Northern Arc Capital reported a standalone net profit of ₹114 crore for the quarter ended June 30, 2026 (Q1FY27), marking a 41% year-on-year increase from ₹81 crore in Q1FY26. The Mumbai-based non-banking financial company (NBFC) delivered its strongest quarterly performance, driven by a 32% surge in net interest income (NII) to ₹394 crore and disciplined credit underwriting that reduced credit costs to 2.6%. This result underscores the company's ability to scale profitability while maintaining robust asset quality in a competitive lending landscape, with earnings per share rising to ₹7.54 from ₹6.42.

The Board of Directors approved the unaudited standalone and consolidated financial results on July 27, 2026, pursuant to Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The results were reviewed by statutory auditors M/s. Walker Chandiok & Co LLP. The company also disclosed compliance with financial covenants under its debenture trust deeds and submitted security cover certificates as required under Regulation 54(2) and 54(3). An investor presentation detailing these results was released on July 27, 2026, highlighting key operational metrics and strategic initiatives.

Financial Performance Highlights

Northern Arc Capital’s total revenue from operations stood at ₹76,749.88 lakh for the quarter, compared to ₹59,058.40 lakh in Q1FY25. Interest income grew significantly to ₹75,408.76 lakh from ₹55,793.38 lakh in the prior year period. While fee and commission income declined slightly to ₹651.24 lakh from ₹1,386.73 lakh, gains from derecognition of financial instruments contributed ₹689.88 lakh. Total expenses rose to ₹60,742.71 lakh from ₹45,471.78 lakh, primarily due to higher finance costs and impairment provisions.

The following table summarizes key financial metrics for the quarter:

Consolidated net profit attributable to owners of the holding company was ₹11,432.84 lakh (₹114.33 crore), up from ₹8,105.17 lakh in Q1FY25. Basic earnings per share stood at ₹7.54, compared to ₹6.42 in the previous year.

Asset Quality and Portfolio Growth

The NBFC’s lending assets under management (AUM) grew by 26% year-on-year to ₹16,855 crore as of June 30, 2026. Direct-to-customer (D2C) lending AUM crossed the ₹10,000 crore milestone, rising 51% to ₹10,766 crore and accounting for 64% of total lending AUM. Asset quality improved sequentially, with gross NPA declining by 20 basis points to 1.0% and net NPA falling by 15 basis points to 0.5%. The provisioning coverage ratio on Stage III assets improved to 48.5%.

Capital adequacy remained strong at 22.7%, well above regulatory requirements. Net worth increased by 15% to ₹4,056 crore. The company maintained a debt-equity ratio of 3.05 and total debts to total assets ratio of 0.72.

Strategic Developments and Risk Management

Northern Arc Capital received SEBI approvals for two new debt funds, expanding its asset management capabilities. ICRA assigned the company an 'Outstanding' ESG Impact Rating with a score of 81/100, reflecting its commitment to sustainable growth. The company reclassified ₹948.28 lakh of loan assets from amortized cost to Fair Value Through Other Comprehensive Income (FVOCI), recognizing a fair value gain of ₹50.22 lakh.

Management maintained a prudent approach to risk, recognizing an additional Expected Credit Loss (ECL) provision of ₹6,584 lakh during the quarter to account for geopolitical uncertainties and macroeconomic stress conditions affecting unsecured retail lending. This overlay provision, dynamic in nature, was reassessed based on evolving portfolio conditions. The company also transferred stressed loans worth ₹3,823.16 lakh to Asset Reconstruction Companies (ARCs) during the quarter.

Ashish Mehrotra, Managing Director & CEO, stated that the quarter marked a strong start to FY27, driven by disciplined execution and a focus on granular retail lending. He highlighted the company's diversified business model and calibrated risk approach as key factors in navigating external uncertainties while sustaining growth momentum.

Northern Arc Capital Limited has submitted its Business Responsibility & Sustainability Report (BRSR) for the financial year 01 April 2025 to 31 March 2026, pursuant to Regulation 34(2)(f) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The report, forming part of the company's Annual Report for FY 2025-26, provides comprehensive disclosures across all nine principles of the National Guidelines on Responsible Business Conduct (NGRBC), covering governance, environmental stewardship, employee well-being, human rights, and community engagement. Northern Arc Capital, incorporated in 1989 and registered in Chennai, Tamil Nadu, operates as a Non-Banking Finance Company (NBFC) with 100% of its turnover derived from financial services (NIC Code: 64990).

Corporate Profile and Operations

Northern Arc Capital operates 91 offices across 8 states in India, with no international operations. The company's paid-up capital stands at INR 1,61,57,18,750. Its five wholly-owned or majority-owned subsidiaries — Northern Arc Investment Managers Private Limited, Northern Arc Creditech Solutions Private Limited, Northern Arc Securities Private Limited, Northern Arc Foundation, and Pragati Finserv Private Limited (90.10% held) — all participate in the company's Business Responsibility initiatives. The company serves a diverse customer base including rural and retail customers, MSMEs, originator partners, emerging corporates, and institutional investors, with disclosures made on a standalone basis.

