book-running lead managers for the IPO, while Kfin Technologies is the registrar.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times)