Northern Arc Capital shares expected to list at nearly 55% premium over IPO price as GMP surges

Northern Arc Capital shares expected to list at nearly 55% premium over IPO price on Sep 24 as GMP surges

Northern Arc Capital Ltd shares will be listed on the bourses on September 24, after the non-banking financial institution received 110.71 times subscription on its maiden share sale. Earlier, the initial share collected Rs 229 crore from anchor investors.

The Rs 777-crore IPO of the Chennai-based company had a price range of Rs 249-263 per share. The company specializing in retail loans, is set for a strong stock market listing as the current grey market premium (GMP) is suggesting a listing gain of Rs 144, indicating 54.75 percent listing gains.

Shivani Nyati, Head of Wealth, Swastika Investmart Ltd. said the company's strong fundamentals, coupled with the overwhelming investor response, suggest a promising debut.

The company's focus on serving underserved households and businesses positions it well in the competitive Indian retail lending market. While Northern Arc Capital has demonstrated growth in revenue and profit, challenges such as negative cash flow and a high debt-to-equity ratio need to be considered, she added.

The IPO was a combination of a fresh issue of equity shares valued at Rs 500 crore and an offer for sale (OFS) of up to 1,05,32,320 equity shares worth Rs 277 crore, at the upper end of the price band, by investor shareholders. This aggregates the issue size to Rs 777 crore.

Proceeds from the fresh issue will be used to meet future capital requirements of the company towards onward lending.

Prathamesh P Masdekar, Research Analyst at StoxBox, said the stock is poised for a strong debut on the stock exchanges on September 24, potentially commanding a premium of approximately 57 percent above the upper band price.

"Considering healthy subscription demand and upbeat market sentiments, it is indicating a healthy listing gain in the range of 40-50% or even above against the issue price of Rs 263 per share," said Prashanth Tapse, Sr VP Research Analyst at Mehta Equities Ltd.

The company has a diversified financial services platform set up primarily to cater to the varied retail credit requirements of India's under-served households and businesses. The company has a diversified base of lenders (including various banks, offshore financial institutions and NBFCs), and investors provide a strong base for increased funding.