Northern Arc Capital IPO: Review, Valuation, Date & GMP

Northern Arc Capital IPO-Complete Overview

Northern Arc Capital IPO a Mainboard IPO is a book-built issue of Rs.777 crore (29,543,727 crore Shares) by Northern Arc Capital Ltd which was founded in 2009. The company provides retail loans to underprivileged Indian families and companies.

The business strategy of Northern Arc Capital is varied throughout a range of services, industries, goods, markets, and borrower types. By March 31, 2024, the company had reached out to over 101.82 million people in India and enabled finance of over Rs. 1.73 trillion.

The organization specializes in lending to small and medium-sized businesses (MSME), microfinance (MFI), consumers, automobiles, affordable housing, and agriculture. Its lending experience spans some target sectors in India. The business has over 14 years of experience financing MSMEs, 15 years of experience financing MFIs, and 9 years of experience financing consumers.

The business uses a multi-channel strategy to service the retail lending industry, which consists of the following:

Lending: Extending funds from the balance sheet of the company (lending) to originator partners in the form of loans or investments in their debt to enable on-lending to retail customers (Intermediate Retail Lending) and directly to underserved households and businesses (Direct-to-Customer Lending); lending through the branch network or in conjunction with retail lending partners to provide rural finance and MSME loans; as of March 31, 2024, the AUM of these loans stood at Rs.1,17,100.19 million.

Placements: As of March 31, 2024, placing loans through a variety of financing products to originator partners had an aggregate AUM of Rs.1,019,038.92 million.

Providing portfolio management services and managing debenture funds with a combined volume of Rs.120,785.58 million as of March 31, 2024, distributed among 10 alternative investment funds (AIFs) and three portfolio management service funds (PMS).

Additionally, the company offers a full suite of integrated technology products that are tailored to various industries. This includes an in-house technology stack made up of the following: (i) nPOS, an application programming interface (API)-based co-lending and co-origination technology solution; (ii) Nu Score, a customized machine learning-based analytical module designed to aid originator partners in the loan underwriting process; (iv) AltiFi, an alternative retail debt investment platform. Nimbus is a curated debt platform that enables end-to-end processing of debt transactions.

This new IPO  is to be launched on 16 September 2024, and the initial public offering of this upcoming IPO will end on 19 September 2024.

 

Northern Arc Capital IPO Overview

The Rs.777 crore Northern Arc Capital Limited IPO comprises a combination of a fresh Issue of 1.9 crore Shares (Rs.500 crore) and an offer for sale (OFS) of 1.05 crore Shares (Rs.277 crore) out of which 35% is allocated to retail investors, 50% to institutional investors, and 15% to non-institutional investors. 

The IPO date is from 16 September to September 19, 2024. The IPO listing is on Tuesday, September 24, 2024, and it will be listed on the BSE and NSE. Northern Arc Capital IPO price band is Rs.249 to Rs.263 for each Share.

To open a demat account and apply for the IPO, Click Here.

Company Financial

The company’s revenue grew by 45% and PAT increased by 31% between FYs ended 31 March 2024 and 31 March 2023.

Below is the synopsis of the company's financial data for the financial year that concluded on 31 March 2024.

• The company’s total assets are Rs.11,707.66 crore.

• The company’s total revenue is Rs.1,906.03 crore.

• The company’s PAT is Rs.317.69 crore.

• The company’s net worth is Rs.2,314.35 crore

• The EBITDA of the company is Rs.1163.56 crore.

(Amount in Crore)

 

Revenue Bifurcation

Below is the revenue breakdown for various activities.

(Amount in million)

 

Sector-wise Revenue Bifurcation of Gross Transaction Volume 

(Values in millions)

 

The Objective of The Issue

The company desires to use the Net Proceeds from the Issue to fulfil its following goals:

• To fulfil the capital needs for further lending in the future.

 

Detailed Video 

Peers of Northern Arc Capital Ltd.

 

Note: The basic EPS of the peers is for the financial year ending 31 March 2024.

The peers' P/E Ratio is computed based on the closing market price of the Share as of 4 September 2024.

Evaluation

Northern Arc Capital price is between Rs.249 to Rs.263 for each Share.

