Northern Arc Capital Q4FY26 PAT Surges 251% YoY; AUM Hits INR 16,594 Cr
Northern Arc Capital reported its highest-ever quarterly PAT of Rs. 133 Cr in Q4FY26, up 251% YoY, with FY26 PAT at INR 406 Cr (+33% YoY) and AUM growing 22% YoY to INR 16,594 Cr. Credit cost improved to 2.2% in Q4FY26 and 2.8% for FY26, with GNPA and NNPA at 1.2% and 0.6% respectively. Management guided for 22–25% AUM growth in FY27, targeting RoA of 3%+ and RoE of 15–17% over 8–10 quarters.
*this image is generated using AI for illustrative purposes only.
Northern Arc Capital Limited's board met on May 08, 2026, and approved the audited standalone and consolidated financial results for the fourth quarter and full year ended March 31, 2026. The company delivered a strong performance, with standalone net profit rising to 1.38B rupees in Q4 compared to 467M rupees in the same period last year, while Q4 standalone revenue grew to 7.3B rupees from 5.9B rupees year-on-year. Profit after tax (PAT) surged 251% year-on-year in Q4FY26, with credit costs declining sharply, reflecting improved asset quality and operational efficiency. Following the results announcement, Northern Arc Capital held an earnings conference call on May 08, 2026, hosted by Motilal Oswal Financial Services, where senior management elaborated on business performance, segment outlook, and strategic priorities.
Q4FY26 and FY26 Financial Highlights
The company reported robust growth across key financial metrics for both the quarter and the full year. The following table presents the headline financial performance:
| Metric: | Q4FY26 | YoY Change | FY2026 | YoY Change |
|---|---|---|---|---|
| Standalone Net Profit: | 1.38B Rupees | vs 467M (YoY) | — | — |
| Standalone Revenue: | 7.3B Rupees | vs 5.9B (YoY) | — | — |
| Net Interest Income: | Rs. 387 Cr | +21% | Rs. 1,377 Cr | +20% |
| Net Revenue (incl. fee income): | Rs. 414 Cr | +18% | Rs. 1,484 Cr | +19% |
| Pre-Provisioning Operating Profit: | Rs. 269 Cr | +17% | Rs. 956 Cr | +21% |
| Credit Cost: | 2.2% | -383 bps | 2.8% | -42 bps |
| PAT: | Rs. 133 Cr | +251% | Rs. 406 Cr | +33% |
| RoA: | 3.3% | +217 bps | 2.8% | +34 bps |
| RoE: | 14% | +326 bps (QoQ) | 11.1% | +110 bps |
AUM Growth and Business Mix
Assets under management (AUM) grew 22% year-on-year and 10% quarter-on-quarter to reach INR 16,594 crores as of March 31, 2026, outpacing the industry. The direct-to-customer (D2C) segment now accounts for 59% of total AUM, up from 19% in FY2021, and grew 39% year-on-year to cross INR 9,800 crores. This shift in mix has driven a 380 basis point expansion in net interest margin (NIM) from 5.6% to 9.4% in FY2026. The following table captures the key AUM and balance sheet metrics:
| Parameter: | Details |
|---|---|
| Total AUM: | INR 16,594 Cr (22% YoY, 10% QoQ) |
| D2C Share of AUM: | 59% |
| Consumer Finance AUM: | INR 5,000 Cr+ |
| MSME Finance AUM: | INR 3,691 Cr (43% YoY) |
| Rural Finance AUM: | INR 1,009 Cr (8% QoQ) |
| Credit Fund AUM: | INR 3,092 Cr |
| Placement Volume (FY26): | INR 11,834 Cr |
| Placement Fee Income (FY26): | INR 31 Cr (+22% YoY) |
| Credit Fund Fee (FY26): | INR 38 Cr |
| Total Borrowings: | INR 12,258 Cr |
| Tangible Net Worth: | INR 3,896 Cr (+13% YoY) |
| Capital Adequacy Ratio: | 22.60% |
| Debt-Equity Ratio: | 3.1x (vs 3.9x in March 2024) |
| Liquidity Surplus: | ~INR 1,250 Cr |
Managing Director and CEO Ashish Mehrotra highlighted that PAT has grown at a five-year CAGR of 43% to INR 406 crores in FY2026, while AUM has grown at a five-year CAGR of approximately 26%. Net NPA has been consistently maintained below 1% over the years, underscoring the company's disciplined, risk-calibrated approach to growth.
