Northern Arc Capital IPO Day 2: Full Subscription Surge, GMP Update & Key Dates – Should You Subscribe Now?

On Monday, Northern Arc Capital’s IPO saw strong interest from investors, achieving full subscription on its first day. Non-institutional investors led the way, followed by retail investors, despite some market concerns.

Just before the shares were made available for public subscription, Northern Arc Capital announced on Friday that it had raised ₹229 crore from anchor investors. Some of the major anchor investors include SBI General Insurance, SBI Life Insurance, Reliance General Insurance, Kotak Mahindra Life Insurance, Goldman Sachs, Societe Generale, and Quant Mutual Fund.

Key Details of the Offer

The price range for Northern Arc Capital’s IPO is set between ₹249 and ₹263 per share. Investors can bid in lots of 57 equity shares, with additional lots in multiples of this size.

Northern Arc Capital has reserved up to 50% of the IPO shares for qualified institutional buyers (QIBs), 15% for non-institutional investors (NIIs), and 35% for retail investors. Employees participating in the reserved portion will receive a ₹24 per share discount, with up to 590,874 equity shares set aside for them.

About Northern Arc Capital

Northern Arc Capital focuses on providing retail credit solutions to underprivileged households and businesses in India. Since 2009, the company has helped meet the credit needs of over 101.82 million people in India, facilitating loans worth ₹1.73 trillion by March 2024.

IPO Subscription Status

On the first day of the IPO, Northern Arc Capital was subscribed 2.87 times. Non-institutional investors oversubscribed their portion by 4.48 times, while retail investors subscribed 3.87 times. The QIB portion saw a 2% subscription rate, and employees booked 92% of their portion.

Should You Subscribe?

Hensex Securities Review

According to Hensex Securities, Northern Arc Capital is a leading non-bank financial company (NBFC) with a strong track record. Its wide network of partners and technological platform supports its scalable business model. With strong risk management practices and robust data systems, the brokerage recommends subscribing for both short-term listing gains and long-term growth potential.

Nirmal Bang Review

Nirmal Bang also sees Northern Arc as well-positioned for growth, with its digital platforms and strong partnerships providing access to underserved credit markets. The company has a respectable return on assets (ROA) of 3.0% and return on equity (ROE) of 14.5%, along with loan growth of 28% CAGR from FY22 to FY24. Its low gross non-performing assets (GNPA) of 0.5% and net non-performing assets (NNPA) of 0.1% indicate strong asset quality. With a price-to-book ratio of 1.8x, Northern Arc is seen as undervalued compared to its peers, leading the brokerage to also advise subscribing.

IPO Details

The IPO includes an offer for sale (OFS) of 1.05 crore shares from existing shareholders and promoters, valued at ₹277 crore at the upper price band. Additionally, there is a new issue worth ₹500 crore, making the total IPO size ₹777 crore. The company plans to use the proceeds to support future lending and capital needs.

Grey Market Premium (GMP) Today

The grey market premium (GMP) for Northern Arc Capital’s IPO is ₹178 today. This means that shares are expected to trade at ₹441 each, 67.68% higher than the upper IPO price of ₹263, according to investorgain.com.

GMP reflects how much investors are willing to pay for shares above the issue price, offering an indication of potential listing gains.

Conclusion

With strong interest from investors and anchor investors, along with solid financials and a premium in the grey market, Northern Arc Capital’s IPO looks promising for both short-term gains and long-term investments.