Northern Arc Capital Ltd

- As of June 30, 2025, Northern Arc Capital held surplus liquidity of around INR 600 crores and undrawn sanctions of over INR 1,200 crores from various banks and institutions, indicating strong borrowing capacity. - Total borrowings stood at INR 9,422 crores, with 75% linked to variable interest rates, positioning well for interest rate declines. - The company continues to diversify its funding base, focusing on long-term sources, with 30% funding from offshore and DFI sources and 70% from domestic banks, institutional, and capital markets. - Capital adequacy is strong at 25.5%, well above regulatory requirements, providing ample headroom for balance sheet growth over the next 3 years. - No explicit mention of planned new fundraising through debt or equity was disclosed on page 13; the focus appears to be on leveraging existing undrawn credit lines and capital adequacy for growth.

- Northern Arc Capital is focused on segmental product profitability and strategic capital allocation based on expected return on assets and equity. - The company plans to grow its direct-to-customer business, targeting 70% of AUM by FY28, led by MSME, consumer, and rural finance lending. - They aim to judiciously expand their intermediate retail business to build a strong fee franchise that will incrementally improve RoA by 30-40 basis points. - Capital adequacy is strong at 25.5%, with ample headroom to grow the balance sheet over the next 3 years. - No specific new capex projects or large capital outlays were mentioned; focus is on leveraging existing capabilities, technology platforms, and credit solution ecosystem expansion. - The strategy involves balancing growth with prudent risk management, particularly in rural and retail segments, while maintaining operating efficiency and improving margins. - Offshore funding is being increased to lower cost of funds, which supports strategic capital use.

- Northern Arc targets an AUM growth of 20% to 25% annually over the next three years. - Growth will be largely driven by expansion in the direct-to-customer (D2C) business, aiming to increase its share to 70% of total AUM by FY28. - Within D2C, lending to MSME, consumer, and rural finance segments will lead the growth. - The intermediate retail (credit solutions) business is planned for judicious expansion to build a strong fee franchise. - Fee and other income, driven by placement volumes, grew 8% YoY, indicating growth in revenue streams beyond balance sheet lending. - The company expects better yield and NIM expansion as the asset mix improves toward retail lending. - Cost control efforts and improved operating efficiency support sustainable profitability with ROA projected to reach 3.7% to 4% by FY28.

- Northern Arc Capital targets an AUM growth of 20% to 25% annually over the next three years, driven mainly by direct-to-customer lending (MSME, consumer, rural finance) rising to 70% of mix by FY28. - Operating efficiency improvements are expected with opex ratio maintained within 3.6% to 3.9%. - Net interest margin (NIM) expansion anticipated due to asset mix shift and better yield, despite slightly rising credit costs in FY27, which are expected to decline thereafter. - Credit cost guidance for FY26 is 2.7% to 2.9%, with a downward trajectory to 2.5%-2.6% from FY28 onwards. - Return on Assets (ROA) expected to be about 3.5% in FY27 and close to 4% by FY28. - Return on Equity (ROE) guidance is 16% to 18% over the next three years. - Profitability will benefit from growth in fee income via credit solution ecosystem and fund management, which are scalable.

- Northern Arc Capital reported the highest ever quarter 1 placement volume in its history, indicating a strong revival in credit demand. - Overall credit growth was muted at about 12% YoY for Q1 FY26. - Growth was led by MSME business with a 34% YoY growth in Assets Under Management (AUM). - Consumer finance segment grew 25% YoY. - Intermediate retail (credit solution business) grew 12% YoY. - Excluding rural finance growth, overall company growth would be about 20% YoY. - The company aims for an AUM growth target of 20% to 25% annually over the next three years. - Target to increase direct-to-customer loan mix to 70% by FY28, driven by MSME, consumer, and rural finance lending.