Northern Arc Capital
Stock Snapshot
Price Performance
Vista Outlook
Basis of our Recommendation
Northern Arc Capital's recent strategic shift towards a direct-to-customer (D2C) lending model, which now constitutes 64% of its assets under management (AUM), is a pivotal development that enhances its revenue growth potential and competitive positioning. Management's focus on scaling fee-based income through innovative platforms like Altifi and expanding its branch network supports Vista's forecast of stable revenue growth and margin expansion, with expectations of achieving a 10% net interest margin (NIM) by year-end. The company's strong asset quality, evidenced by a gross non-performing asset (GNPA) ratio of 1%, further underpins its financial outlook. However, potential headwinds such as inflationary pressures and geopolitical risks could impact borrower repayment capacity and operational costs. Overall, Northern Arc is well-capitalized with a Tier 1 ratio of 22.7%, providing a solid foundation for growth without immediate equity dilution. Over the next 12-24 months, key opportunities include the expansion of its D2C portfolio and the monetization of its technology platforms, while watchpoints include external economic fluctuations and competitive intensity in the MSME segment
Why We Like This Stock
- Shift towards a higher-margin D2C portfolio enhances revenue growth potential
- Strong asset quality with GNPA at 1% supports financial stability
- Well-capitalized with a 22.7% Tier 1 ratio, allowing for growth without equity dilution
Things To Watch Out For
- Inflationary pressures could impact borrower repayment capacity
- Geopolitical risks may affect operational costs and market sentiment
- Intensifying competition in the MSME segment could pressure margins
Key Parameters
Financial Snapshot
View Technicals Analysis →| Actuals | Forecast | ||||
|---|---|---|---|---|---|
| FY24 | FY25 | FY26 | FY27 | FY28 | |
| Revenue (Cr.) | 1,161 | 1,512 | 1,795 | 1,956 | 2,314 |
| Profit Before Tax (Cr.) | 420 | 386 | 536 | 586 | 712 |
| PBT Margin | 36.2% | 25.5% | 29.9% | 30.0% | 30.8% |
| Net Profit (Cr.) | 312 | 222 | 398 | 433 | 526 |
| Earnings Per Share | 18.7 | 13.9 | 24.7 | 26.8 | 32.6 |
Analyst Recommendations
| Broker | Recommendation | Target Price | Date |
|---|---|---|---|
| Motilal Oswal | ▲ Buy | 395 | 28-Jul-2026 |
Company Overview
Show Company Profile
Northern Arc Capital Limited, a non-banking financial company, provides lending and allied services in India. It operates through Financing Activity, Investment Advisory Services, and Investment Management Services segments. The company offers rural financing services; loans for personal, microfinance, vehicle finance, as well as buy now pay later solutions; education loans; insurance premium financing; MSME financing, MFI, consumer and vehicle finance, and housing and agriculture finance; rural financing; mid-market corporate lending, loans against property, and supply chain finance; and fund management services, including alternative investment funds and portfolio management services. It also provides debt products, such as term and working capital loans, non-convertible debentures, principal protected market linked debentures, commercial papers, external commercial borrowings, and sub-debt products; and credit-enhanced debt products, including guarantee-backed lending, single issuer partial credit enhanced, and pooled loan and bond issuance program. In addition, the company offers portfolio financing products comprising rated securitization, multi-originator microfinance securitization, persistent securitizations, and direct assignments. Further, it provides Altifi, an alternative retail debt investment platform; Nimbus, a curated debt platform that enables end-to-end processing of debt transactions; nPOS, a co-lending and co-origination technology solution; and NuScore, a customized machine learning based analytical module designed to assist in the loan underwriting process. It serves rural and retail customers; micro, small, and medium enterprises; originator partners; emerging corporates; and institutional investors. The company was formerly known as IFMR Capital Finance Limited and changed its name to Northern Arc Capital Limited in February 2018. Northern Arc Capital Limited was incorporated in 1989 and is based in Chennai, India.