Northern Arc Capital raises Rs 229 crore from anchor investors ahead of IPO launch

Chennai-based non-banking lender Northern Arc Capital has raised Rs 229 crore from marquee anchor investors just ahead of its upcoming initial public offering (IPO).

According to a circular on the Bombay Stock Exchange (BSE), Northern Arc allotted 87.02 lakh equity shares to 15 funds at Rs 263 per share, which is the upper end of the price band.

Some notable investors in this transaction include SBI General Insurance Company, SBI Life Insurance Company, Reliance General Insurance Company, Kotak Mahindra Life Insurance Company, Goldman Sachs (Singapore) Pte, Societe Generale, and Quant Mutual Fund.

IPO details and structure

Northern Arc's Rs 777 crore IPO will open for public subscription on September 16, 2024, and close on September 19. The price band for the shares has been set at Rs 249 to Rs 263 per share.

The IPO consists of a fresh issue of equity shares worth Rs 500 crore and an offer for sale (OFS) of up to 10,532,320 equity shares, totalling Rs 277 crore at the upper end of the price band.

The offer for sale is being conducted by existing investors, including Leapfrog Financial Inclusion India, Accion Africa-Asia Investment Company, Eight Roads Investments, Sumitomo Mitsui Banking Corporation, and Dvara Trust.

Purpose of fundraising

With the raised funds, Northern Arc will focus on meeting the future capital requirements, particularly to support onward lending.

The firm has been actively involved in providing credit to underserved households and businesses across India, with a diversified lending portfolio that covers sectors such as microfinance, MSME finance, consumer finance, vehicle finance, and agriculture finance.

It has a notable history of raising funds, including a $75 million investment earlier this year through non-convertible debentures from Dutch entrepreneurial development bank FMO, and an $80 million round from the World Bank’s International Finance Corporation (IFC) in April.

What does Northern Arc Capital do?

Founded by Ashish Mehrotra, Northern Arc Capital provides financial services to micro, small, and medium-sized enterprises (MSMEs), microfinance institutions (MFIs), and Indian households.

Since its inception, the firm claims to have facilitated over Rs 1.73 lakh crore worth of financing and reached more than 10.18 crore individuals across India as of March 2024.

For the fiscal year ending March 31, 2024, Northern Arc reported a total revenue of Rs 1,906.03 crore, a significant increase from Rs 1,311.2 crore in the previous fiscal year. It also posted a net profit of Rs 317.69 crore, a growth from Rs 242.21 crore in the prior year.

ICICI Securities, Axis Capital, and Citigroup Global Markets India are the lead managers for the Northern Arc Capital IPO, while Kfin Technologies is acting as the registrar for the issue.

The shares are expected to be listed on both the BSE and National Stock Exchange (NSE), with September 24 tentatively set as the listing date.