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Company is a niche player on diversified financial services platforms. Northern Arc offers a suite of solutions including lending, placements and investments in key sectors like MSME Financing, MFI, Consumer Financing, Vehicle Financing, Affordable Housing Financing and Agricultural Supply Chain Finance. Northern Arc Capital IPO aims to raise Rs 777.00 crores. The issue is a combination of fresh issue aggregating to Rs 500 crores and offer for sale aggregating to Rs 277 crores.

About Northern Arc Capital:

• Incorporated in 1989, 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.
• The company has 3 primary channels:
  • Lending,
  • Placement and 
  • Fund Management.
• Since 2009, they have facilitated financing of over ₹1.73 trillion that has impacted over 101.82 million people.
• They are one of the leading players amongst India’s diversified NBFCs in terms of AUM as of March 31, 2024, with a business model diversified across offerings, sectors, products, geographies and borrower categories.
• In the Lending space it extends financing to Originator Partners (large network of financial institution partners, technology platforms and other entities that act as business correspondents to originate financial exposure) in the form of loans or investment in their debt to enable on-lending to the retail customer.
• Their in-house technology stack consists of:
  • Nimbus, a curated debt platform that enables end-to-end processing of debt transactions;
  • nPOS, a co-lending and co-origination technology solution based on application programming interfaces (“API”);
  • Nu Score, a customised machine learning based analytical module designed to assist their Originator Partners in the loan underwriting process;
  • AltiFi, an alternative retail debt investment platform. 

Financials : Northern Arc Capital IPO

Anchor: Northern Arc Capital IPO

Salient Points: Northern Arc Capital IPO

• Company is a systemically important non-deposit taking non-banking finance company registered with the RBI.
• Northern Arc Capital is backed by marquee equity investors like IFC, Sumitomo Mitsui Banking Corporation, LeapFrog, 360 ONE (formerly IIFL), Accion, Augusta Investments (known as Affirma Capital), Dvara Trust and Eight Roads (proprietary arm of Fidelity).
• The fresh issue of Rs. 500 cr is towards growth capital and to strengthen CRAR. This will go up from 18% to 23%, vs RBI requirement of 15%
• Rs. 277 cr OFS is by financial investors Leapfrog, Eight Roads, 360 One, Japan’s SMBC, Dvara, Accion
• Financial investors present 69% combined stake will get reduced to 55% post the IPO.
• Company has developed domain expertise in enabling credit across their focused sectors in India, namely, MSMEs, MFI, Consumer Finance, Vehicle Finance, Affordable Housing Finance and Agricultural Finance.
• They have been operating in the MSME, MFI and consumer finance sectors for over a decade now.
• Through Nimbus, their technology platform,, the company works with a large network of investors across different investor classes who uses a platform to access opportunities to invest in under-served sectors (Investor Partners) including through Placements channel which includes structure and syndicate financing through a variety of debt, credit-enhanced debt and portfolio financing products for Originator Partners.
• Proprietary technology product suite ;
• Their credit rating was revised upward to AA- (Stable) by ICRA and India Ratings in 2023 from A+ credit rating for long -term facilities.
• They have one of the lowest industry-wide credit costs amongst diversified NBFCs in India, as of March 31, 2024. 
• P/E ratio stands at ~ 13.4x.
• Listed Peers:

• Before the IPO, they have done a clean up by write off with high provisions of Rs.. 122 cr in FY24 thereby shrinking net NPA to 0.08%.
• They have been leveraging technology as exemplified in their proprietary platforms, nPOS and Nimbus. nPOS, a cloud-based API-enabled platform, streamlines loan processes for partnership and co-lending businesses, while Nimbus provides comprehensive end-to-end debt transaction management. These innovations support efficient loan processing and debt management, ensuring that Northern Arc can meet the diverse needs of its clients with data and technology.
• I intend to apply in Northern Arc Capital IPO. Pre-IPO and fresh issue proceeds of nearly Rs. 900 cr (combined) provide healthy visibility for future. Further their in-house technology stack has helped them to create a scalable and sustainable business model.. This appears the best among the three mainline IPOs open at present.
• GMP as reported on social media has been Rs. 202 (77%)
• This post is exploratory and educational purposes only.
• Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . I have in the past cleared some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Do check the data from company’s RHP and exchanges before making any decision. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.