Northern Arc Capital IPO fully subscribed, GMP signals 66% premium
What's the story
Northern Arc Capital's initial public offering (IPO) has been fully subscribed on the first day of bidding. The issue was subscribed 1.02 times by noon, with retail investors subscribing 1.55 times and non-institutional investors booking it 1.18 times. However, Qualified Institutional Buyers had bid for only 6,213 shares out of the reserved 58.48 lakh shares for them. The IPO will close on September 19 while the allotment and listing will happen on September 20 and September 24, respectively.
Pre-IPO funding
Northern Arc Capital raises ₹228 crore ahead of IPO
Prior to the opening of its IPO, Northern Arc Capital successfully raised ₹228 crore from anchor investors. The public issue comprises an offer for sale aggregating up to ₹277 crore and a fresh issue up to ₹500 crore. The company has set a price band of ₹249-263 per share for the IPO, allowing investors to bid for 57 shares in one lot.
Market response
Northern Arc Capital's IPO witnesses high gray market premium
The gray market premium for Northern Arc Capital IPO was ₹175 at the time of writing, indicating a premium of over 66%. Analysts have recommended investors to subscribe to the IPO due to the company's strong position for growth. They highlighted its sector expertise, digital platforms, and robust partner ecosystem as key factors in accessing India's underpenetrated credit markets.
Expert opinion
Analysts endorse Northern Arc Capital's IPO
BP Wealth endorsed the IPO, stating that "the issue is valued at a P/BV of 1.49x on the upper price band based on FY24 book value, which is fair." They further recommended a 'Subscribe' rating due to the company's unique credit underwriting process that ensures strong asset quality and consistent risk-adjusted returns across business cycles. Nirmal Bang also supported this view, highlighting the company's diversified funding sources and improved credit rating as factors supporting sustainable expansion.
Company overview
Northern Arc Capital's business model and future plans
Northern Arc Capital is a diversified financial services platform primarily catering to the diverse retail credit needs of underserved households and businesses in India. The company has facilitated over ₹1.73 trillion worth of financing, reaching more than 10 crore people across the country as of March 2024. It intends to use the net proceeds from the IPO to meet future capital requirements for onward lending.