About the Company:
Northern Arc Capital Ltd is a diversified financial services platform set up primarily with the mission of catering to the diverse retail credit requirements of the under-served households and businesses in India.
Over the last 15 years, Company’s approach has been to create a differentiated and comprehensive play on the retail credit ecosystem in India spread across sectors.
Company is one of the leading players amongst India’s diversified NBFCs in terms of Assets under Management (“AUM”) as of March 31, 2024, with a business model diversified across offerings, sectors, products, geographies and borrower categories.
Further, Company has one of the lowest industry-wide credit costs amongst diversified NBFCs in India, as of March 31, 2024.
Company has developed domain expertise in enabling credit across our focused sectors in India, namely, micro, small and medium enterprises (“MSMEs”) financing, microfinance (“MFI”), consumer finance, vehicle finance, affordable housing finance and agricultural finance.
Company had one of the lowest gross non-performing assets (“GNPA”) of 0.45% and net non-performing assets (“NNPA”) of 0.08%, as of Fiscal 2024.
Company’s Three Primary Channels:
- Lending.
- Placements.
- Fund Management.
Direct to Customer Lending:
Company extends loans directly to under-served households and businesses (“Direct to Customer Borrowers”) in the MSME, MFI, consumer and vehicle finance sectors through a ‘phygital’ (physical plus digital) approach which is a combination of leveraging our technology platforms and data-first approach with infrastructure network of 316 physical branches across India and 50 select Originator Partners who enable us to lend directly to our Direct to Customer Borrowers (“Retail Lending Partners”), as of March 31, 2024.
Placements:
Through our technology platform, Nimbus, we work with a large network of investors across different investor classes who use us as a platform to access opportunities to invest in under-served sectors in India (“Investor Partners”), including through our Placements channel.
The Placement Channel includes structure and syndicate financing through a variety of debt, credit-enhanced debt and portfolio financing products for our Originator Partners and we also credit enhance/ co-invest in transactions as required to achieve the target credit rating and/or provide comfort to our Investor Partners. We believe this differentiates us from other facilitators in the market.
Fund Management:
Company’s Fund Management channel is operated through our subsidiary, NAIM. Based on contributions received from Investor Partners, NAIM manages debt funds that invest largely in the sub-set of Originator Partners and mid-market companies in line with the investment mandate of the respective funds.
Company’s Sector wise Loan Disbursement:
MSME: Company extends loans to under-served MSME businesses and NBFCs engaged in MSME financing either directly or through our Originator Partners. This sector offers diverse funding opportunities across various industries, determined by the performance and potential of the businesses.
Microfinance (MFI): Company offers microfinance loans to under-served individuals, either directly through our dedicated rural finance partner subsidiary, Pragati, acting as our business correspondent, or in collaboration with our Retail Lending Partners and Originator Partners.
As of March 31, 2024, we had 68 Originator Partners operating in this sector out of which eight were also Retail Lending Partners. Our primary focus in microfinance is the joint liability group (“JLG”) lending format, wherein borrowers form groups and share responsibility for each other’s loan repayments in case of default, providing social collateral.
Consumer Finance: Company extends financing to individuals from new to credit backgrounds and other under-served categories, encompassing both employed and self-employed individuals, either directly or by collaborating with Originator Partners, many of whom eventually become our Retail Lending Partners.
As of March 31, 2024, Company had 40 Originator Partners operating in this sector out of which 20 were also Retail Lending Partners. Company offers a variety of consumer finance solutions, including consumer durable loans, cash or personal loans, salary advance loans, and buy-now-pay-later financing for products and services available through both online and offline channels.
Vehicle Finance: Company primarily works with Originator Partners operating in the vehicle sector, who enable us to lend to under-served individuals and businesses exploring financing for purchase of commercial vehicles used for commercial transportation of goods or passengers, two-wheelers, electronic vehicles (“EV”) as well as companies engaged in e-mobility, EV fleet services, EV infrastructure (battery swapping) and EV last-mile delivery. As of March 31, 2024, we had 50 Originator Partners operating in this sector.
Affordable housing finance: Company works with Originator Partners, mostly being housing finance companies (“HFC”), who lend to self-employed or salaried borrower categories for the purchase of residential property, home improvement and home extension. As of March 31, 2024, we had 35 Originator Partners operating in this sector.
Company’s Proprietary integrated technology platform “Nimbus”.
Company’s proprietary integrated technology platform, Nimbus, is a curated debt platform that enables flow of credit to our Originator Partners either through our balance sheet or through our Investor Partners.
Nimbus provides the ability for end-to-end processing of debt transactions, from loan application, credit evaluation, generation of legal documentation to transaction execution and closure, leading to distinct advantages for the users, such as scale, precision, transparency and efficiency in turnaround time.
It also enables flow of information between our Originator Partners and Investor Partners by enabling them to monitor deal progress, execute and conclude debt transactions. Further, the platform enables Investor Partners to review the underlying company’s performance and provide a comprehensive solution from ideation to execution, to monitoring and to closure.