Evaluation of P/E Ratio

Considering the period of FY 2024, with an EPS of Rs.34.61 from the last year, the resulting P/E ratio is 7.6x.

Considering the weighted EPS of Rs.29.18 for the last three years, the P/E ratio is 9.01x.

Comparative Analysis with Listed Peers

The average P/E Ratio of the industry is 23.28x.

In simple words, the P/E ratio of Northern Arc Capital IPO (34.61x), compared with the industry’s average P/E of 23.28x, has an overvaluation (on a P/E ratio basis only). Hence the price of the Share seems aggressively priced for the investors when considered based on the average P/E ratio of the industry.

IPO's Strengths 

• Sizable, underserved market with excellent sectoral knowledge

• A vast network of collaborators, data, and technological platforms that produce powerful network effects

• A set of proprietary technologies is revolutionizing the debt market environment.

• Sturdy risk management built on in-house risk models, domain knowledge, and a data repository that promotes asset quality

• Various finance sources for our own implementation and proactive liquidity control

• High governance standards are being driven by a seasoned board, renowned investors, and a professional management team.

 

IPO’s Weaknesses 

• The non-performance of the company borrowers' repayment obligations could result in a rise in non-performing assets (NPA), associated provisions, and write-offs. This could harm its business's operations, financial condition, and cash flows.

• The investments consist primarily of unsecured credit facilities and debt instruments that are ranked below other creditors. If these investments are not recouped, NPA levels could rise, which could harm the company.

• Its business could suffer if it cannot comply with the strict regulatory requirements for its listed non-convertible debentures in the future or if there is a delay in doing so.

• Function in a highly competitive sector and its incapacity to successfully compete could harm the company’s business, operations, etc.

• In the last FYs, its operating and investing activities resulted in negative cash flows.

Northern Arc Capital IPO GMP Today

Northern Arc Capital IPO GMP today is Rs.0 as of 13 September 2024.

Northern Arc Capital IPO Timetable (Tentative)

The Northern Arc Capital IPO open date is from September 16 to September 19, 2024, with IPO allotment on September 20, 2024, refund initiation on September 23, 2024, and listing on September 24, 2024.

 

Northern Arc Capital IPO Details 

The IPO with a face value of Rs.10 per Share is set to start on September 16, 2024, close on September 19, 2024, and offers a total issue size of 29,543,727 Shares between Rs.249 to Rs.263 per Share with a Lot size of 57 Shares and will be listed at BSE and NSE.

Northern Arc Capital IPO Lot Details 

The IPO allows retail investors to invest in a minimum and maximum of 1 Lot (57 Shares) amounting to Rs.14,991 and 13 Lots (741 Shares) amounting to Rs.1,94,883 respectively, while for HNI investors, the minimum Lot is 14 (798 Shares) amounting to Rs.2,09,874.

Northern Arc Capital IPO Reservation

Promoters and Management of Northern Arc Capital Ltd. 

The company doesn’t have any identifiable promoter.

Northern Arc Capital IPO Lead Managers

• ICICI Securities Limited

• Axis Bank Limited

• Citigroup Global Markets India Private Limited

Dividend Policy

The company has not paid any dividends in the last three fiscals.

 

Conclusion

The company has experienced negative cash flow in operating and investing activities in the last few fiscal years. To fulfill its objectives, the company is currently conducting an IPO for the public.

We believe the information offered in this blog helps you learn about the company's financial performance. So this blog will be very useful to you if you are looking for information about the approaching IPO since it will give you reliable information about the company's, insights, financials, and past performance. If this informative blog piques your interest, you may be interested in reading our other related and useful posts on our website.

Finowings IPO Analysis

Hope you enjoyed the Finowings IPO Analysis. We tried our best to give every required detail about the company that you should know before applying to the IPO. 

You must consult your financial advisor before making any financial decisions. 

To Apply for the IPO, Click Here.

To Read the Prospectus of the Company Click Here to Download the DRHP.

Disclaimer: 

The content is purely for educational and information purposes only. We do NOT encourage/advise/suggest our active readers to be involved in any kind of buying or selling securities activities. Always consult your eligible financial advisor for investment-related decisions. The author does NOT through this blog intend to involve readers in trading.  

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