Northern Arc Capital Limited

Financial Services — Credit Services · NSE

₹280.90−₹4.15 (−1.46%)

DalalBaazaar Score

74 / 100

🟢 Good

Verdict

NEUTRAL

Risk

High

Driven by negative free cash flow, micro-cap size, which brings thin liquidity, a beta above 1.3, so it swings harder than the index.

In simple words: The business is earning a fairly low return on the money invested in it, with both sales and profits growing well. Cash generation is currently the main factor to watch.

Decision support, not a buy or sell call.

As of 18 Oct 2026, 6:58 pm

Understanding the Business

Company site ↗

The 60-second version of Northern Arc Capital Limited — what it does, how it earns, and who it competes with, before any of the numbers below.

What does this company do?

Northern Arc Capital Limited, a non-banking financial company, provides lending and allied services in India. It operates through Financing Activity, Investment Advisory Services, and Investment Management Services segments.

IndustryCredit Services

SectorFinancial Services

Employees3,163

Annual revenue₹2,287 Cr

How does it make money?

Turns over ₹2,287 Cr a year. Of every ₹100 of sales, about ₹18 reaches shareholders as profit, with ₹26 left at the operating level before interest, tax and depreciation. Each of its 3,163 employees supports ₹72.3 lakh of revenue a year, the signature of a people-led business.

Revenue / employee₹72.3 lakh

Who are its competitors?

The closest listed comparisons in its industry are BAJAJ FINANCE LIMITED, STATE BANK OF INDIA, HDFC BANK LTD, ICICI BANK LTD.. These are the companies its valuation and returns are measured against elsewhere in this report.

Compared side by side in Peers ↓

What is its competitive advantage?Not assessable from these ratios

For a lender, returns on capital are shaped by leverage and funding cost rather than by pricing power, so the usual financial signature of an advantage does not apply. Judge this one on deposit franchise, cost of funds and asset quality — none of which are in this data.

Peer median ROE16.5%

What is the outlook?

5 analysts covering the stock expect revenue to grow about 23.5% and earnings to grow about 32.9% in the year to 2028. These are estimates by people who follow the company, not a forecast for the wider industry.

Est. revenue growth+23.5%

Est. earnings growth+32.9%

Analysts5

What has been driving growth?

Growth has come mainly from selling more, rather than from keeping more of each sale. Over 3 years revenue moved +120% while net margin moved -24% relative to itself. What this cannot tell you is which products, customers or geographies did the work — that lives in the segment disclosures of the annual report.

Revenue effect+120%

Margin effect-24%

DalalBaazaar Score

74/ 100

Good

Weighted across six categories. Every point is explained below.

✗ Beta of 1.40 — amplifies market moves in both directions
✗ Micro Cap: thinner liquidity and sharper drawdowns are normal
✓ Profits have been consistent from year to year
✗ Negative free cash flow means dependence on external funding

Quality vs. Valuation

Company Quality

78/ 100

Good

How good the business is, ignoring the share price entirely.

Valuation

70/ 100

Cheap

What you are being asked to pay, ignoring how good the business is.

A good business currently available at an undemanding price — the combination this framework is built to look for.

Historical Valuation

Current P/E

10.4x

2Y Median

12.3x

27 monthly readings · mean 12.3x · range 8.8x–15.7x

Sector Median

17.0x

median of 4 sector peers

🟢Current valuation is approximately 15% below its 2y median of 12.3x. Cheaper than its own history, which is worth a reason too: the market may be pricing in something the backward-looking numbers do not show.

🟢Against its sector it trades 39% below the peer median of 17.0x.

vs. its own history

Fair

12.3x median over 27 months · -15%

vs. sector peers

Cheap

17.0x median of 4 peers · -39%

vs. generic bands

Cheap

Below 15x

EV/EBITDA

27.9x

PEG

0.55

What's Good / What's Bad

🟢 What's Going Well2

Margins are improving
EBITDA margin is up from 12.3% to 26.0% over 3 years.
Consistently profitable
Profitable in every one of the last 4 reported years.

