DAM Capital has initiated coverage on Northern Arc Capital with a buy rating and a target price of ₹335, saying the stock is attractively valued at 0.9 times FY27 estimated book value and 6.8 times FY27 estimated earnings. The brokerage said Northern Arc is well positioned to capitalise on structural growth drivers in India’s lending ecosystem.
The company is seeing a rising share of direct-to-customer lending, and lower interest rates are expected to support margin expansion. Its fund management and placement business is also expected to drive fee income and improve return on assets. On asset quality, DAM Capital expects pressures, particularly in microfinance loans, to ease from the second half of FY26, with full normalisation by FY27.
The brokerage projects earnings to grow at a compound annual rate of 39% over FY26–27, underpinned by stronger margins, diversified income streams, and improving asset quality. It said Northern Arc’s attractive entry valuations, coupled with its growth trajectory, make it a compelling play in the financial services space.
Disclaimer: The views and recommendations made in this article are those of DAM Capital. This article does not constitute investment advice. Investors should consult their financial advisors before making any investment decisions.
