Northern Arc Capital IPO to open on September 16; Check Details

Northern Arc Capital IPO

Northern Arc Capital IPO: An In-Depth Look at the Upcoming Offering

Northern Arc Capital, a prominent player in the non-banking financial company (NBFC) sector, is gearing up for its much-anticipated initial public offering (IPO). Scheduled to open for subscription on September 16, 2024, the IPO represents a significant opportunity for investors to participate in the growth of this diversified financial services company.

The offering will be available for public subscription until September 19, 2024.

IPO Overview

Issue Structure and Size

Northern Arc Capital’s IPO will include the issuance of fresh equity shares worth up to ₹500 crore. This fresh issuance aims to raise significant capital to support the company’s strategic objectives.

In addition to the new shares, approximately 1.05 crore equity shares will be offered through an Offer for Sale (OFS).

The OFS will be conducted by existing shareholders, including notable entities such as LeapFrog Financial Inclusion India, Accion Africa-Asia Investment Company, and 360 One Special Opportunities Fund.

The OFS component allows these shareholders to monetize their investments, providing liquidity and potentially enhancing the company’s stock market profile.

Anchor Investor Portion

To attract institutional investors and stabilize the IPO’s initial pricing, a special one-day window for anchor investors will be available on September 13, 2024.

Anchor investors, which typically include large institutional players such as mutual funds, insurance companies, and pension funds, will be given the opportunity to purchase shares before the general public.

This early commitment from institutional investors often provides a positive signal to retail and other investors, potentially leading to increased confidence in the IPO.

Use of Proceeds

The proceeds from Northern Arc Capital’s IPO will be strategically allocated to several key areas:

1. Debt Repayment: A substantial portion of the funds raised will be used to repay existing debt. Reducing debt levels is crucial for improving the company’s financial health and credit profile, allowing it to potentially lower interest costs and enhance profitability.
2. Future Capital Requirements: The remaining funds will be directed towards meeting future capital needs. This includes financing for expansion initiatives, technological advancements, and other growth-oriented investments that align with the company’s strategic goals.

Historical Context

Previous IPO Efforts

Northern Arc Capital’s journey to going public has seen previous attempts. The company initially filed IPO papers in July 2021 and secured approval from the Securities and Exchange Board of India (SEBI) in September 2021.

However, due to market conditions and internal considerations, the IPO did not materialize within the one-year period following SEBI’s approval.

The company reinitiated the IPO process by filing a revised Draft Red Herring Prospectus (DRHP) with SEBI on February 2, 2024.

This new filing reflects updated financials and business strategies, positioning the company to capitalize on improved market conditions and investor sentiment.

Business Model and Market Position

Northern Arc Capital operates as a Systemically Important Non-Deposit Taking Non-Banking Financial Company (NBFC), registered with the Reserve Bank of India (RBI).

Established over a decade ago, the company has a proven track record in the financial inclusion sector, providing critical financial services to underserved segments of the population.

Diverse Offerings

Northern Arc’s business model is characterized by its diversification across multiple sectors and borrower segments. The company offers a range of financial products and services, including:

• Loans to Individuals and Businesses: The company extends credit to both individuals and businesses, focusing on those who are typically excluded from traditional banking channels. This includes small and medium-sized enterprises (SMEs) and low-income families.
• Partnerships and Collaborations: Northern Arc partners with various financial institutions and organizations to expand its reach and impact. These partnerships enable the company to leverage its expertise and resources to serve a broader customer base.
• Innovative Financial Solutions: The company is known for developing and implementing innovative financial solutions that cater to the specific needs of its clients. This includes tailored loan products and financial services designed to address the unique challenges faced by underserved communities.

Listing and Market Dynamics

Stock Exchanges

Upon completion of the IPO, Northern Arc Capital’s shares will be listed on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).

The dual listing is expected to enhance the company’s visibility and liquidity, providing investors with greater flexibility and access to its shares.

Market Position

As a prominent NBFC, Northern Arc Capital operates in a competitive market characterized by a growing demand for financial inclusion and innovative lending solutions.

The company’s strong market position is supported by its extensive experience, diversified product portfolio, and strategic partnerships.

Lead Managers and Registrar

Book Running Lead Managers

The IPO is being managed by a consortium of leading financial institutions, including ICICI Securities, Axis Capital, and Citigroup Global Markets India.

These book running lead managers play a crucial role in underwriting the issue, marketing the shares to potential investors, and ensuring the smooth execution of the IPO process.

Registrar

KFin Technologies Limited has been appointed as the official registrar for the IPO. The registrar will handle various administrative tasks related to the IPO, including the processing of applications, allocation of shares, and maintenance of investor records.

Investment Considerations

Investors considering participation in Northern Arc Capital’s IPO should carefully evaluate several factors:

• Company’s Financial Health: Review the company’s financial statements, including revenue growth, profitability, and debt levels. Understanding the company’s financial position will help assess its ability to achieve its strategic objectives and generate returns for shareholders.
• Market Conditions: Consider the current market environment and economic conditions. Market sentiment, regulatory changes, and macroeconomic factors can impact the performance of the IPO and the company’s stock post-listing.
• Growth Prospects: Analyze Northern Arc’s growth potential, including its expansion plans, market opportunities, and competitive landscape. Assessing the company’s ability to capitalize on emerging trends and address challenges will provide insights into its long-term prospects.

Final Remarks

Northern Arc Capital’s IPO presents a significant opportunity for investors to participate in the growth of a leading NBFC with a strong track record in financial inclusion.

The IPO’s structure, use of proceeds, and strategic objectives offer a compelling investment case. As the company prepares to enter the public market, investors should conduct thorough due diligence and consider how the IPO aligns with their investment goals and risk tolerance.