🔴 What Needs Attention0

Nothing stands out as clearly deteriorating on the years of data available.

Red Flags

No automated checks triggered

None of the automated financial checks below were triggered on the years of data available. That is not the same as a clean bill of health — see what could not be checked.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Margin expansion has further to run
EBITDA margin has risen from 12.3% to 26.0%. If that holds, profit compounds faster than sales and today's multiple looks cheaper in hindsight than it does now.
Cheaper than its peers
It trades 39% below the sector median. Either the market sees a problem the numbers do not show, or the discount closes.
Earnings have proved durable
Profitable in every one of the last 4 reported years. Consistency lowers the risk that any single bad year is structural rather than cyclical.

🔴 Bear CaseWhat could go wrong?

Size brings its own risk
Micro Cap businesses are thinly traded, so exits are harder in a falling market and single events move the price more than they would for a larger company.

🟡 Key Things to WatchMeasurable tripwires, set against where this company stands today

1Revenue growth stays above 23% a year✓ 30.0% CAGR
Latest reported year was 43.9%. The bar is set below the established compounding rate, so ordinary variation does not trip it.
2EBITDA margin holds above 24%✓ 26.0%
Two points below today's level — enough room for noise, tight enough to catch real compression.
3Return on equity stays above 8%✓ 10.4%
For a lender this is the cleanest single read on whether the book is being grown profitably.
4Valuation vs its own median of 12.3x✓ 10.4x today
A re-rating above its own history needs a reason; without one it is just a higher price.

Investment Checklist

8 / 12 checks passed

✗ Strong return on equity (ROE ≥ 15%)
✗ Strong return on capital employed (ROCE ≥ 15%)
✓ Healthy net margin (≥ 10%)
✗ Generates positive free cash flow
✗ Manageable leverage (Debt/Equity < 1.0)
✓ Adequate short-term liquidity (Current Ratio ≥ 1.0)
✓ Revenue growing year-over-year
✓ Profit growing year-over-year
✓ Not trading at an extreme valuation (P/E < 40x)
✓ Not buying right at the 52-week high
✓ Analyst consensus isn't majority-sell
✓ Short-term technical trend isn't bearish

Price history

Quick Metrics

5 good · 3 neutral · 3 weak

Market Cap

₹4,545 Cr

Micro Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

10.4x

Cheap

Cheap against the generic band

P/B Ratio

1.17x

Reasonable

Reasonable against the company's book value

EPS (TTM)

₹26.97

Profitable

Profitable on a per-share basis

ROE

10.4%

Moderate

Moderate capital efficiency

ROCE

5.6%

Weak

Low return on total capital employed

Debt/Equity

3.15x

High

High leverage

Revenue Growth (YoY)

43.9%

Healthy

Healthy top-line growth

Profit Growth (YoY)

40.2%

Healthy

Profits growing at a healthy clip

Dividend Yield

None

No dividend yield reported — usually means no payout, but verify if one was recently initiated

Free Cash Flow

-₹1,556 Cr

Cash burning

Spending more cash than the operations bring in

More Metrics

P/E (Forward)

6.3x

Improving

Below the trailing multiple — the street expects earnings to grow into the price

Operating Margin

38.5%

Good

Healthy core-business profitability

Net Margin

36.6%

Good

Strong bottom-line conversion

Current Ratio

1.61

Comfortable

Healthy short-term liquidity

Beta (vs Nifty)

1.40

High swing

Swings more than the market in both directions

52W Range Position

59%

Mid-range

Technical Snapshot

SMA 20 / SMA 50

295.0 / 294.2

Bullish alignment (short > long)

Price vs SMA 200

Above

Long-term uptrend

RSI (14)

