Northern Arc Capital files IPO papers again, increases fresh issue size to Rs 500 crore | CPT PPP Coverage

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Chennai-based financial services company Northern Arc Capital has filed the preliminary papers again with the SEBI for fund raising via public issue on February 2.

The IPO comprises a fresh issuance of shares worth Rs 500 crore, and an offer-for-sale (OFS) of 2.1 crore equity shares by several investors.

LeapFrog Financial Inclusion India, Accion Africa-Asia Investment Company, Augusta Investments II, Eight Roads Investments Mauritius, Dvara Trust, 360 ONE Special Opportunities Fund, and Sumitomo Mitsui Banking Corporation will be the selling shareholders in the OFS.

The professionally managed non-banking finance company may also consider fund raising up to Rs 100 crore, before the filing of red herring prospectus with the ROC, which is a pre-IPO placement.

Earlier it had filed the IPO papers in July 2021 and received approval for the same from the capital markets regulator in September 2021, but could not hit Dalal Street within a period of one year from the SEBI approval. The media report had indicated that the total IPO size was around Rs 1,800 crore comprising a fresh issue of Rs 300 crore worth of shares, and an OFS of 3.65 crore equity shares.

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The weakness in equity markets as well as the banking & financial services space since the start of October 2021 might be one of the reasons for not launching the issue within the permitted period.

The diversified NBFC is planning to utilise the fresh issue proceeds for its future capital requirements towards onward lending.

As per the capital adequacy norms issued by the RBI, the firm is required to have a regulatory minimum capital to risk-weighted assets ratio (CRAR) of 15 percent consisting of Tier I and Tier II capital. Further, it is required to ensure that total Tier-II capital, at any point in time, does not exceed 100 percent of the Tier-I capital.

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The CRAR at the end of September 2023 was 19.92 percent, against 20.77 percent at the end of March 2023.

Northern Arc Capital with total assets under management (AUM) of Rs 10,081.1 crore for the six-month period ended September FY24 recorded total disbursements of Rs 6,550 crore during the same period serving the majority to MSME finance, microfinance institutions, and consumer finance segments.

The firm has reported a net profit at Rs 242.2 crore for the year ended March FY23, growing 33 percent over a year-ago period, and net interest income during the same period increased by 60 percent to Rs 591 crore.

Profit for the six months ended September FY24 came in at Rs 150 crore, with net interest income at Rs 419.2 crore and total revenue from operations at Rs 838 crore.

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On the asset quality front, the gross non-performing assets (NPA) stood at 0.42 percent and net NPA at 0.16 percent in the first half of FY24, while the gross NPA increased to 0.77 percent in FY23, from 0.5 percent in FY22, and net NPA also jumped to 0.4 percent from 0.21 percent in the same period.

ICICI Securities, Axis Capital, and Citigroup Global Markets India are acting as merchant bankers for the issue.