The company proposes to utilize the net Proceeds from the fresh issue to meet future capital requirements towards onward lending.

Northern Arc Capital caters to this retail credit market through a multi-channel approach that includes: (i) extending financing from own balance sheet to Originator Partners in the form of loans or investment in their debt to enable on-lending to the retail customer (“Intermediate Retail Lending”) and directly to under-served households and businesses (“Direct to Customer Lending”) to offer rural finance and MSME lending; (ii) enabling credit for Originator Partners through various financing products (“Placements”) and (iii) managing debt funds and providing portfolio management services. It operates across retail debt syndication - micro, small and medium enterprises (“MSMEs”) financing, microfinance (“MFI”), consumer finance, vehicle finance, affordable housing finance and agricultural finance.

-It has a large ecosystem of partners and data and technology platforms, creating strong network effects. The company has developed an ecosystem of 328 Originator Partners, 50 Retail Lending Partners, and 1,158 Investor Partners as of FY24, impacting over 101.82 million lives. They have a substantial data repository of over 35.17 mn data points as of FY24. They have a growing community of Originator Partners, Retail Lending Partners, and Investor Partners coupled with a track record in diversified product offerings, and the proprietary technology stack helps in accessing large pools of liquidity, serving wider classes of investors, and meeting their varied requirements. This generates an annuity effect, providing a combination of fee and interest income.

-Their proprietary technology product suite is transforming the debt market ecosystem. They have a technology-driven financial services platform supported by in-house technology solutions and architecture, driving a scalable and sustainable business model. Nimbus, their curated debt platform, enabled credit of Rs.997 bn as of FY24. nPOS, their cloud-based API-enabled market infrastructure platform, facilitated transactions worth Rs.59,891 mn. AltiFi, their alternative retail debt investment platform, had 30,518 registered users, which enabled over Rs.4,163 mn of investments.

-They have diversified funding sources for their deployment and proactive liquidity management. They have a total of 49 lenders as of FY24. Also conducted 12 rounds of equity fund raises in the last 11 Fiscals, allowing the company to benefit from the capital sponsorship of a marquee set of equity investors. Credit rating was upgraded to AA- (Stable) credit rating by ICRA and India Ratings in March 2023 and September 2023, respectively, from A+ credit rating for all long-term facilities and non-convertible debentures which can further bring down the COF in the future.

The following points should be kept in mind:

-The company's major shareholders are Private equity, Venture capital investors, and AIF, who will hold ~79% post-issue. This will create a selling overhang on the stock. 

-The MFI industry is currently facing asset quality issues. Any downturns in NBFCs and MFIs can adversely affect the companies. 

-They depend on certain key lenders for a significant portion of their borrowings (their top 5 and top 10 lender sources accounted for 34.13% and 52.15%, respectively, as of FY24). Any decrease in borrowings from any of their key lender sources or any loss of these lender sources may adversely affect their business, financial condition, cash flows, and results of operations.