Northern Arc Capital IPO Listings: Stock lists at 33% premium over IPO price

Northern Arc Capital IPO Listings

Northern Arc Capital IPO Listings: Strong Debut with 33% Gain and Over 110 Times Subscription

Northern Arc Capital’s Initial Public Offering (IPO) made a remarkable debut on the stock exchanges today, September 24, 2023.

The company’s shares commenced trading on the Bombay Stock Exchange (BSE) at a price of Rs 351, representing a significant 33.5% premium over the IPO issue price of Rs 263.

This strong first-day performance has provided a notable windfall for investors, despite falling short of the expectations set by the gray market, where shares were trading at a premium of approximately 50% prior to the listing.

IPO Overview

The Northern Arc Capital IPO has garnered widespread attention, successfully raising a total of Rs 777 crore. This amount was sourced through a combination of newly issued shares and sales by existing shareholders.

Specifically, the company issued new shares worth Rs 500 crore, while the remaining Rs 277 crore was generated from the sale of shares by current investors.

The IPO’s strong response from the market culminated in an extraordinary subscription rate of approximately 110.71 times by the time the offer closed.

This overwhelming demand is indicative of investor confidence in the company’s business model and growth prospects, particularly in a market that has seen increased interest in financial services and microfinance sectors.

Subscription Breakdown

The robust subscription levels across various investor categories reveal a diverse interest in the IPO:

• Qualified Institutional Buyers (QIBs) exhibited the strongest enthusiasm, subscribing to an impressive 240.79 times the shares allocated to them. This category includes large institutional investors such as mutual funds, insurance companies, and pension funds, all of whom are generally seen as sophisticated investors with extensive research capabilities.
• Non-Institutional Investors also demonstrated significant interest, with a subscription rate of 142.28 times. This segment typically includes high-net-worth individuals and corporate entities that seek substantial investments in promising companies.
• Retail Investors, representing individual investors, showcased their confidence as well, with a subscription rate of 30.74 times. This level of participation reflects a growing trend of retail investors entering the market, buoyed by increased access to investment platforms and a favorable economic environment.

Such high levels of subscription across all categories not only underscore the appeal of Northern Arc Capital but also signal a broader trend of investor enthusiasm for IPOs in the current market landscape.

About Northern Arc Capital

Established in 2009, Northern Arc Capital operates primarily in the financial services sector, focusing on providing funding solutions to a wide range of entities, including Micro, Small, and Medium Enterprises (MSMEs) and microfinance institutions (MFIs). The company has carved a niche for itself in several key areas:

• MSME Finance: With over 15 years of experience in MSME financing, Northern Arc Capital plays a vital role in supporting small businesses, which are crucial to the Indian economy. MSMEs contribute significantly to employment and GDP, making this focus particularly relevant.
• Consumer Finance: Northern Arc has been active in consumer finance for 9 years, providing loans for various personal needs, thereby promoting financial inclusion.
• Agricultural Finance: Understanding the unique needs of farmers and agricultural businesses, the company also offers tailored financial solutions to enhance productivity in this sector.
• Affordable Housing Finance: With the government’s push for affordable housing, Northern Arc Capital’s offerings in this area aim to support the housing needs of lower-income groups.

This diverse portfolio positions Northern Arc as a significant player in the financial services landscape, allowing it to cater to a broad spectrum of clients while mitigating risks associated with sector-specific downturns.

Financial Performance

The financial health of Northern Arc Capital reflects its robust growth trajectory and sound management practices. In the fiscal year 2022, the company reported a net profit of Rs 181.94 crore.

This figure rose to Rs 242.21 crore in FY 2023, showcasing a healthy growth rate. By FY 2024, the net profit further increased to Rs 317.69 crore, underscoring the company’s capacity for consistent profitability.

During this period, Northern Arc Capital’s revenue grew at a compound annual growth rate (CAGR) of over 44%, reaching an impressive Rs 1,906.03 crore.

Such growth metrics not only highlight the company’s operational efficiency but also its ability to scale its business effectively in a competitive environment.

Market Outlook

The successful IPO and the favorable reception from investors could be seen as a positive indicator for the broader financial services market.

As more companies explore public offerings, the landscape could witness a flurry of activity, fueled by a favorable regulatory environment and a recovering economy.

Investors are increasingly seeking opportunities in sectors that promote financial inclusion and sustainable growth, and Northern Arc Capital fits this profile.

The company’s focus on MSMEs and underbanked segments aligns well with the growing demand for accessible financial services in India.

Final Remarks

In summary, Northern Arc Capital’s IPO not only reflects strong market demand but also highlights the company’s solid financial health and growth potential.

The overwhelming subscription rates across various investor categories are a testament to the confidence in the company’s business model and its commitment to serving the needs of diverse market segments.

As Northern Arc Capital embarks on this new chapter, its robust foundation and strategic focus position it well for continued success in the evolving financial landscape.

Investors and analysts alike will be keen to watch how the company leverages its public listing to drive growth and enhance shareholder value in the coming years.