Northern Arc Q2 FY27 Results (NSE: NORTHARC)
Signal: Earnings grew
The read
Q2FY27 marks a sharper earnings inflection: PAT rose 41% YoY to ₹129 Cr after increasing 13% QoQ, while AUM accelerated 34% YoY to ₹19,003 Cr and credit cost stayed at 2.6%; the key thesis shift is growth scaling without deterioration in 0.5% NNPA, although debt rose to ₹14,107 Cr and debt/equity reached 3.3x.
| Metric | Value | YoY | QoQ |
|---|---|---|---|
| Revenue | ₹453 Cr | +32% | +9% |
| EBIT | ₹286 Cr | +32% | |
| Net profit | ₹129 Cr | +41% | |
| EBIT margin | 0% |
P&L walk
Net revenue rose 32% YoY to ₹453 Cr and PPoP rose 32% to ₹286 Cr, while credit cost remained contained at 2.6%; PAT reached ₹129 Cr, up 41% YoY, helped by operating growth rather than a disclosed one-off.
Key positives
- Lending AUM grew 34% YoY to ₹19,003 Cr, with direct-to-customer AUM reaching ₹12,502 Cr and contributing 66%.
- PAT rose 41% YoY to ₹129 Cr, the company's record quarterly profit, while PPoP increased 32% YoY to ₹286 Cr.
- Asset quality remained stable: net NPA was 0.5%, total credit cost was 2.6%, and Stage III assets were 1.3% of AUM at Sep'26.
- NIM improved to 9.3% from 9.0% a year ago while cost of funds declined to 8.5% from 8.6%, supporting spread stability.
- The company added 12 branches in Q2FY27, taking the network to 446 branches, while the direct customer base surpassed 30 lakh.
Key concerns
- Borrowings increased to ₹14,107 Cr from ₹12,440 Cr in Jun'26 and debt/equity rose to 3.3x from 3.1x at Mar'26, increasing balance-sheet sensitivity as AUM expands.
- Cost-to-income remained broadly flat at 36.8% versus 36.7% a year ago, so the 41% PAT growth was not driven by operating-cost dilution.
- Rural finance NNPA was 0.4% at Sep'26 versus 0.01% for consumer finance, indicating materially higher credit risk in the rural book despite stable consolidated asset quality.
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