Domestic brokerage firm Motilal Oswal has reiterated its Buy rating on Northern Arc Capital Ltd. with a target price of ₹405, based on 1.3 times FY28E price/book-value. According to the brokerage, Northern Arc is transitioning from an intermediary-led credit platform into a diversified D2C-led financial services franchise. The stock currently trades at ₹306.70, representing a significant upside potential from the current market price.
As reported by Motilal Oswal, Northern Arc has demonstrated remarkable transformation from a credit intermediary into a diversified D2C-led financial services franchise. D2C assets have increased from about 19% of lending AUM in FY21 to around 59% in FY26 and are projected to reach around 68% by FY28E, expanding the addressable opportunity and strengthening the growth profile. Consumer finance and MSME lending have emerged as key growth engines, while improving collections should support a calibrated recovery in rural finance. The expansion into adjacent secured products provides further optionality for the company's diversified portfolio.
The brokerage highlights significant improvements in Northern Arc's asset quality metrics. Improving collections, declining Stage 2 assets, and granular portfolio monitoring reinforce confidence in asset quality. Northern Arc's transformation into a diversified D2C-led credit platform is steadily strengthening the quality of its growth profile. The combination of multiple lending growth engines, an expanding fee-income business, improving profitability drivers, and a robust risk management framework positions the company to deliver sustainable growth with improving earnings quality.
According to Motilal Oswal's analysis, the company's transformation into a diversified D2C-led financial services franchise positions it for sustained growth. The brokerage's projections indicate that the structural improvement in return ratios will be a key driver of the company's financial performance over the forecast period. At 1.1x FY27E P/BV, the brokerage believes valuations do not fully capture the improving growth and profitability trajectory, supporting the Buy recommendation with a target price of ₹405.
