Northern Arc Capital IPO: Strong Debut, Shares Drop 10% Amid Profit Booking - Read Now 

Northern Arc Capital IPO: Northern Arc Capital Ltd made a strong debut in the stock market today, September 24, 2024, with its shares listing at a 33% premium over the issue price. Priced initially at ₹263 per share, the company’s stock opened at ₹351 on the BSE, delivering substantial listing gains to early investors. However, following its robust start, the stock witnessed profit booking, dropping 10% from its listing price and closing at ₹312 per share by mid-day trading.

Northern Arc Capital IPO: Strong Market Demand, But Challenges Ahead

Northern Arc Capital IPO: The Northern Arc Capital IPO garnered significant interest from both institutional and retail investors, with the issue being oversubscribed 110.91 times. In particular, the Qualified Institutional Buyers (QIBs) category saw a 240.79 times subscription, and the retail category was booked 31.08 times. This strong demand reflected investors' confidence in the company, which provides financial services to underserved households and businesses across India.

Despite this enthusiasm, market analysts remain cautious about Northern Arc Capital’s long-term prospects due to concerns over the company's high debt-to-equity ratio and negative cash flow. Investors are advised to book partial profits while keeping a stop loss at the issue price for long-term holding, according to Swastika Investmart.

Listing Gains: A Mixed Bag for Investors

Investors who secured one lot (57 shares) during the IPO allotment enjoyed a gain of ₹5,016 at the listing price of ₹351. While the stock initially soared, it later dipped 11% from its high, highlighting the volatile nature of post-IPO trading. According to Prashanth Tapse, Sr VP Research at Mehta Equities Ltd, the stock was expected to perform well based on Northern Arc’s strong focus on microfinance and MSME sectors, but profit-booking dampened its initial momentum.

Valuation Compared to Peers

Despite the volatility, analysts argue that Northern Arc Capital’s stock remains fairly valued. The company is priced at a P/B (Price-to-Book) ratio of 1.83x, making it undervalued compared to industry peers who average a P/B ratio of 3.0x. This suggests potential for growth in the long term, especially with the company’s established leadership in MSME and consumer finance.

While the stock has experienced some short-term fluctuations, analysts believe Northern Arc Capital remains well-positioned for growth. Its wide-reaching services across India and focus on expanding microfinance and MSME sectors make it a strong contender in the financial services industry. For investors willing to take a long-term view, holding on to the stock could yield benefits, particularly as the company continues to focus on growth areas such as retail loans and financial inclusion.

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