IIFL and Leapfrog Investments-backed Northern Arc Capital Ltd (NACL), a non-banking financial company in microfinance lending and funding microfinance institutions, is looking for about Rs 285 crore of private equity funding ahead of its Initial Public Offering (IPO) in the first current financial year (FY25).
The company has filed a prospectus for IPO, which it is planning to launch in the first half of FY2025. Also, NACL is expecting private equity capital infusion of about Rs 385 crore in the near term, before the planned IPO. This is expected to support it in maintaining its managed gearing under four times on a steady-state basis, according to rating agency ICRA.
Click here to follow our WhatsApp channel
Rating agency ICRA said the capital infusion was critical for its medium-term growth plans. With the sizeable expansion in its assets under management (AUM) in recent years, NACL’s managed gearing, also known as leverage, increased to four times from 3.8 times as of March 2023 and 3.6 times as of March 2022. Rating agency ICRA reaffirmed ratings for Northern Arc’s long-term fund-based facilities at “AA-“.
The capital adequacy ratio stood at 19.3 per cent as of December 2023 compared to 19.9 per cent in September 2023, partly impacted by the higher risk weight on consumer credit, which had an 18 per cent share in the overall AUM.
Its assets under management on a consolidated basis grew by 30 per cent year-on-year to Rs 10,675 crore as of December 2023. The AUM expanded at a compounded annual growth rate of around 28 per cent from March 2020. As of December 2023, the AUM comprised exposures like advances to non-banking financial companies and corporates – 43.1 per cent, investment in debt instruments – 11.9 per cent, advances to retail via partners – 24.2 per cent, and direct retail loans – 12.1 per cent.
IIFL Special Opportunities Fund was the largest shareholder 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 – 22.5 per cent and Augusta Investments II Pte Ltd – 19.5 per cent.