3 days Ago
The initial public offering ( IPO ) of Northern Arc Capital, which opened for subscription earlier on Monday, was fully subscribed on the first day, attracting the strongest demand from retail investors. The issue was subscribed 1.02 times as of noon.
Retail investors had subscribed to the issue 1.55 times followed by non-institutional investors who booked it 1.18 times.
Meanwhile the Qualified Institutional Buyers (QIBs) had bid for only 6,213 shares from the 58.48 lakh shares reserved for them. The issue will be available for investors to bid till September 19.
The company has raised Rs 228 crore from anchor investors ahead of the issue opening. The public issue consists of an offer for sale aggregating up to Rs 277 crore and fresh issue 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.
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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. Also read: Multibagger on Listing! Bajaj Housing Finance shares list at 114% premium over IPO price 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 to Rs 986 crore, while net profit increased 31% year-on-year 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 Economic Times) (You can now subscribe to our ETMarkets WhatsApp channel ).