Company’s AUM (Assets Under Management):
Details of Company’s Sector-wise disbursements:
Management Team:
- Mr. P.S. Jayakumar (Designation: Chairman and Non-Executive Independent Director)
- Mr. Ashish Mehrotra (Designation: Chief Executive Officer & Managing Director)
Objectives of the Issue:
Offer For Sale: (Rs.277 cr)
- Company will not receive any proceeds from the Offer for Sale. The Selling Shareholders will be entitled to their respective portion of proceeds of the Offer for Sale.
Fresh issue: (Rs. 500 cr)
- To meet future capital requirements towards onward lending.
- Further, Company expects to receive the benefits of listing of the Equity Shares on the Stock Exchanges, enhancement of Company’s brand name and creation of a public market for our Equity Shares in India.
Proposed Schedule of Implementation and Deployment of Net Proceeds: (in Millions)
Positives for the Company:
- Large ecosystem of partners and data and technology platform creating strong network effects.
- Proprietary technology product suite transforming the debt market ecosystem.
- Robust risk management based on domain expertise, proprietary risk models and data repository driving asset quality.
- Professional management team supported by an experienced Board and marquee investors driving high standards of governance.
Financials of the Company:
| (in Crores) | FY 22 | FY 23 | FY 24 |
|---|---|---|---|
| Revenue | 916.5 | 1311.2 | 1906.0 |
| Net Profit | 181.9 | 242.2 | 317.6 |
Valuation of Peer Group Companies:
| Company Name | Face Value | EPS | PE Ratio | RoNW | NAV |
|---|---|---|---|---|---|
| Northern Arc Capital Ltd | 10 | 23.40 | 11.24 | 13.32% | 177.06 |
| Five-Star Business Finance Ltd | 1 | 28.39 | 26.76 | 16.09% | 177.68 |
| Credit Access Grameen Ltd | 10 | 90.41 | 13.12 | 5.01% | 1,809.93 |
| MAS Financial Services Ltd | 10 | 15.31 | 18.55 | 14.08% | 108.71 |
IPO Details:
| Details | Info |
|---|---|
| Issue Opens on | 16th September 2024 |
| Issue Closes on | 19th September 2024 |
| Issue Price | Rs.249 -263 |
| Face Value | Rs.10 |
| Retail Category Allocation | 35 % |
| Minimum Lot | 57 Shares |
| Minimum Investment | Rs.14,991 |
| Issue Constitutes | 18.31 % |
| Issue Size | Rs.777 cr ($ 93 million ) |
| Market Cap | Rs.4242 cr ($ 505 million ) |
| Listing at | NSE & BSE |
| Equity Shares Offered (Fresh) | 1,90,11,407 (Rs.500 cr) |
| Equity Shares Offered (OFS) | 1,05,32,320 (Rs. 277 cr) |
| Total Equity Shares Offered (Fresh + OFS) | 2,95,43,727 (Rs.777 cr) |
| Equity Shares Prior to the Issue | 14,23,14,010 |
| Equity Shares after the Issue | 16,13,25,417 |
IPO Valuation Parameters:
| Earnings Per Share (EPS) | Price To Earnings ratio (PE) | Return on Net Worth (RoNW) | Net Asset Value (NAV) |
|---|---|---|---|
| 23.40 | 11.24 | 13.32% | 177.06 |
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| Should You Subscribe or Not ? (Markets Guruji’s View) |
|---|
| Northern Arc Capital Ltd is a diversified financial services platform primarily established to meet the retail credit needs of underserved households and businesses in India. Over the past 15 years, the company has built a comprehensive approach to the retail credit ecosystem, spanning multiple sectors.
As of March 31, 2024, Northern Arc Capital is one of India’s leading diversified non-banking financial companies (NBFCs) in terms of Assets under Management (AUM). The business model is diversified across offerings, sectors, products, geographies, and borrower categories. The company also boasts one of the lowest credit costs among diversified NBFCs. With expertise in micro, small, and medium enterprises (MSMEs) financing, microfinance (MFI), consumer finance, vehicle finance, affordable housing finance, and agricultural finance, Northern Arc Capital has become a major player in India’s financial landscape. The company reported one of the lowest gross non-performing assets (GNPA) at 0.45% and net non-performing assets (NNPA) at 0.08% as of fiscal 2024. With its IPO attractively priced, investors should consider applying for decent listing gains. |
Important Dates:
| Finalization of Basis of Allotment | on or Before 20th September 2024 |
| Initiation of Refunds | on or Before 23rd September 2024 |
| Credit of Equity Shares: | on or Before 23rd September 2024 |
| Listing Date: | on or Before 24th September 2024 |
| Company Contact Info: |
|---|
| Northern Arc Capital Limited No. 1, Kanagam Village 10th Floor, IITM Research Park Taramani, Chennai 600 013 Tamil Nadu, India. Tel: +91 44 6668 7000 E- mail: investors@northernarc.com Website: www.northernarc.com |
| Registrar to the Issue: |
|---|
| KFin Technologies Limited Selenium Tower-B Plot No. 31 & 32, Financial District Nanakramguda, Serilingampally Hyderabad 500 032 Telangana, India Tel: +91 40 6716 2222 E-mail: nacl.ipo@kfintech.com Website: www.kfintech.com |
