Crisis-hit non-bank financier Kinara Capital Pvt. Ltd is tapping strategic investors—fintechs and other non-banking financial companies (NBFCs)—to pump in funds in exchange for a majority stake in the company, said founder and chief executive Hardika Shah.
Shah said she is hoping to raise a few hundred crores by selling a majority stake in the business, helping the company restart lending.
“Putting myself in their shoes, I would see this as a strategic investment, which means they would want full control of which direction to take that entity,” she said in an interview, declining to share names since the conversations are at a preliminary stage.
The debt crisis
Backed by Gaja Capital, British International Investment, and others, the company provides a mix of secured and unsecured loans to small businesses and has been navigating a liquidity crisis for several months.
In 2024-25, the lender reported losses for the first time, primarily due to bad loans. Then, in the end of July, a private sector lender set off its loan against balances in the company’s bank account, leading to other bankers issuing loan recall notices.
Then came credit rating downgrades to D or default.
Shah said there are about 20 domestic and 11 international lenders, and Kinara’s total debt stood at ₹1,400 crore as of August, with “nearly 70% of it coming from international lenders”.
Shah said Kinara tried raising capital and also attempted to sell a portion of its loanbook to generate cash, but neither worked out. “It has been hard for their (investors) universe to unlock additional capital for NBFCs,” said Shah. “We just completely lost all liquidity and hired a banker to try to bring new equity. While we had some good potential proposals, those did not convert.”
In October 2022, Kinara Capital raised ₹200 crore from investors led by British International Investment (BII), hoping that the fundraise would help the lender grow 5x by 2025 to ₹6,000 crore. The company was valued at ₹1,060 crore as on 30 December 2024, according to data from market intelligence platform Tracxn.
At a standstill
The non-bank has stopped disbursing fresh loans due to the liquidity crunch and is focusing on recovering existing loans. Shah said it will be able to restart lending operations once it gets fresh capital.
At the end of 2024-25, it had assets under management worth ₹2,831 crore, as against ₹3,142 crore in the previous fiscal year.
Kinara has now reached a settlement with almost all local lenders who will recover all their principal and some interest as well, according to Shah. The foreign lenders had decided to a standstill in repayments and the NBFC has now started repaying them.
She said the company will continue to explore portfolio sales. “We need to provide liquidity, with recoveries to our international lenders, and we will continue to look for the fastest way to provide those recoveries to them.”
In August, Care Ratings Ltd downgraded Kinara’s ratings after delays in servicing principal and interest payments on its non-convertible debentures, noting that delinquencies in certain segments increased in 2024-25, with slippages remaining high at 8%, the same level as in 2023-24.
“The development also underscores increased stress in the company’s liquidity and overall financial profile,” said a Care Ratings note on 7 August. “Asset quality deteriorated due to higher delinquencies witnessed in certain sectors and geographies, and in loans disbursed at higher ticket size.”
Kinara is not alone in its attempt to clean up its books post a lending boom in unsecured loans. Mint reported on 28 October that non-bank lenders such as Kinara Capital, Lendingkart, Aye Finance, and Ashv Finance have scaled back unsecured lending after regulatory scrutiny tightened funding to the sector.
These lenders, which cater to small businesses, have either sold or securitized unsecured loans, or are exploring such options.
