Northern ARC Capital IPO - 7 Things to Know

Northern ARC Capital Ltd, a diversified NBFC operating in India had filed its draft red herring prospectus (DRHP) with SEBI in July 2021 and its DRHP had been approved by SEBI in September 2021. However, Northern ARC Capital Ltd has not yet finalized the dates of its IPO and is awaiting for the right market conditions.

7 Important Things to Know About Northern ARC Capital IPO

1) The proposed IPO of Northern ARC Capital Ltd will comprise of a fresh issue of Rs.300 crore and an offer for sale of 3,65,20,585 shares. The actual value of the OFS and the total size of the IPO will only be known once the pricing of the issue is finalized.

Normally, the IPO is launched within a month of the SEBI approval, but in this case the company has held back the IPO for more conducive market conditions.

2) Out of the total OFS size of 365.21 lakh shares likely to be offered, some of the major early investors offering shares in the IPO include Leapfrog Financial Inclusion India, Accion Africa-Asia Investment Company, August Investments Private Ltd, Eight Roads Investments Mauritius, Dvara Trust and IIFL Special Opportunities Fund. 

3) Ahead of the actual Northern ARC Capital IPO is also exploring the possibility of a pre-IPO placement of up to Rs.150 crore. If the pre-IPO placement is successful, then the size of the actual IPO will be reduced to that extent.

This pre-IPO placement is different from the regular anchor placement that happens just a day ahead of the IPO opening. Pre-IPO placements have more leeway in pricing the shares at discount and the lock-in period is also longer than the anchor placement.

4) Northern ARC Capital Ltd is a systematically important non-deposit taking NBFC registered with the RBI. The company works closely in the area of promoting financial inclusion in India with the purpose of getting more of the unbanked into the banking and financial sector mainstream. Northern Arc largely provides credit to underserved households and businesses; either directly or through business partners.

5) Regarding the use of funds of the IPO, the OFS portion will only result in transfer of ownership and exit for early investors as well as wider ownership. Of the Rs.300 crore that will come in afresh, the funds will be predominantly used to boost the capital adequacy of the NBFC with a view to boosting the asset book in the future.

6) It must be noted that Northern ARC Capital Ltd operates in a segment of credit markets that is highly disparate, heterogeneous and hence high on risk. Risk management therefore is the key. Northern ARC Capital Ltd uses a risk management framework that combines proprietary insight based models, quant based models and market intelligence and credit check scores to disburse credit in the most de-risked manner possible.

7) The IPO of Northern ARC Capital Ltd will be lead managed by Credit Suisse Securities India, IIFL Securities Ltd and SBI Capital markets. They will act as the book running lead managers or BRLMs to the issue.

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