Current Rating and Its Implications
MarketsMOJO’s Strong Sell rating on ARC Finance Ltd indicates a cautious stance for investors, signalling significant concerns about the company’s financial health and market prospects. This rating suggests that the stock is expected to underperform relative to the broader market and peers in the Non Banking Financial Company (NBFC) sector. Investors should carefully consider the risks before allocating capital to this microcap stock.
Here’s How ARC Finance Ltd Looks Today
As of 25 December 2025, ARC Finance Ltd’s Mojo Score stands at 12.0, reflecting a marked decline from its previous score of 31. This score places the company firmly in the Strong Sell category, underscoring the challenges it faces across multiple dimensions including quality, valuation, financial trend, and technical outlook.
Quality Assessment
The company’s quality grade is below average, highlighting fundamental weaknesses. The long-term Return on Equity (ROE) is a modest 2.52%, which is considerably low for an NBFC, where investors typically expect higher returns given the sector’s growth potential. Furthermore, operating profit has deteriorated sharply, with an annualised decline rate of -214.05%. This negative growth trajectory signals operational inefficiencies and challenges in generating sustainable earnings.
Valuation Concerns
ARC Finance Ltd is currently classified as risky from a valuation perspective. The stock trades at levels that are unfavourable compared to its historical averages, reflecting market scepticism about its future earnings potential. Negative EBITDA further compounds valuation risks, indicating that the company is not generating sufficient earnings before interest, taxes, depreciation, and amortisation to cover its operating costs. This situation often deters value-focused investors and raises questions about the stock’s price sustainability.
Register here to know the latest call on ARC Finance Ltd
- - Fundamental Analysis
- - Technical Signals
- - Peer Comparison
Financial Trend and Profitability
The financial grade for ARC Finance Ltd is flat, indicating stagnation in key financial metrics. The latest quarterly results show a Profit Before Tax (PBT) excluding other income of just ₹0.17 crore, which has fallen by 96.28%. This sharp decline in profitability is a red flag for investors seeking growth or stability. Over the past year, the company’s profits have plummeted by 133.5%, a severe contraction that has weighed heavily on investor sentiment.
Technical Outlook
Technically, the stock is rated bearish. Price action over recent months has been weak, with a 3-month return of -12.50% and a 6-month return of -29.29%. The year-to-date (YTD) return stands at -48.91%, while the one-year return is down by 50.35%. Despite a modest 1-day gain of 1.45% and a 1-week rise of 9.37%, these short-term upticks do little to offset the broader downtrend. The bearish technical grade suggests that momentum remains negative, and the stock may continue to face selling pressure in the near term.
Sector and Market Context
ARC Finance Ltd operates within the NBFC sector, which has experienced mixed performance amid tightening credit conditions and regulatory scrutiny. Compared to its peers, ARC Finance’s microcap status and weak fundamentals place it at a disadvantage. Investors typically favour NBFCs with robust asset quality, consistent earnings growth, and prudent capital management, areas where ARC Finance currently falls short.
Our current monthly pick, this Mid Cap from Automobile Two & Three Wheelers, survived rigorous evaluation against dozens of contenders. See why experts are backing this one!
- - Rigorous evaluation cleared
- - Expert-backed selection
- - Mid Cap conviction pick
What This Rating Means for Investors
For investors, the Strong Sell rating on ARC Finance Ltd serves as a cautionary signal. It suggests that the stock currently carries elevated risks due to weak fundamentals, unfavourable valuation, stagnant financial trends, and negative technical momentum. Those holding the stock may consider reassessing their positions, while prospective investors should weigh these factors carefully before committing capital.
It is important to note that while short-term price movements can be volatile, the underlying financial health and operational performance of the company remain critical determinants of long-term value. ARC Finance Ltd’s current profile indicates significant challenges that may take time to resolve.
Summary
In summary, ARC Finance Ltd’s Strong Sell rating as of 25 July 2025 reflects a comprehensive evaluation of its quality, valuation, financial trend, and technical outlook. The latest data as of 25 December 2025 confirms ongoing difficulties, including poor profitability, risky valuation, and bearish price action. Investors should approach this stock with caution and consider alternative opportunities within the NBFC sector that demonstrate stronger fundamentals and growth prospects.
About MarketsMOJO Ratings
MarketsMOJO’s rating system integrates multiple parameters to provide a holistic view of a stock’s investment potential. The Strong Sell rating is reserved for stocks with significant weaknesses across key metrics, signalling that the risk of holding or buying the stock outweighs potential rewards. This rating assists investors in making informed decisions aligned with their risk tolerance and investment objectives.
Only Rs. 9,999 - Get MojoOne + Stock of the Week for 1 Year (MRP = Rs. 34,999) Start Today
