Northern Arc Capital Ltd — Q4 FY26 earnings call
Summary generated by AI from the official transcript Northern Arc Capital Ltd filed with BSE on 14 May 2026. Every statement cites a verbatim quote from that document — open any citation to read it. This is a record of what management said, not a recommendation. How we check these summaries
The short read
Northern Arc Capital reported its highest ever quarterly profit of Rs 133 crore for Q4FY26, taking full-year profit after tax to Rs 406 crore, up 33% year-on-year. Assets under management grew 22% year-on-year and 10% quarter-on-quarter to Rs 16,594 crore, driven by the direct-to-customer business which now contributes 59% of AUM. Management discussed improvements in collection efficiency, credit costs, and net interest margins, along with the impact of new RBI guidelines on FLDG treatment in ECL computation.
Numbers mentioned
Assets under management: Rs 16,594 crore (as on March 31, 2026)
p. 3
“Our assets under management has grown over the last five years at a CAGR of about 26%, taking us to the milestone of INR 16,594 as on 31st of March”
Ashish Mehrotra, page 3 of the filed PDF · View the filing
Profit after tax: Rs 406 crore (FY26)
p. 3
“this disciplined, risk-calibrated AUM growth has translated into strong earnings performance with profit after tax has grown at 5-year CAGR of 43% to INR406 crores in FY '26”
Ashish Mehrotra, page 3 of the filed PDF · View the filing
Quarterly profit: Rs 133 crore (Q4FY26)
p. 4
“I am very pleased to announce that we continued to build on the momentum with Northern Arc Capital reporting highest ever quarterly profit of INR133 crores, taking our overall profit to INR406 crores for FY26”
Ashish Mehrotra, page 4 of the filed PDF · View the filing
Net interest margin: 9.4% (FY26)
p. 3
“This shift has given us almost 380 basis points of expansion in our net interest margin from 5.6% to 9.4% in FY '26”
Ashish Mehrotra, page 3 of the filed PDF · View the filing
Direct-to-customer AUM growth: 39% (year-on-year)
p. 4
“Our direct-to-customer business grew by about 39% on a year-on-year basis, reaching past INR9,800 crores, in line with our strategy to grow this business.”
Ashish Mehrotra, page 4 of the filed PDF · View the filing
MSME portfolio: Rs 3,691 crore (as on March 31, 2026)
p. 4
“Our MSME business continued to be a growth engine for Northern Arc with portfolio growing at about 43% on year-on-year basis to reach INR 3,691 Cr as on 31st March '26”
Ashish Mehrotra, page 4 of the filed PDF · View the filing
Rural finance disbursement: Rs 305 crore (Q4FY26)
p. 5
“We recorded highest ever quarterly disbursement of about INR305 crores in Q4FY26, reflecting strong 17% quarter-on-quarter growth.”
Ashish Mehrotra, page 5 of the filed PDF · View the filing
Full-year credit cost (rural): 4.9% (FY26)
p. 5
“The credit costs have consistently improved quarter-on-quarter to reach 1.3% in Q4FY26, with fullyear credit cost declining from 6.7% to 4.9% in FY26.”
Ashish Mehrotra, page 5 of the filed PDF · View the filing
Placement fee income: Rs 31 crore (FY26)
p. 5
“Our placement volume for FY26 was INR11,834 crores, with placement fee income growing by 22% year-on-year to INR31 crores.”
Ashish Mehrotra, page 5 of the filed PDF · View the filing
Credit fund AUM fee income: Rs 38 crore (FY26)
p. 5
“Further, our credit fund's assets under management is INR3,092 crores, which garnered the fee of about INR 38 crores in FY26.”
Ashish Mehrotra, page 5 of the filed PDF · View the filing
Net interest income: Rs 1,377 crore (FY26)
p. 7
“For FY26, NII grew by 20% Y-o-Y to INR1,377 crores and NIMs improved by 25 basis points year-on-year to 9.4%.”
Atul Tibrewal, page 7 of the filed PDF · View the filing
Cost of funds: 8.5% (FY26)
p. 7
“The cost of fund for FY26 decreased by 48 basis points year-on-year to 8.5%.”
Atul Tibrewal, page 7 of the filed PDF · View the filing
Pre-provisioning operating profit: Rs 956 crore (FY26)
p. 7
“Pre-provisioning operating profit for FY26 grew by 21% Y-o-Y to INR956 crores.”
Atul Tibrewal, page 7 of the filed PDF · View the filing
GNPA: 1.2% (Q4FY26)
p. 7
“GNPA and NNPA improved quarter-on-quarter to 1.2% and 0.6% respectively.”
