Northern Arc Capital Surges 51% YoY Profit, Assets & Network Boom

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AuthorAarav Shah|Published at:
Northern Arc Capital Surges 51% YoY Profit, Assets & Network Boom
Overview

Northern Arc Capital reported a robust Q3FY26, with Profit After Tax (PAT) surging 51% YoY to ₹101 crore. Lending Assets Under Management (AUM) grew 18% to ₹15,121 crore, while Gross Transaction Volume (GTV) jumped 43%. The company also saw a significant 73% YoY increase in both direct customers and origination partners, indicating strong business expansion. Asset quality improved markedly, with Net NPAs falling to 0.69%, and Net Interest Margins expanded to 9.9%.

Northern Arc Capital Q3FY26: Profit Soars, AUM & Network Expand Amidst Asset Quality Gains

Northern Arc Capital has delivered a strong performance in its third quarter for fiscal year 2026 (Q3FY26), with Profit After Tax (PAT) witnessing a substantial 51% year-on-year (YoY) increase, reaching ₹101 crore. For the nine months ended December 31, 2025 (9MFY26), PAT stood at ₹271 crore, marking a 13% YoY growth. These figures underscore a robust expansion trajectory for the company.

The growth is underpinned by significant operational momentum. Lending Assets Under Management (AUM) grew by 18% YoY to ₹15,121 crore. Gross Transaction Volume (GTV) saw an impressive 43% YoY surge, hitting ₹10,401 crore in Q3FY26. The company's network effect is strengthening, evidenced by a 73% YoY increase in both Direct Customers and Origination Partners, which now stands at 357. This expansion signifies deepening market penetration and successful partnership strategies.

Asset quality remains a key highlight, with Net Non-Performing Assets (NPA) improving to 0.69% as of December 31, 2025. This represents a marked improvement from 2.28% recorded in March 2021 and a slight decrease from the previous quarter's 0.74%. Profitability metrics have also strengthened, with Net Interest Margin (NIM) expanding to 9.9% in Q3FY26, up from 8.4% in the prior year's corresponding quarter. Return on Equity (RoE) was reported at 10.7%, and Return on Assets (RoA) stood at 2.7% for the quarter.

The company's balance sheet reflects its growth, with total assets growing 24% YoY to ₹15,406 crore. Borrowings increased by 30% YoY to ₹11,200 crore, maintaining a stable Debt-to-Equity ratio of approximately 3.0x, supported by diversified funding sources predominantly from banks. Management continues to leverage its technology stack and strong liability franchise, focusing on MSME, Consumer, and Rural finance, alongside credit solutions for originator partners. The reaffirmation of its 'AA-(Stable)' credit rating by ICRA Limited and India Ratings further solidifies its financial standing.

Risks & Outlook

While borrowing has increased, the stable Debt-to-Equity ratio suggests prudent leverage management. The company's strategic focus on MSME, Consumer, and Rural finance segments, backed by strong technological capabilities and partnerships, positions it for sustained growth. Investors will watch for continued execution in these segments and any shifts in asset quality or funding costs amidst evolving market conditions. The sustained improvement in NIM and NPA levels are positive indicators for future performance.

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