Northern Arc Capital Shares Surges 33.5% on BSE: Why It Fell Short of Grey Market Expectations
Northern Arc Capital made a notable entry into the stock market. The company’s shares opened at ₹351 on the Bombay Stock Exchange (BSE), reflecting a 33.5% increase over its initial public offering (IPO) price of ₹263. On the National Stock Exchange (NSE), shares debuted at ₹350, marking a similar rise of 33%. This debut, while impressive, fell short of the grey market premium which had anticipated a 50% increase before listing.
Main Points
IPO Details and Market Reception
The IPO for Northern Arc Capital aimed to raise ₹777 crore, consisting of a fresh issue worth ₹500 crore and an offer for sale (OFS) of approximately 1.05 crore shares, valued at ₹277 crore. The IPO was well-received, garnering bids that were 116.92 times the total shares offered. Specifically, retail investors subscribed to the issue 31.57 times, while qualified institutional buyers (QIBs) and non-institutional investors (NIIs) subscribed 242.73 times and 147.37 times, respectively.
Analysts have noted that despite the robust subscription numbers, the listing price was below expectations set by the grey market, where shares were trading at a premium of about ₹144 prior to listing. This discrepancy highlights the speculative nature of the grey market compared to actual trading conditions.
Expert Opinions on Future Performance
Financial experts have shared mixed views regarding Northern Arc Capital’s future performance. Prashanth Tapse, Senior Vice President of Research at Mehta Equities Ltd., advised investors to hold onto their shares for long-term growth potential. He emphasized that Northern Arc is strategically positioned to cater to the retail credit needs of underserved households and businesses in India, particularly in sectors such as microfinance and consumer finance.
Shivani Nyati, Head of Wealth at Swastika Investment Ltd., echoed this sentiment but raised concerns about the company’s financial health, specifically its negative cash flow and high debt-to-equity ratio. She suggested that while holding could be beneficial for long-term investors, those looking to secure profits might consider booking some gains now.
Northern Arc Capital has shown promising growth in its financial metrics over recent years:
| Year | Revenue (₹ Crore) | Net Profit (₹ Crore) |
|---|---|---|
| FY22 | 909 | 181 |
| FY23 | 1,304 | 242 |
| FY24 | 1,890 | 317 |
This data indicates a steady increase in both revenue and profit after tax (PAT), suggesting strong operational performance leading up to its IPO.
Registered as a systemically important non-banking financial company (NBFC) with the Reserve Bank of India (RBI), Northern Arc Capital has established itself as a key player in financial inclusion over the past decade. The company focuses on providing access to credit for underserved segments through various products and partnerships.
The outlook for Northern Arc remains cautiously optimistic. Analysts believe that if the company can navigate its current financial challenges while capitalizing on its market position, it could deliver substantial returns for investors in the longer term.
As for tomorrow’s trading session, market analysts predict that Northern Arc Capital’s share price may experience volatility as investors react to today’s performance and expert recommendations. The consensus seems to favor holding onto shares for those with a long-term investment strategy while also considering partial profit-taking for others.
