Northern Arc Capital · Material risks, their source context, and severity in the latest available quarter.
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Risk intelligence
Small-ticket MSME segment (average ticket 12-14 lakhs) is experiencing higher provisioning and roll-forward rates across the industry. While collection efficiency is improving with bounce rates at 27-28%, management acknowledged this segment faces ongoing stress requiring continued monitoring.
Microfinance portfolio was deliberately calibrated over 6 quarters starting June 2024. While 30+ DPD improved to 80bps and par accretion turned negative (better than Dec 2023), the Karnataka ordinance impact from ~10 months ago and RBI's new MIN guardrails add complexity to scaling this business back.
Housing Finance Company exposure requires NCLT filing with RBI approval needed (4-6 weeks). Management stated provisions exceed highest bidder value, but legal process timing remains uncertain despite company targeting filing by February 15.
Retail securitization YTD is 7% lower than prior year, offshore funding participation remains subdued, and repo rate cuts have not fully transmitted to MCLR reductions. While liquidity is comfortable (1,400 crore surplus), incremental cost of fund at 8.6% remains above pre-stress levels.
