Northern Arc Capital IPO subscribed 10 times on Day 3 so far. GMP surges to 76%

After receiving robust demand in the first two days of the bidding process, the initial public offer (IPO) of Northern Arc Capital was subscribed 10 times by the third day, attracting significant interest from non-institutional investors.

As of 10 am, non-institutional investors had subscribed to the issue 21.7 times, followed by retail investors, who subscribed 10.8 times. Meanwhile, Qualified Institutional Buyers (QIBs) had subscribed 20%.

The issue will be available for investors to bid until September 19. The company has raised Rs 228 crore from anchor investors ahead of the opening.

The public issue consists of an offer for sale totaling up to Rs 277 crore, along with 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 GMP

On the third day of the bidding process, the grey market premium of Northern Arc Capital increased to Rs 200 from Rs 178 on Tuesday. The current GMP is a premium of nearly 76% over the listing price.

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 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 proposes to utilize the net proceeds to meet future capital requirements towards onward lending.

Northern Arc is a diversified financial services platform set up primarily with the mission of catering to the diverse retail credit requirements of the under-served households and businesses in India.

Its business model is diversified across different offerings, sectors, products, geographies, and borrower categories. As of March 2024, the company has facilitated over Rs 1.73 trillion worth of financing, reaching out to over 10 crore people across India.

Northern Arc employs a customized 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, strengthen 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)