Workforce and Employee Well-Being

As of 31 March 2026, Northern Arc Capital employed a total of 1,524 employees, comprising 1,126 permanent and 398 other-than-permanent employees. The workforce is predominantly male, with 1,270 male employees (83.33%) and 254 female employees (16.67%). The Board of Directors comprises 9 members, of whom 3 (33.33%) are women. All permanent employees are covered under health insurance and accident insurance, and the company reported a well-being expenditure of 0.08% of total revenue for FY 2025-26. The overall employee turnover rate for permanent employees stood at 51.80% for FY 2025-26, compared to 67.38% in FY 2024-25 and 72.22% in FY 2023-24.

Human rights training coverage improved significantly, with 55.64% of total employees (848 out of 1,524) receiving training in FY 2025-26, compared to 31.31% (464 out of 1,482) in FY 2024-25. All permanent and other-than-permanent employees are paid above the statutory minimum wage. The return-to-work and retention rates for permanent employees who took parental leave were both 100% for FY 2025-26.

Governance, Ethics, and Compliance

Northern Arc Capital's policies cover all nine NGRBC principles, each approved by the Board and extended to value chain partners. The company reported nil monetary and non-monetary penalties, fines, or disciplinary actions against directors, KMPs, or employees for bribery or corruption in both FY 2025-26 and FY 2024-25. Conflict of interest complaints for directors and KMPs were also nil in both years. The number of days of accounts payables declined from 54 days in FY 2024-25 to 44 days in FY 2025-26. Sales to related parties as a percentage of total sales stood at 0.19% in FY 2025-26, down from 0.45% in FY 2024-25, while investments in related parties as a percentage of total investments declined from 15.62% to 7.27% over the same period.

Customer complaints received during FY 2025-26 totalled 29,768, with 156 pending resolution at year-end, compared to 938 complaints and nil pending in FY 2024-25. Shareholder complaints declined sharply from 53 in FY 2024-25 to 1 in FY 2025-26, with none pending at year-end.

Environmental Performance

As an NBFC, Northern Arc Capital's direct environmental footprint is limited, with e-waste being the primary waste category. Total non-renewable energy consumption increased to 2099.34 GJ in FY 2025-26 from 1801.75 GJ in FY 2024-25, driven by electricity consumption of 2063.84 GJ and fuel consumption of 35.50 GJ. The company reported no renewable energy consumption in either year.

Scope 1 GHG emissions for FY 2024-25 have been restated from 11.68 metric tonnes of CO2 equivalent following a refinement in calculation methodology, with no material impact on overall emission intensity. Scope 3 emissions reporting was enhanced in FY 2025-26 to cover Category 1 (Purchased goods and services), Category 2 (Capital goods), Category 3 (Fuel- and energy-related activities), Category 5 (Waste generated in operations), Category 6 (Business travel), and Category 7 (Employee commuting). All e-waste is disposed of through Pollution Control Board-approved recyclers.

CSR Activities and Social Impact

Northern Arc Capital's CSR obligation for FY 2025-26, computed as 2% of the average net profit of the preceding three financial years, amounted to INR 7,52,66,825. The company spent the entire obligated amount, with nil unspent balance transferred to the Unspent CSR Account.

CSR projects during the year benefited multiple vulnerable groups, including 50 differently abled children through a residential education programme, 40 patients through palliative care services, 624 students (comprising 200 MBBS, 384 Nursing, and 40 Physiotherapy students) from economically and socially disadvantaged backgrounds, and 3,619 cumulative and indirect beneficiaries through the FoodHeals ration programme. The CSR Committee, chaired by Mr. Ashutosh Pednekar (Non-Executive, Independent Director), held 3 meetings during the year, all attended by all members.

Material ESG Issues and Strategic Commitments

The BRSR identifies nine material responsible business conduct issues, spanning responsible lending and client engagement, transparent and ethical governance, responsible collections, financial inclusion, prudent enterprise risk management, technology-enabled credit access, ESG integration, human capital development, and data privacy and cybersecurity. Each issue is assessed for its risk or opportunity classification, with corresponding mitigation strategies and financial implications disclosed.

Key forward-looking commitments outlined in the report include:

• Increasing women's representation in the workforce from 17% to 22% and in leadership positions from 11% to 15% by 2030
• Achieving climate finance of INR 1,000 crore by 2030
• Achieving financing of INR 4,000 crore to women-owned or women-led businesses by FY 2028-29
• Delivering a minimum 15% year-on-year growth in financial inclusion outreach from FY 2026-27 through FY 2028-29
• Expanding branch operations to 15 additional underserved districts by FY 2028-29

The company is affiliated with seven national trade and industry associations, including FIDC, MFIN, UFF (previously DLAI), FACE, IAMAI, ASSOCHAM, and FICCI. No independent external assurance was obtained for the BRSR disclosures for FY 2025-26.