33.4

Neutral momentum

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹1,041 Cr	₹1,626 Cr	₹2,045 Cr	₹2,287 Cr	+30.0%
EBITDA	₹128 Cr	₹319 Cr	₹552 Cr	₹594 Cr	+67.0%
EBITDA Margin	12.3%	19.6%	27.0%	26.0%	—
PAT (Net Profit)	₹242 Cr	₹308 Cr	₹305 Cr	₹406 Cr	+18.8%
EPS	₹15.01	₹19.11	₹20.03	₹24.82	+18.3%
ROE	12.4%	13.3%	8.9%	10.4%	—
ROCE	5.4%	7.1%	5.1%	5.6%	—
Total Debt	₹7,035 Cr	₹9,048 Cr	₹9,860 Cr	₹12,258 Cr	+20.3%
Free Cash Flow	-₹1,296 Cr	-₹2,148 Cr	-₹1,065 Cr	-₹1,556 Cr	—

🟢 Revenue has grown at 30.0% a year over 3 years.

🟢 EBITDA has grown at 67.0% a year over 3 years.

🟢 EBITDA Margin has risen from 12.3% to 26.0% over 3 years (+13.7 pts).

🟢 PAT (Net Profit) has grown at 18.8% a year over 3 years.

🟢 EPS has grown at 18.3% a year over 3 years.

🔴 ROE has fallen from 12.4% to 10.4% over 3 years (-2.0 pts).

🟡 ROCE has held roughly flat at 5.6% over 3 years.

🔴 Total Debt has grown at 20.3% a year over 3 years.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹16,745 Cr

Total Liabilities

₹12,844 Cr

Cash & Equivalents

₹231 Cr

Operating Cash Flow

-₹1,541 Cr

Capex

-₹15 Cr

Shareholding (proxy)

Institutional Holding

8.2%

Insider Holding

46.1%

Analyst Consensus

Recommendations

5 Buy · 0 Hold · 0 Sell

Target Price (Mean)

₹380.8

+35.6% vs CMP

Target Range

₹370 – ₹399

Peer Comparison

Company	P/E	ROE
BAJAJ FINANCE LIMITED	30.2x	17.8%
STATE BANK OF INDIA	10.3x	15.2%
HDFC BANK LTD	15.9x	13.8%
ICICI BANK LTD.	18.1x	16.5%

Recent News

2 mixed4 general

Is Northern Arc Capital the Best Stock in Its Sector? A Look at the Numbers

Univest, 05 Oct

Northern Arc Capital jumps 10% after Rs 335-crore block deal. Should you buy?

The Economic Times, 31 Aug

Northern Arc Capital Ltd Share Price Target, Forecast for Long Term Equity.

HDFC Sky, 05 JulAnalyst view

🟡Mixed / dependsBroker commentary — an opinion about the price rather than new information about the business.

Northern Arc Capital shares jump over 11% after ₹335 crore block deal; what investors should know

Upstox, 31 AugPrice move

🟡Mixed / dependsA price move, which is not by itself a change in the business. Worth finding the cause before reading it as either good or bad.

Northern Arc Capital allots 1.44 lakh equity shares under ESOP

Business Standard, 16 Sept

Accion International, Leapfrog, Eight Roads, Augusta Investments offload over 13% stake in Northern Arc...

Moneycontrol.com, 01 Sept

Watch Items

This is a financial-sector business: borrowing is its raw material, not leverage in the usual sense. Debt/Equity and ROCE here aren't comparable to a manufacturer's — read them alongside NIM, GNPA and capital adequacy from the company's own disclosures.
Cross-check against the company's latest quarterly filing / investor presentation before acting.

DalalBaazaar Thesis

StrongBusiness Quality · Financial Health · Growth · Profitability · Valuation

WeakRisk

Points for each in the Score ↑

Attractive on both counts

A good business currently available at an undemanding price — the combination this framework exists to look for. The work left is qualitative: whether the advantage the numbers imply is one you can identify and expect to last.

All 4 tripwires holding · see Key things to watch ↑