Finova Capital’s INR 800 Cr Fundraise: A Bold Step Towards Transforming India’s MSME and Rural Economy

In the ever-evolving landscape of India’s fintech industry, Finova Capital has emerged as a standout player. Focused on serving MSMEs and rural markets, Finova Capital is at the forefront of driving financial inclusion in regions typically underserved by traditional banks. As the company looks to raise INR 800 Cr (approx. $95.3 Mn) in its latest funding round, let’s explore key aspects of Finova’s journey and its role in reshaping India’s financial ecosystem.

Founding and Purpose

• Established in 2015 by husband-wife duo Mohit Sahney and Sunita Sahney in Jaipur, Rajasthan.
• The company’s mission is to provide accessible and affordable loans to MSMEs and individuals in semi-urban and rural areas.
• It seeks to bridge the gap left by traditional banks that often overlook small businesses and individuals in underserved regions.

Loan Products

Finova Capital offers two primary financial products:

• MSME Business Loans: Targeting small and micro businesses to support their growth and expansion.
• Home Loans: Loans secured by immovable property, aimed at individuals looking to finance homes in semi-urban and rural areas.
• Loan Amounts: These range from INR 3 Lakh to INR 25 Lakh, providing flexibility for borrowers to meet their specific financial needs.

Branch Network and Expansion

• Finova Capital has built a strong presence across 16 states, including key regions such as Rajasthan, Madhya Pradesh, Chhattisgarh, Karnataka, Andhra Pradesh, Telangana, and Himachal Pradesh.
• The company boasts a branch network of over 400 locations, allowing it to effectively penetrate semi-urban and rural markets where access to formal credit has been traditionally limited.
• Its geographic focus has been instrumental in catering to businesses and individuals who have little to no access to organized financial services.

Key Financial Achievements

• In FY24, Finova Capital posted a consolidated profit after tax (PAT) of INR 151.5 Cr, a 71% increase from the previous year (FY23 PAT: INR 88.4 Cr).
• The company’s operating revenue grew by 59%, jumping from INR 332.6 Cr in FY23 to INR 529.3 Cr in FY24.
• This remarkable growth underscores Finova’s ability to scale its operations while maintaining a strong financial footing.

The Upcoming INR 800 Cr Fundraise

• Finova Capital is in the advanced stages of securing INR 800 Cr in its latest funding round.
• This capital raise will include a primary capital infusion and secondary share sales.
• Leading investors in this round include:
  • Avataar Venture Partners
  • Madison India Capital
  • Sofina (Belgium-based investment fund)
• Existing investors such as Norwest Venture Partners and Faering Capital are also expected to participate.
• The funds will be utilized to:
  • Expand Finova’s loan book.
  • Invest in digital infrastructure and technology to enhance service delivery.
  • Broaden its branch network to reach new markets.

Previous Fundraising Milestones

• In 2022, Finova Capital raised $65 Mn from Norwest Venture Partners, Maj Invest, and Faering Capital.
• In 2020, the company raised INR 260 Cr from Peak XV Partners (formerly Sequoia Capital India) and Faering Capital.
• These funding rounds have supported the company’s expansion and allowed it to strengthen its financial base.

The Competitive Landscape

• Finova Capital’s focus on MSMEs and underbanked markets positions it as a key player in the growing lending tech sector.
• Other NBFCs targeting MSMEs, like Aye Finance (which raised INR 250 Cr in debt funding) and Arthan Finance (INR 50 Cr in Series B), are also witnessing similar growth trends.
• The Indian lending tech market is expected to reach a market size of $1.3 trillion by 2030, creating enormous potential for companies like Finova Capital.

Market Impact and Financial Inclusion

• Finova Capital’s products are directly aligned with promoting financial inclusion.
• By offering MSME loans and home loans to businesses and individuals in semi-urban and rural areas, Finova is playing a critical role in driving economic growth in these regions.
• The availability of formal credit to MSMEs fuels job creation, supports local economies, and fosters entrepreneurship.
• Home loans are improving living standards by providing individuals with access to secure housing finance.

Technology and Digital Transformation

• A significant portion of the upcoming INR 800 Cr funding will be used to bolster Finova’s digital capabilities.
• The company aims to invest in technology infrastructure that will streamline the loan application and disbursement process, making credit more accessible and faster for its target customers.
• This technological investment is expected to further enhance customer experience and reduce operational costs.

The Future Outlook

• With the planned INR 800 Cr funding and a solid financial performance, Finova Capital is poised to further expand its reach and product offerings.
• The company will continue to play a key role in India’s MSME sector, contributing to the country’s overall economic development.
• By scaling its branch network and investing in technology, Finova Capital is well-positioned to serve an even larger customer base, fulfilling its vision of promoting financial inclusion and helping underserved communities gain access to critical financial services.

Conclusion: A Bright Future for Finova Capital

Finova Capital’s journey from its inception in 2015 to becoming one of India’s most influential NBFCs is a testament to the company’s visionary leadership and focus on underserved markets. By raising INR 800 Cr, Finova Capital is gearing up to expand its operations and enhance its technological infrastructure, ensuring that it remains a leading player in India’s fintech and lending tech market.

With a clear focus on MSMEs and semi-urban and rural areas, Finova Capital is not only scaling its business but also making a positive impact on countless lives, businesses, and communities across India. As the company enters its next phase of growth, it is set to continue its mission of financial empowerment and inclusive development, shaping a better future for India’s economy.