Top Reasons to Subscribe Northern Arc Capital Limited IPO

About Northern Arc Capital

Northern Arc Capital Limited, founded in 2009, focuses on providing retail loans to underserved households and businesses across India. The company's business model is highly diversified, covering a range of offerings, sectors, products, geographies, and borrower categories. As of March 31, 2024, Northern Arc Capital has facilitated financing worth over ?1.73 lakh crore, reaching more than 10.18 crore people across the country.

The company has extensive expertise in lending across various sectors in India, particularly in micro, small, and medium enterprise (MSME) finance, microfinance (MFI), consumer finance, vehicle finance, affordable housing finance, and agriculture finance. It has been active in MSME finance for over 14 years, MFI finance for 15 years, and consumer finance for nine years.

Northern Arc serves the retail lending market through a multi-channel approach:

• Lending: The company provides financing from its own balance sheet to originator partners in the form of loans or investments to enable on-lending to retail customers. It also lends directly to underserved households and businesses in collaboration with retail partners or through its branch network, offering rural finance and MSME loans. As of March 31, 2024, Northern Arc had assets under management (AUM) of ?11,710.01 crore across 671 districts in 28 states and 7 union territories.

• Placements: The company enables loans to originator partners through various financing products, with a total AUM of ?1,01,903.89 crore as of March 31, 2024.

• Fund Management: Northern Arc manages debenture funds and offers portfolio management services, with a total volume of ?12,078.56 crore spread across 10 alternative investment funds (AIFs) and three portfolio management service (PMS) funds.

The company also boasts an end-to-end integrated technology product suite tailored to different sectors. This includes:

• Nimbus: A debt platform that facilitates the entire debt transaction process.
• nPOS: A co-lending and co-origination technology solution using API integration.
• Nu Score: A machine learning-based module to assist originator partners in the loan underwriting process.
• AltiFi: An alternative retail debt investment platform.

Northern Arc’s technology-driven approach and diverse lending model position it as a key player in the Indian financial ecosystem.

Key Factors

• Diverse Lending Portfolio:?

Northern Arc Capital operates across multiple sectors, including MSME finance, microfinance, consumer finance, vehicle finance, affordable housing finance, and agriculture finance. This diversified approach helps mitigate risks by reducing dependence on any single sector.

• Strong Track Record:?

Since its inception in 2009, the company has facilitated over ?1.73 lakh crore in financing, reaching more than 10.18 crore people across India. Its long-standing presence and experience in MSME and microfinance, spanning 14 and 15 years respectively, solidify its expertise in these sectors.

• Extensive Geographic Reach:?

With operations across 671 districts in 28 states and 7 union territories, Northern Arc has a wide-reaching presence, enabling it to serve a diverse range of underserved households and businesses across India.

• Technology-Driven Solutions:?

The company's in-house technology stack, including platforms like Nimbus, nPOS, Nu Score, and AltiFi, enhances its ability to streamline operations, improve loan underwriting, and provide innovative financing solutions. This integrated approach strengthens its operational efficiency and scalability.

• Multi-Channel Approach:?

Northern Arc uses multiple channels for lending, including direct lending, intermediate retail lending, and placement services for originator partners. This flexibility allows the company to cater to a wide variety of customers and partners, ensuring a broader impact across the financial ecosystem.

• Expertise in Fund Management:?

With ?12,078.56 crore in AUM across alternative investment funds (AIFs) and portfolio management services (PMS), Northern Arc demonstrates expertise in managing funds and offering tailored investment solutions.

• Underserved Market Focus:?

By focusing on underserved households and businesses, Northern Arc addresses a significant gap in the Indian financial market, giving it a unique positioning and growth potential in a sector with increasing demand for accessible credit.

Key Details

IPO Date: 16 September 2024 to 19 September 2024

Face Value: ?10 per share

Price Band: ?249 to ?263 per share

Lot Size: 57 Shares?

Total Issue Size: ?777 Cr

Objectives Of The IPO

The company proposes to utilize the Net Proceeds to meet future capital requirements toward onward lending.

Conclusion

Northern Arc Capital Limited offers a strong investment opportunity with its diversified lending portfolio and focus on underserved markets in India. With a proven track record since 2009, the company has facilitated over ?1.73 lakh crore in financing, reaching more than 10.18 crore people. Its multi-channel approach, including direct lending, intermediate retail lending, and fund management, allows it to effectively serve a wide range of borrowers and originator partners across 671 districts in 28 states and 7 union territories.

The company’s integrated technology stack, including platforms like Nimbus and nPOS, enhances operational efficiency, ensuring scalability and improved loan processing. Strong financials, with growing revenue and profits over the years, further highlight the company’s solid performance. With an IPO priced between ?249 to ?263 per share, Northern Arc aims to meet future capital requirements for onward lending, positioning itself well for future growth in India's financial ecosystem.