 "Northern Arc Capital seeks Rs 385 crore PE funding ahead of market debut")
Northern Arc Capital Ltd (NACL) is looking to raise Rs 385 crore of private equity funding ahead of its planned initial public offering (IPO) in the first half of the current financial year (H1FY25).
The PE infusion will support the IIFL- and LeapFrog Investments-backed non-banking financial company (NBFC) to maintain its managed gearing, or financial leverage, under 4.0 times on a steady-state basis, according to rating agency ICRA.
The rating agency added the capital infusion was critical for its medium-term growth plans. NACL’s managed gearing stood at 3.8 times as of March 2023 and 3.6 times as of March 2022. ICRA reaffirmed ratings for the microfinance to MSME finance firm's long term-fund based facilities at 'AA-'.
The firm's capital adequacy ratio stood at 19.3 per cent in December 2023 compared to 19.9 per cent in September 2023, partly impacted by the higher risk weighting on consumer credit, which had 18 per cent share of the overall assets under management (AUM).
On consolidated basis, the firm's AUM grew 30 per cent year-on-year (Y-o-Y) to Rs 10,675 crore as of December 2023. The AUM expanded at a compound annual growth rate (CAGR) of around 28 per cent from March 2020. Advances to NBFCs and corporate houses comprised 43.1 per cent of the AUM as of December 2023, with advances to retail customers via partners at 24.2 per cent, direct retail loans 12.1 per cent and investment in debt instruments at 11.9 per cent.
IIFL Special Opportunities Fund was the largest shareholder in the firm with a stake of 25.6 per cent in NACL as of December 2023. The other key institutional investors included Leapfrog Financial Inclusion India II Limited with a 22.5 per cent stake and Augusta Investments II Pte Ltd holding 19.5 per cent.