Northern Arc Capital reported a strong Q1 FY27 performance, with net profit rising 17.6% and net interest income surging 44.2% year-on-year. The NBFC also witnessed robust AUM growth, improving asset quality and higher profitability, although margin pressure remained a key area to watch.
Northern Arc Capital recorded an impressive performance for the quarter ended June 30, 2026, with net profit up by 17.6% YoY to ₹121.8 crore against ₹103.6 crore in the corresponding quarter of the previous year.
Income growth at Northern Arc Capital maintained their strength, with the Net Interest Income (NII) increasing 44.2% YoY to ₹496.1 crore from ₹344.1 crore. The total income was up by 30% YoY to ₹767.5 crore from ₹590.6 crore in the year-ago quarter.
Provisions in the quarter were ₹110.5 crore, which was somewhat more than the ₹103 crore that the company had declared in the Q1 FY26. EPS in the quarter was ₹7.54 against ₹6.42 in the corresponding quarter.
Lending Business Shows Strong Expansion
The NBFC went ahead to add to its list of loans, with its assets under management (AUM) increasing 26% YoY to ₹16,855 crore as of June 30, 2026.
The Direct-to-Customer (D2C) portfolio of loans showed significant growth, increasing 51% YoY to ₹10,766 crore to form 64% of the total lending AUM. The Performance Credit Fund AUM for the company was at ₹2,988 crore, and the gross transaction volume for the quarter was ₹8,595 crore.
The Managing Director and CEO of the company Ashish Mehrotra stated that the first quarter of fiscal year 2027 proved to be a strong start to the year, as the focus of the company is on developing a diversified lending portfolio of retail loans.
Profitability and Asset Quality Improve
The PPoP of Northern Arc Capital increased by 27% YoY to ₹263 crore. The operating expense ratio is unchanged at 3.6% as against last year.
The credit cost fell by 44 bps YoY to 2.6%. The RoA has improved by 29 bps to 2.7%, and the RoE has increased by 220 bps to 11.5%.
The asset quality of the company has also been improved on a sequential basis. The GNPA ratio has fallen by 20 bps QoQ to 1%, and the NNPA ratio has increased by 15 bps to 0.5%.
The provision coverage for the Stage III assets has risen to 48.5%. The capital adequacy ratio was at 22.7% by June-end. The net worth of the company has increased by 15% YoY to ₹4,058 crore.
Margin Pressure Remains a Key Monitorable
Even though revenue and profit growth were still strong, there was some margin pressure on standalone EBITDA. Standalone EBITDA stood at ₹420 crore from ₹353 crore in the previous quarter while EBITDA margin fell to 54.92% from 59.86%.
This fall in the margin points to the impact of rising costs or increasing expenses due to growth in the D2C lending business. Yet the company emphasized that underwriting discipline, diversified portfolio and prudent risk management were still critical for growth.
Outlook and Key Risks
Northern Arc Capital highlighted that it remains cautious about external risks, including geopolitical developments in West Asia and possible El Niño impact on monsoon conditions.
The company believes its diversified business model, calibrated risk approach and focus on sustainable growth will help maintain profitability and portfolio quality. Key factors to watch include borrowing costs, retail credit demand, asset quality trends and regulatory changes impacting NBFC capital requirements.
