Northern Arc Q1 results: Core income jumps 44%; asset quality improves

Northern Arc Capital reported a 17.6% year-on-year (YoY) rise in net profit to ₹121.8 crore for the quarter ended June 30, compared with ₹103.6 crore a year earlier. Net interest income (NII), the company's core income, increased 44.2% to ₹496.1 crore from ₹344.1 crore, while total revenue rose 30% year-on-year to ₹767.5 crore from ₹590.6 crore.

Provisions stood at ₹110.5 crore, up from ₹103 crore in the corresponding quarter last year. Basic earnings per share (EPS) increased to ₹7.54 from ₹6.42.

The non-banking financial company (NBFC) said its lending assets under management (AUM) grew 26% year-on-year to ₹16,855 crore as of June 30. Direct-to-customer (D2C) lending AUM surged 51% to ₹10,766 crore, accounting for 64% of the overall lending AUM.

Performing Credit Fund AUM stood at ₹2,988 crore, while gross transaction volume during the quarter rose to ₹8,595 crore.

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Managing Director and CEO Ashish Mehrotra said, "Q1 FY27 marked a strong start to the year as we continued to execute with discipline and build on the momentum of our long-term strategy. We remain focused on building a granular and diversified retail lending book, with our Direct Lending (D2C) portfolio crossing the ₹10,000 crore milestone during the quarter."

Pre-provision operating profit (PPoP) increased 27% year-on-year to ₹263 crore. The company reported an operating expense ratio of 3.6%, unchanged from a year earlier, while credit cost declined by 44 basis points year-on-year to 2.6%. Return on assets improved by 29 basis points to 2.7% and return on equity rose by 220 basis points to 11.5%.

Asset quality improved sequentially, with the gross non-performing asset (GNPA) ratio declining 20 basis points quarter-on-quarter to 1%, while the net NPA ratio improved 15 basis points to 0.5%.

Mehrotra said, "This reinforces our focus on quality growth, underpinned by prudent underwriting, portfolio diversification and sustainable risk-adjusted returns."

Provision coverage on Stage III assets increased to 48.5%, and the capital adequacy ratio stood at 22.7% at the end of June. Net worth grew 15% year-on-year to ₹4,058 crore.

"While we remain watchful of evolving external risks, including geopolitical developments in West Asia and the potential impact of El Niño conditions on the monsoon, we believe Northern Arc is well positioned to navigate these uncertainties. Our diversified business model, calibrated approach to risk and disciplined execution give us confidence in sustaining growth momentum while protecting profitability and maintaining strong portfolio quality," Mehrotra said.

Shares of Northern Arc Capital closed 0.5% lower at ₹298 ahead of the earnings result announcement on Monday. The stock has gained more than 19% so far in 2026 and about 28% over the last 12 months.