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Northern Arc Capital is a part of the BSE Financial Services and has a market capitalisation of Rs 4,071.61 crores as of February 24. As of 9:50 am, the shares of the Non-Banking Financial Company (NBFC) were up 3.7 per cent or Rs 9.1 to trade at 254.75.
MOSL on Northern Arc
Motilal Oswal Financial Services has initiated coverage on Northern Arc Capital with a BUY rating, setting a target price of Rs 360 per share against the current market price of Rs 245, implying a potential 47 per cent upside.
The brokerage highlights Northern Arc’s structural transition from an institution-led (IR) portfolio, 81 per cent in FY21, to a direct-to-customer (D2C) mix, which now stands at 56 per cent and is expected to reach nearly 70 per cent over the next 2–3 years.
Key Drivers
According to MOSL:
- Technology edge: Proprietary platforms enhance sourcing, underwriting, and collections, enabling scalable growth while maintaining asset quality.
- D2C-led growth: Expansion in direct lending is expected to boost net interest margins (NIMs).
- IR lending stability: Diversified, collateralised exposures to originator partners continue to provide balance-sheet resilience.
- Fee income diversification: Fund management and placement services add recurring revenue streams, strengthening earnings stability.
Outlook
Motilal Oswal projects AUM and PAT CAGR of nearly 20 per cent and 34 per cent, respectively, over FY26–28E, with return ratios improving to RoA of 3.2 per cent and RoE of 15 per cent by FY28E.
The brokerage notes that rural consumption recovery and normalisation trends should support asset quality improvements, aiding sustainable earnings growth.
Valuation
Attractive valuations underpin the BUY call by the brokerage, with Northern Arc trading at nearly 0.9x FY27E P/BV and close to 7x FY27E P/E.
Northern Arc Stock Performance
Over the past year, Northern Arc Capital has shown mixed performance across different time frames. In the past week, based on the data available on BSE, the stock gained 1.65 points, marking a 0.66 per cent increase. Over two weeks, it declined by 6.95 points, a 2.68 per cent drop, and in the past month, it fell by 20.60 points, down 7.54 per cent.
Year-to-date, Northern Arc has risen 2.50 points, or 1 per cent, while over the last three months, it again dropped 6.95 points, representing a 2.68 per cent decrease. In the past six months, the stock was largely flat, gaining only 0.35 points (0.14 per cent), but over the one-year horizon, it delivered a strong performance, surging 83.05 points, an impressive 48.97 per cent increase.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions.)
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