In its bull case scenario, Motilal Oswal sees the stock rallying as much as 75%.
According to the brokerage, Northern Arc Capital has built a differentiated financial services ecosystem catering to underserved retail credit segments across MSME, consumer and rural markets.The company’s pan-India distribution network and proprietary technology platform support its sourcing, underwriting and collections capabilities.
Motilal said that the company has developed end-to-end in-house capabilities across its core segments, creating an integrated ecosystem for borrowers, originators and investors.
The brokerage said that Northern Arc has structurally transitioned from an IR-led portfolio, which accounted for 81% in FY21, to a higher-yielding D2C mix that now stands at 56%, with a target of 70% over the next 2-3 years.This shift is expected to improve yields and profitability. Disciplined risk management, backed by field-level oversight, FLDG structures, CGFMU guarantees and stringent partner onboarding, should help keep credit costs under control as rural finance normalises.
Proprietary technology and fee income from fund management and placement activities further diversify revenues, supporting earnings stability and return ratios.
The stock trades at 7 times its FY27E P/E (price-to-earnings), which Motilal Oswal considers attractive given the improving business mix and strong earnings visibility.
The brokerage models an AUM CAGR of 20% and PAT CAGR of 34% over FY26-28E, with RoA and RoE estimated at 3.2% and 15%, respectively, in FY28.
Northern Arc Capital has no promoter shareholding, and all six analysts tracking the stock currently have ‘Buy’ ratings.
Shares were trading 2.56% higher at ₹252.20. The stock remains below its IPO price of ₹263.
