Northern Arc Capital IPO Day 1: Key GMP, Subscription Status & Expert Review – Should You Apply?

The Initial Public Offering (IPO) of Northern Arc Capital, a company that provides retail loans, opened for subscription on Monday, September 16, and will close on Thursday, September 19. The IPO aims to raise ₹777 crore, which includes a fresh issue of ₹500 crore and an Offer for Sale (OFS) worth ₹277 crore.

Before the IPO, Northern Arc Capital raised ₹229 crore from anchor investors. The company allotted 87.02 lakh shares to 15 funds at ₹263 per share, totaling ₹229 crore. Some of the key anchor investors include SBI General Insurance, SBI Life Insurance, Reliance General Insurance, Kotak Mahindra Life Insurance, Goldman Sachs, and Quant Mutual Fund.

Northern Arc Capital IPO Subscription Update

As of 10:05 AM on the first day of the IPO, data from BSE showed that the IPO was subscribed 0.02 times overall. The retail investor portion was subscribed 0.02 times, and the non-institutional investors’ section was subscribed 0.05 times. The Qualified Institutional Buyer (QIB) portion hadn’t received any subscriptions by that time.

Key Information About Northern Arc Capital IPO

Here are 10 important things to know about the IPO:

1. GMP (Grey Market Premium): The GMP for Northern Arc Capital IPO was around ₹158. This suggests that investors in the grey market expect the stock to list at a price of ₹421, which would represent a premium of 60.08%.
2. Price Band: The price band for the IPO is set between ₹249 and ₹263 per share.
3. IPO Dates: The IPO opened on Monday, September 16, and will close on Thursday, September 19.
4. Issue Size: Northern Arc Capital plans to raise ₹777 crore through the IPO, including a fresh issue of ₹500 crore and an OFS of ₹277 crore.
5. Lot Size: The minimum application size for retail investors is 57 shares. With the upper price band at ₹263, the minimum investment required is ₹14,991.
6. Allotment Date: The company is expected to finalize the allotment of shares on Friday, September 20. Shares will likely be credited to investors’ demat accounts on Monday, September 23. Refunds for those who do not receive shares will also be processed on that day.
7. Registrar: Kfin Technologies Ltd is the registrar for the IPO.
8. Listing Date: Northern Arc Capital’s shares are expected to be listed on the BSE and NSE on Tuesday, September 24.
9. Purpose of the IPO: The company intends to use the funds from the IPO for its future capital needs, mainly for lending activities.
10. Company Overview: Northern Arc Capital provides retail loans to under-served households and businesses across India. It operates through three channels: lending, placements, and fund management. The company reported a profit of ₹181.94 crore in FY22, which increased to ₹242.21 crore in FY23 and ₹317.69 crore in FY24.

Should You Apply for the Northern Arc Capital IPO?

Analysts generally have a positive outlook on Northern Arc Capital’s IPO, largely due to its reasonable valuation.

Prathamesh Masdekar, a research analyst at StoxBox, recommends subscribing to the IPO. He highlights the company’s strong credit underwriting process, which has helped maintain good asset quality and deliver stable returns throughout different market conditions. According to a CRISIL report, the company had one of the lowest gross non-performing assets (GNPA) at 0.45% and net non-performing assets (NNPA) at 0.08% as of FY24.

Masdekar pointed out that the IPO is fairly valued with a price-to-book value (P/BV) ratio of 1.49 times based on FY24 data, making it an attractive option for investors.

Anshul Jain, head of research at Lakshmishree Investment and Securities, also sees strong potential for Northern Arc Capital. He mentions that the company’s consistent financial growth and position in the growing Indian credit market make it a good opportunity for investors looking for short-term gains. Northern Arc’s AUM and profit after tax have shown solid growth, and the company has maintained a healthy return on equity (ROE) of nearly 12% over the last three years.

However, Jain cautions that the company’s smaller scale could pose a challenge when competing with larger non-banking financial companies (NBFCs) and banks. While the company’s diversified loan book and good asset quality are strengths, it’s important for investors to carefully consider the risks involved before making an investment decision.

In conclusion, Northern Arc Capital’s IPO presents a promising opportunity for those seeking short-term gains, but it’s essential to perform thorough research before investing.