Northern Arc Capital Submits DRHP to SEBI for ₹500 Crore IPO

Northern Arc Capital Ltd, a non-banking financial company has submitted preliminary papers to the Securities and Exchange Board of India (SEBI) for its upcoming initial public offering (IPO). The IPO will consist of a fresh issue of equity shares amounting to ₹500 crore and an offer for sale (OFS) of up to 2.1 crore equity shares by existing investors.

The Capital will be utilized to meet the company's future capital requirements for onward lending. Additionally, investor shareholders including Leapfrog Financial Inclusion India (II) Ltd, Accion Africa-Asia Investment Company, Augusta Investments II Pte Ltd, Eight Roads Investments Mauritius II Ltd, Dvara Trust and IIFL Special Opportunities Fund will participate in the OFS.

Northern Arc Capital is also considering a pre-IPO round to mobilize up to ₹100 crore. This move reflects the company's strategic approach to strengthen its financial position before the public offering. Leading financial institutions, namely Axis Capital, ICICI Securities and Citigroup Global Markets India have been appointed as the merchant bankers to guide and advise Northern Arc Capital on the IPO process as outlined in the draft red herring prospectus (DRHP).

Business Profile

Registered with the Reserve Bank of India (RBI), Northern Arc Capital has been actively involved in the financial inclusion sector for over a decade. As a non-deposit taking NBFC, the company operates with a diversified business model spanning offerings, sectors, products, geographies and borrower segments. It plays a crucial role in providing credit access to under served households and businesses both directly and indirectly through originator partners.

This isn't the first time Northern Arc Capital has considered going public. In July 2021, the company filed draft papers with SEBI for its maiden public issue and received regulatory approval in September of the same year. However, the launch was postponed at that time.
IPO delay could be linked to the weaker performance of stock markets and the banking & financial services sector since October 2021. These market conditions might be a key reason for holding off on the issue within the allowed time.

The company reported a 33% YoY growth in net profit at ₹242.2 crore for FY23, with net interest income rising by 60% to ₹591 crore. In H1 FY24, profit stood at ₹150 crore, net interest income at ₹419.2 crore, and total revenue at ₹838 crore. In terms of asset quality, gross NPA was 0.42% and net NPA was 0.16% in H1 FY24. In FY23, gross NPA increased to 0.77% from 0.5% in FY22 and net NPA rose to 0.4% from 0.21%.

Final Words

Northern Arc Capital's latest IPO filing highlights its commitment to furthering financial inclusion by raising capital to meet the evolving needs of its lending operations. As one of India's leading diversified NBFCs, the company aims to provide reliable access to debt capital for institutions impacting financially excluded households and enterprises.