Northern Arc Capital IPO: Price Band ₹249-263 Per Share; Opens 16th Sept

Northern Arc Capital Limited was founded in 2009 and offers retail loans to underserved households and businesses in India. The company's business model is diversified across different offerings, sectors, products, geographies, and borrower categories. As of 31st March 2024, the company has facilitated over ₹1.73 trillion worth of financing, reaching out to over 101.82 million people across India. The company has expertise in lending across various focus sectors in India, especially in micro, small, and medium enterprise (MSME) finance, microfinance (MFI), consumer finance, vehicle finance, affordable housing finance, and agriculture finance. As of 31st March 2024, the company had 2,695 permanent employees.

The Objectives of the Issue

Northern Arc Capital Limited plans to use the net proceeds from the issue to meet future capital needs for onward lending.

Highlights of Northern Arc Capital IPO

Northern Arc Capital IPO is set to launch with a book-built issue of ₹777.00 lakhs. The issue is a combination of fresh issue and offer for sale. Here are the key details of the IPO:

• The IPO opens for subscription on 16th September 2024 and closes on 19th September 2024.
• The allotment is expected to be finalised on 20th September 2024.
• Refunds will be initiated on 23rd September 2024.
• Credit of shares to Demat accounts is also expected on 23rd September 2024.
• The company will tentatively list on BSE and NSE on 24th September 2024.
• The price band is set at ₹249 to ₹263 per share.
• The fresh issue comprises 1.9 lakh shares aggregating to ₹500.00 lakhs.
• The offer for sale comprises 1.05 lakh shares aggregating to ₹277.00 lakhs.
• The minimum lot size for the application is 57 shares.
• Retail investors need to invest a minimum of ₹14,991.
• The minimum investment for small NII (sNII) is 14 lots (798 shares), amounting to ₹209,874.
• The minimum investment for big NII (bNII) is 67 lots (3,819 shares), amounting to ₹1,004,397.
• ICICI Securities Limited, Axis Bank Limited and Citigroup Global Markets India Private Limited are the book running lead managers for the IPO.
• Kfin Technologies Limited serves as the registrar.

Northern Arc Capital IPO - Key Dates

The cut-off time for UPI mandate confirmation is 5:00 PM on 19th September 2024. This deadline is crucial for investors to ensure their applications are processed successfully. Investors are advised to complete their applications well before this deadline to avoid any last-minute technical issues or delays.

Northern Arc Capital IPO Issue Details/Capital History

The Northern Arc Capital IPO is scheduled from 16th September to 19th September 2024, with a price band of ₹249 to ₹263 per share and a face value of ₹10. The total issue size is 2,95,43,727 shares, raising up to ₹777.00 lakhs through a combination of fresh issue and offer for sale. The IPO will be listed on BSE and NSE. The pre-issue shareholding is 14,23,14,010 shares.

Northern Arc Capital IPO Allocation & Minimum Investment Lot Size

The IPO shares are allocated across different investor categories as follows:

Investors can place bids for a minimum of 57 shares, with additional bids required in multiples of this figure. The table below illustrates the minimum and maximum investment amounts for retail investors and HNIs, expressed in shares and monetary values.

SWOT Analysis: Northern Arc Capital Ltd

Strengths:

• Diversified business model across sectors, products, and geographies
• Expertise in lending to underserved households and businesses
• Strong technology infrastructure with customised solutions
• Extensive reach across India

Weaknesses:

• Dependence on the performance of the Indian economy
• Exposure to risks associated with lending to underserved segments

Opportunities:

• Growing demand for financial services in underserved segments
• Potential for expansion into new geographical areas and products
• Increasing digitalisation of financial services

Threats:

• Intense competition in the financial services sector
• Regulatory changes affecting lending practices
• Economic fluctuations impacting borrowers' repayment capacity

Financial Highlights: Northern Arc Capital Ltd

Below are the consolidated financial results for the Fiscal years FY24, FY23, and FY22:

Northern Arc Capital Limited has demonstrated strong financial growth, particularly in the most recent fiscal year. The company's revenue increased by 45% and profit after tax (PAT) rose by 31% between the financial year ending with 31st March 2024 and 31st March 2023. Assets have shown significant growth, increasing from ₹79,741.16 lakh in FY22 to ₹1,17,076.59 lakh in FY24, representing a growth of about 46.8% over two years.

Revenue has seen substantial growth, especially in FY24. It rose from ₹9,165.45 lakh in FY22 to ₹19,060.33 lakh in FY24, marking an impressive increase of 108% over two years. The year-over-year growth from FY23 to FY24 was particularly notable at 45%, indicating strong performance across the company's business segments.

The company's profitability has seen consistent improvement. Profit after tax increased from ₹1,819.38 lakh in FY22 to ₹3,176.93 lakh in FY24, representing a growth of 74.6% over two years. The year-over-year growth in PAT from FY23 to FY24 was 31%, showing improved operational efficiency and successful business strategies.

Net worth has shown steady growth, increasing from ₹17,390.42 lakh in FY22 to ₹23,143.49 lakh in FY24, a growth of about 33.1% over two years. This increase reflects the company's ability to generate and retain earnings, strengthening its financial position.

Total borrowings have increased over the years, from ₹59,829.58 lakh in FY22 to ₹90,477.56 lakh in FY24. This increase in borrowings, coupled with increasing assets and profitability, suggests expansion activities and investments in growth to meet the increasing demand for the company's lending services.