Northern Arc Capital Ltd., a non-banking financial company (NBFC) with significant backing from ace investor Ashish Dhawan, has experienced a remarkable surge in its stock price. The company's shares have climbed an impressive 55% in the financial year commencing April 1, 2026, even as the wider market has faced periods of volatility. Despite some recent profit booking, the stock's performance reflects strong underlying financial health and investor confidence.
Northern Arc Capital's Recent Performance
The company's shares reached Rs 321.90 on Monday, pushing its market capitalization past the Rs 5,000 crore mark. This rally represents a substantial increase from its approximate level of Rs 207 on March 30, 2026. In the last month alone, Northern Arc Capital stock posted a 35% gain, with a 21% rally observed in just five sessions leading up to Monday.
Strong Q4 FY26 Financial Results
Northern Arc Capital reported robust financial outcomes for the quarter ending March 31, 2026 (Q4 FY26):
- Net Profit: Increased by over 250% year-on-year (YoY) to Rs 133 crore.
- Net Interest Income: Rose 21% YoY to Rs 387 crore.
- Lending AUM: Grew 22% YoY to Rs 16,594 crore.
- Asset Quality: Showed improvement at both gross and net levels.
- Pre-provisioning Operating Profit: Up 17% YoY to Rs 269 crore.
- Return on Equity (ROE): Stood at 14% for the quarter.
- Credit Cost: Dropped 383 basis points (bps) to 2.2%.
- Return on Assets (ROA): Improved 217 bps to 3.3%.
Management's Outlook and Strategic Direction
Ashish Mehrotra, MD & CEO of Northern Arc Capital, described FY26 as a pivotal year. He noted the company's ability to deliver record performance despite headwinds in the microfinance segment and geopolitical uncertainties. Mehrotra highlighted that lending AUM surpassed Rs 16,500 crore and annual PAT reached an all-time high. Looking ahead, the management is focused on driving profitable growth in FY27.
IPO History and Recovery
Northern Arc Capital debuted on the bourses in September 2024, raising Rs 777 crore through its IPO, with shares priced at Rs 263 each. Post-listing, the stock initially faced challenges, dropping to Rs 167 by March 2025 – a nearly 37% fall from its IPO price. However, the recent rebound signifies a strong recovery, with the stock now trading approximately 93% above its lows.
Analyst Ratings and Target Prices
Several leading brokerages have issued 'Buy' ratings for Northern Arc Capital, citing its strong performance and future potential:
- DAM Capital: Maintained a 'Buy' rating with a target price of Rs 400. They attributed the earnings beat to better credit costs and noted a healthy improvement in 30+ DPD. Management guidance for FY27 includes AUM growth of 22–25% and credit cost of 2.7–2.8%.
- ICICI Securities: Issued a 'Buy' rating with a revised target price of Rs 370. They highlighted strong AUM growth (10% QoQ, 22% YoY) and management's FY27 guidance for AUM growth at three times real GDP (22-25%). The strategic shift towards Direct-to-Consumer (D2C) lending is expected to granularize the balance sheet and generate better risk-adjusted returns, with RoA projected to reach 3% over FY27E/FY28E, translating to RoE of 13%/14%.
- Motilal Oswal Financial Services: Reiterate a 'Buy' rating with a target price of Rs 390, based on 1.2x FY28E P/BV. They emphasized the strong Q4 FY26 performance and management's confidence in sustaining momentum in FY27, driven by recovery in the MFI segment and continued growth in MSME and consumer finance businesses. The credit solutions business is also expected to provide a steady fee income stream.