Atul Tibrewal, page 7 of the filed PDF · View the filing
ROA: 2.8% (FY26)
p. 7
“ROA for FY26 grew by 34 basis points Y-o-Y to 2.8%.”
Atul Tibrewal, page 7 of the filed PDF · View the filing
ROE: 14% (Q4FY26)
p. 7
“ROE for the FY26 increased by 110 basis points to 11.1%, and ROE for Q4FY26 increased by 326 basis points to 14%.”
Atul Tibrewal, page 7 of the filed PDF · View the filing
Total borrowings: Rs 12,258 crore (as on quarter end)
p. 7
“Total borrowings at the end of the quarter stood at INR12,258 crores, with around 60% linked to variable interest rate, positioning us well to benefit from the ongoing decline in interest rates.”
Atul Tibrewal, page 7 of the filed PDF · View the filing
Tangible net worth: Rs 3,896 crore (as on March 31, 2026)
p. 7
“Tangible net worth stood at INR3,896 crores, which grew by 13% Y-o-Y.”
Atul Tibrewal, page 7 of the filed PDF · View the filing
Capital adequacy: 22.6% (as on March 31, 2026)
p. 7
“Capital adequacy remains quite strong at 22.6%, well above the regulatory requirement, giving us ample headroom to grow the balance sheet over the next two to three years.”
Atul Tibrewal, page 7 of the filed PDF · View the filing
What management said it would do
A record of statements made on the call, in the words management used. Parakho does not forecast, endorse or assess them, and their presence here is not a view on whether they will happen.
AUM growth — 22% to 25% · FY27
stated firmly by Ashish Mehrotra
p. 8
“Our sense is we should be able to grow business at about three times of GDP, so look at anywhere between 22% to 25%, and that's our commitment to the Street on a forward-looking basis unless we see something massive.”
Ashish Mehrotra, page 8 of the filed PDF · View the filing
Return on assets — 3 plus
stated as an aspiration by Ashish Mehrotra
p. 8
“my objective is to get to 3 plus return on assets and like we said over the next 8 to 10 quarters, get to mid-teens and late-teens ROE”
Ashish Mehrotra, page 8 of the filed PDF · View the filing
Return on equity — 15% to 17% · 8 to 10 quarters
stated as an aspiration by Ashish Mehrotra
p. 11
“About 8 to 8 to 10 quarters, yes, that's the target.”
Ashish Mehrotra, page 11 of the filed PDF · View the filing
Credit cost — 2.7% to 2.8% · FY27
stated firmly by Pardhasaradhi R.
p. 12
“And going forward also, we would expect the credit cost to be in the range of 2.7% to 2.8%, that is what is the plan projection.”
Pardhasaradhi R., page 12 of the filed PDF · View the filing
Cost of fund — 8.5% to 8.6%
stated firmly by Atul Tibrewal
p. 12
“I think we will definitely not see a reduction in the cost of fund, but we will be able to hold on to the numbers that we have demonstrated this year.”
Atul Tibrewal, page 12 of the filed PDF · View the filing
Direct-to-customer mix — 65%
stated as an aspiration by Ashish Mehrotra
p. 13
“Pertinent to highlight as the mix continues to improve from 59% to targeted 65%, you will see some bit of expansion in NIMs.”
Ashish Mehrotra, page 13 of the filed PDF · View the filing
Consumer finance risk-adjusted yield — 15% to 16%
stated firmly by Ashish Mehrotra
p. 15
“We've always said that the risk-adjusted yield on the consumer finance book will hover between 15 to 16%.”
Ashish Mehrotra, page 15 of the filed PDF · View the filing
Q&A highlights
Management's answers to analyst questions, in Parakho's words rather than a transcript. Each row names who answered and carries the verbatim quote it was drawn from.
Management guided to AUM growth of 22-25% and a path to 3%+ ROA and mid-to-late teens ROE over 8-10 quarters.
Answered by Ashish Mehrotra
Asked by Digant Haria: What is the guidance for FY27 loan growth and ROA?
p. 8
“Our sense is we should be able to grow business at about three times of GDP, so look at anywhere between 22% to 25%, and that's our commitment to the Street on a forward-looking basis unless we see something massive.”
Ashish Mehrotra, page 8 of the filed PDF · View the filing
CFO confirmed results were pure organic aside from the DLG-related item, with no one-off from Aviom.
Answered by Atul Tibrewal
Asked by Digant Haria: Is there any one-off in the results such as Aviom write-back?
p. 10
“It's pure organic, except for the DLG that we spoke about, but apart from that there is no one-off.”
