Northern Arc Capital IPO - Investment Rationale, Issue Details, Strengths, Risks And More: Anand Rathi

Anand Rathi Report

Northern Arc Capital Ltd. launched its initial public offering today and the offer closes for subscription on Sept. 19. The diversified financial services platform has fixed a price band of Rs 249-263 per share. The minimum lot size for bidding will be 57 shares.

The Rs 776 crore. crore IPO is a combination of a fresh issue of equity shares valued at Rs 500 crore and an offer for sale of 1.05 crore shares worth Rs 276 crore.

Objects of the Issue:

• To meet the future capital requirements towards onward lending.

• The company expects to receive the benefits of listing of the Equity Shares on the Stock Exchanges, enhancement of their brand name and creation of a public market for their Equity Shares in India.

Valuation & outlook

Over the past 15 years, North Arc Capital have significantly contributed to the Indian retail credit market, facilitating financing of more than Rs 1.73 trillion since 2009, impacting over 101.82 million lives. As of March 31, 2024, they have established an ecosystem that includes 328 Originator Partners, 50 Retail Lending Partners, and 1,158 Investor Partners.

Their multi-channel offerings encompass Lending, Placements, and Fund Management, supported by proprietary technology solutions and a robust data repository containing over 35.17 million data points.

They intend to expand their presence to more effectively reach and serve underserved households and businesses in their target sectors across India. This will involve enhancing and growing their origination channels by bringing new Originator Partners onto their platform, financing the debt capital needs for the growth of these partners, and onboarding new Retail Lending Partners to help them access more direct-to-customer borrowers. At the upper price band company is valued at P/BV of 1.4X with a market cap of Rs 42,428.6 million post issue of equity shares.

Thus, we recommend an “Subscribe” rating to the IPO.

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