Are Northern ARC Capital Ltd latest results good or bad?

Northern ARC Capital Ltd's latest financial results for Q3 FY26 reveal a notable performance characterized by strong revenue and profit growth. The company reported net sales of ₹721.14 crores, reflecting a quarter-on-quarter increase of 14.93% and a year-on-year growth of 25.18%. This marks the highest quarterly revenue in the company's history, indicating robust operational activity and successful scaling of its business.
The consolidated net profit for the same quarter stood at ₹100.76 crores, representing a quarter-on-quarter growth of 9.87% and a year-on-year increase of 33.25%. This growth in profit outpaced revenue growth, suggesting improved operational leverage despite some challenges in maintaining margins.

However, the operating margin (excluding other income) contracted to 50.88%, down from 53.51% in the previous quarter, indicating some pressure on profitability. This margin compression is attributed to rising employee costs and increased interest expenses, which have also seen a quarter-on-quarter rise.

The company’s return on equity (ROE) was reported at 7.81%, which, while reflecting the capital-intensive nature of the NBFC sector, is below the industry average. The balance sheet appears reasonably positioned, but the company carries a significant debt-to-equity ratio of 2.82x, emphasizing the importance of effective asset quality management.

In summary, Northern ARC Capital has demonstrated impressive top-line growth and record profitability, but it faces challenges in sustaining its operating margins as it scales operations. The company saw an adjustment in its evaluation, reflecting the mixed nature of its financial performance amidst these operational trends.