Atul Tibrewal, page 10 of the filed PDF · View the filing
Management attributed the decline to RBI's new guideline allowing FLDG/DLG benefit to be reflected in ECL, and to a mix shift in Stage-3 assets toward secured MSME loans.
Answered by Pardhasaradhi R.
Asked by Raghav: Why has ECL coverage been declining, including on Stage-3 assets?
p. 11
“Coming to Stage-3, what we had earlier as Stage-3 assets were unsecured. Now the mix has changed and now whatever we are carrying as Stage-3 assets are mainly coming from MSME secured where obviously you get the benefit of the collateral that is available because of which the ECL coverage requirement for that is lower.”
Pardhasaradhi R., page 11 of the filed PDF · View the filing
Management confirmed 2.8% was net of FLDG benefit and overlay, and guided to 2.7-2.8% going forward.
Answered by Pardhasaradhi R.
Asked by Chintan Shah: What credit cost is targeted for FY27 and is 2.8% net of FLDG provisioning?
p. 12
“Yes, the overall year credit cost of 2.8% is after taking after adjusting for the FLDG benefit and the overlay of INR 66 crore created as measure of prudence for future uncertainty.”
Pardhasaradhi R., page 12 of the filed PDF · View the filing
CFO said cost of funds would be held at current levels and yields should improve with the D2C mix shift, rather than seeing further cost of fund reduction.
Answered by Atul Tibrewal
Asked by Chintan Shah: Will margins moderate in FY27 given rising cost of funds?
p. 12
“I think we will definitely not see a reduction in the cost of fund, but we will be able to hold on to the numbers that we have demonstrated this year.”
Atul Tibrewal, page 12 of the filed PDF · View the filing
Management estimated adjusted quarterly credit cost would have been closer to Rs 120 crore, or about 2.9-3%.
Answered by Pardhasaradhi R.
Asked by Pavan Kumar: What would the credit cost have been without the FLDG-related provisioning adjustments?
p. 13
“Adjusted for all this, the actual the credit cost without the overlay and adjusted for all this would have been closer to around 120 crores, which would have been much closer to the 2.9% to 3%, the which we would have otherwise got.”
Pardhasaradhi R., page 13 of the filed PDF · View the filing
CFO explained the company shifted toward fixed-rate instruments and reduced bank borrowing share, diversifying into offshore and capital market issuances.
Answered by Atul Tibrewal
Asked by Kaushik Agarwal: What is the borrowing mix strategy given rising market yields?
p. 15
“The bank borrowings used to be close to about65% of my total borrowing in March 25, this has consciously come down to around 52% as we speak in March 26.”
Atul Tibrewal, page 15 of the filed PDF · View the filing
Management said the ROA on consumer finance is much higher than the overall business ROA, at around 4%.
Answered by Ashish Mehrotra
Asked by Kaushik Agarwal: What is the ROA on the consumer finance business specifically?
p. 15
“Yes, it is, I said the risk-adjusted yield is 15% 15 to 16% range, return on assets will be obviously much higher if you look at it upward of close to about 4%.”
Ashish Mehrotra, page 15 of the filed PDF · View the filing
Risks flagged
Geopolitical tension in West Asia and its potential impact on the macroeconomic environment
p. 6
“As a prudent measure, company created a management overlay for potential unforeseen events given the current macroeconomic environment and what we are witnessing in the West Asia.”
Ashish Mehrotra, page 6 of the filed PDF · View the filing
Weather and monsoon variability affecting rural business
p. 6
“Looking ahead, we remain watchful of evolving risk including geopolitical tension in West Asia, potential impact on weather and monsoon”
Ashish Mehrotra, page 6 of the filed PDF · View the filing
Rising G-Sec rates and hedging costs pressuring borrowing costs
p. 12
“We have also seen the hedge cost going up significantly over the last couple of months.”
Atul Tibrewal, page 12 of the filed PDF · View the filing
Karnataka microfinance ordinance impacting collection efficiency earlier in the year
p. 6
“Overall performance for FY26 was resilient despite the challenges we saw at the beginning of the year arising out of the Karnataka microfinance ordinance.”
Ashish Mehrotra, page 6 of the filed PDF · View the filing
Potential impact from the conflict-related sectors within MSME exposure
p. 14
“So, on the potential conflict, the entire MSME universe, and between gas, petrol, chemicals, pesticide, , all of that is less than 2% of our book”
Ashish Mehrotra, page 14 of the filed PDF · View the filing
Generated by claude-sonnet-5. Source: the transcript as filed with BSE. We link to the exchange's copy; we do not host transcripts. Parakho is a data and screening tool, not an investment adviser — nothing here is a recommendation to buy, sell or hold.