The Initial Public Offering (IPO) of Northern Arc Capital, a prominent retail loans provider, has captured strong attention from investors. With innovative financial products and a focus on sectors like MSMEs, microfinance, and consumer finance, Northern Arc Capital is well-positioned for future growth. As the IPO nears its close, here is a comprehensive look at the IPO’s subscription status, grey market premium (GMP), and why experts recommend a long-term investment in this offering.
Northern Arc Capital IPO Subscription Status
The IPO of Northern Arc Capital Ltd. has seen strong demand from investors. As of September 19, the final day of the bidding period, the issue has been oversubscribed by 15.13 times in total. This overwhelming response underscores the confidence investors have in the company’s business model and future prospects.
- Retail Category: The retail portion has been subscribed 15.50 times, reflecting robust participation from individual investors.
- Non-Institutional Investors (NII): The NII category, which includes high-net-worth individuals, has seen an extraordinary subscription of 35.15 times.
- Qualified Institutional Buyers (QIB): QIBs, such as mutual funds and financial institutions, have been relatively cautious, with a subscription rate of 0.22 times.
The overall subscription numbers reflect widespread investor interest, particularly from retail and NII segments, positioning Northern Arc Capital for a successful market debut.
Northern Arc Capital IPO Grey Market Premium (GMP)
As of today, Northern Arc Capital shares are trading at a hefty premium in the grey market. The GMP for Northern Arc Capital IPO stands at ₹203 per share, indicating that the shares are expected to list at a premium of 77%.
With an issue price set at ₹263 per share, the shares are projected to list at approximately ₹466 per share based on current grey market trends. This strong premium reflects investor confidence in the company’s future growth prospects and its strategic positioning in the financial services sector.
While the grey market is an unofficial market where shares trade ahead of listing, the GMP often provides an early indicator of the potential listing gains. Investors keep a close eye on this premium to gauge the IPO’s popularity and anticipated performance on the stock exchanges.
Should You Apply for Northern Arc Capital IPO?
Experts are largely optimistic about Northern Arc Capital’s IPO, advising investors to apply for the long term. The company’s strong sectoral focus on underserved segments like MSMEs, microfinance, and consumer finance, coupled with innovative offerings such as loan against property and supply chain finance, makes it a compelling choice.
According to Rajan Shinde, Research Analyst at Mehta Equities Ltd., the company has demonstrated impressive growth:
- Revenue from operations grew by 43.5% in FY2023 and 44.8% in FY2024.
- Net profit surged by 33.1% in FY2023 and 31.2% in FY2024.
On the valuation front, Northern Arc Capital is priced reasonably. At the upper end of the price band (₹263 per share), the IPO is seeking a Price to Book Value (PBV) of 1.83x, which is considered attractive compared to its listed peers, trading at around 3x to 3.5x PBV. This suggests that the IPO is priced to offer value to investors, especially those with a long-term horizon.
Given the company’s solid financial performance, diverse product portfolio, and plans for geographical expansion, experts recommend a “Subscribe” for the long term.
Key Highlights of Northern Arc Capital IPO
- IPO Opening and Closing Dates: The IPO opened for subscription on September 16 and will close on September 19.
- Allotment and Listing: The share allotment is expected to be finalized on September 20, and the shares are likely to be listed on September 24 on both the BSE and NSE.
- Price Band: The price band for Northern Arc Capital IPO has been set at ₹249 to ₹263 per share.
- Issue Size: The IPO aims to raise a total of ₹777 crore, comprising a fresh issue of 1.9 crore equity shares worth ₹500 crore and an Offer for Sale (OFS) of 1.05 crore shares aggregating ₹277 crore.
- Lead Managers: The book-running lead managers for this IPO are ICICI Securities, Axis Bank, and Citigroup Global Markets India.
- Registrar: The registrar for this IPO is Kfin Technologies.
Utilization of Funds
Northern Arc Capital plans to utilize the proceeds from the fresh issue primarily to meet its future capital requirements toward onward lending. As the company continues to deepen its presence in rural and underserved areas, the additional funds will enable Northern Arc Capital to grow its loan book, expand its geographical footprint, and offer more diverse financial products.
Northern Arc Capital’s Competitive Edge
Northern Arc Capital is not just another financial services provider; it stands out due to its innovative credit products tailored to meet the diverse needs of its clients. With a focus on lending to MSMEs, microfinance institutions, and consumer finance, the company has positioned itself at the heart of India’s financial inclusion story.
The company’s strategic partnerships with both domestic and international investors have enabled it to maintain a robust capital structure. Moreover, with over ₹1.73 trillion in cumulative financing, Northern Arc Capital has built a strong track record of serving the credit needs of a broad customer base.
Conclusion: Why Northern Arc Capital IPO is a Strong Bet
With a well-diversified product portfolio, innovative offerings, and a strong focus on underserved sectors, Northern Arc Capital is uniquely positioned for continued growth in the Indian financial services market. The company’s financial performance, coupled with its strategic growth initiatives, makes this IPO an attractive investment for those looking for long-term gains.
While the IPO has already received significant interest from investors, the reasonable valuations and expected strong listing gains only add to its appeal. For investors seeking to tap into India’s rapidly expanding credit market, Northern Arc Capital IPO presents an opportunity worth considering.
Disclaimer: The opinions and recommendations expressed above are those of individual analysts or brokerage firms and do not reflect the views of OSTP Media. We recommend that investors consult with certified financial experts before making any investment decisions.
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