Segment Performance
Within the D2C segment, the consumer finance business continued to grow, driven by consumption demand, with the company underwriting approximately 25,000 to 26,000 loans per day. Management noted that 70% of consumer finance customers are repeat customers, reflecting underwriting quality and customer stickiness, with the business targeting a risk-adjusted yield of approximately 15% and above. The MSME finance business grew 43% year-on-year to INR 3,691 crores, supported by the addition of 17 new branches during FY2026 and improved collection efficiency, with X-bucket collection efficiency improving from 97.8% in September 2025 to 99.4% in March 2026. The rural finance segment recorded its highest-ever quarterly disbursement of approximately INR 305 crores in Q4FY26, reflecting 17% quarter-on-quarter growth, with the rural network expanding to approximately 342 branches. Rural X-bucket collection efficiency improved to 99.6% in March 2026, and credit cost in the rural segment declined to 1.3% in Q4FY26, with full-year credit cost improving from 6.7% to 4.9% in FY2026.
Asset Quality and Returns
Credit cost, a key indicator of asset quality, declined sharply by 383 basis points year-on-year to 2.2% in Q4FY26, and by 42 basis points year-on-year to 2.8% for FY2026, in line with previously issued guidance. GNPA and NNPA improved quarter-on-quarter to 1.2% and 0.6% respectively. Stage-2 assets declined from 2.6% in September 2025 to 1.5% in March 2026, reflecting moderation in early bucket stress. The full-year credit cost of 2.8% incorporates the benefit of the Reserve Bank of India's February 2026 guidelines on treatment of default loss guarantee (DLG) in computation of expected credit loss (ECL), as well as a management overlay of INR 66 crores created as a measure of prudence for potential unforeseen events. Return on Assets improved by 217 basis points year-on-year to 3.3% in Q4FY26, while Return on Equity for Q4FY26 increased by 326 basis points to 14%.
| Metric: | Q4FY26 | Q3FY26 | FY2026 | FY2025 |
|---|---|---|---|---|
| Credit Cost: | 2.2% | 3.5% | 2.8% | 3.2% |
| GNPA: | 1.2% | — | — | — |
| NNPA: | 0.6% | — | — | — |
| Stage-2 Assets: | 1.5% | — | 2.6% (Sep'25) | — |
| NIM: | — | — | 9.40% | — |
| Cost of Funds: | 8.50% | — | 8.50% | ~9.0% |
| Incremental Cost of Funds: | 8.60% | — | — | 9.30% |
Management Outlook and Guidance
During the earnings call, management provided guidance for FY2027, targeting AUM growth of approximately 22% to 25%, equivalent to approximately three times nominal GDP growth. On profitability, the company targets a return on assets of 3% and above, and aims to achieve mid-to-late teens Return on Equity of 15% to 17% over the next 8 to 10 quarters. Credit cost guidance for FY2027 is in the range of 2.7% to 2.8%. Management noted that the D2C mix is targeted to increase from 59% towards 65%, which is expected to support further NIM expansion. On the liability side, CFO Atul Tibrewal noted that the share of fixed-rate borrowings has increased from approximately 30% to approximately 40%, with bank borrowings declining from approximately 65% to approximately 52% of total borrowings as the company diversifies towards capital market issuances and offshore borrowings. The company held a liquidity surplus of close to INR 1,250 crores as of March 31, 2026.
Regulatory Compliance
The board meeting outcome and financial results have been disclosed pursuant to Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The transcript of the earnings conference call for the quarter and year ended March 31, 2026, has been made available on the company's website at https://www.northernarc.com/financial-results , as intimated vide Ref No. NACL/07/MAY/2026-27 dated May 14, 2026. The disclosures were filed by Prakash Chandra Panda, Company Secretary & Compliance Officer of Northern Arc Capital.
Historical Stock Returns for Northern Arc Capital
| 1 Day | 5 Days | 1 Month | 6 Months | 1 Year | 5 Years |
|---|---|---|---|---|---|
| +0.09% | +2.53% | +9.81% | +5.91% | +32.17% | -12.77% |
How might the Reserve Bank of India's evolving regulatory stance on digital lending and default loss guarantees impact Northern Arc's ECL computation and credit cost trajectory in FY2027?
As Northern Arc targets increasing its D2C AUM mix from 59% to 65%, which specific product segments or geographies are most likely to drive this shift, and what execution risks could slow the transition?
With the company diversifying borrowings toward capital market issuances and offshore sources, how vulnerable is its cost of funds to potential rupee depreciation or global interest rate volatility in FY2027?
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