Debt-laden Kinara Capital looks to sell majority stake for survival
Shah said he hopes to raise a few hundred crores by selling a majority stake in the company and help the company restart lending.
“If I put myself in their shoes, I see this as a strategic investment, which means they’re going to want full control over which direction this asset goes,” he said in an interview, declining to share names because talks are still in their early stages.
debt crisis
The company, backed by Gaja Capital, British International Investment and others, provides secured and unsecured loans to small businesses and has been struggling with a liquidity crisis for several months.
The lender reported losses for the first time in 2024-25, mainly due to bad loans. Then, at the end of July, a private sector lender offset its loan against balances in the company’s bank account, prompting other bankers to issue loan recall notices.
Then came the credit rating downgrade to D or default.
Shah said there are about 20 domestic and 11 international lenders and Kinara’s total debt is 200 million lira. ₹1,400 crore as of August, “almost 70% of which comes from international lenders”.
Kinara tried to raise capital and also tried to sell part of its loan book to raise cash, but neither worked, Shah said. “It has been difficult for their (investors’) universe to unlock additional capital for NBFCs,” Shah said. “We completely lost all liquidity and hired a banker to bring in new equity. Although we had some good potential offers, they did not convert.”
Kinara Capital raised in December ₹200 crore from investors led by British International Investment (BII) hopes the fundraise will help the lender grow 5x by 2025 ₹6,000 crore. The company was valued ₹1,060 crore as of December 30, 2024, according to data from market intelligence platform Tracxn.
in pause
The non-bank institution stopped issuing new loans due to liquidity crunch and focused on rescuing existing loans. Shah said it may resume lending operations when it receives new capital.
It had assets under management at the end of 2024-25. ₹2,831 crore as against ₹3,142 crore in the previous financial year.
According to Shah, Kinara has now reached an agreement with almost all local lenders that will get them back all of their principal and some of their interest. Foreign lenders decided to stop repayments and NBFC has now started repayment.
He said the company will continue to explore portfolio sales. “We need to provide liquidity through repayments to our international lenders and we will continue to seek the fastest way to provide these repayments to them.”
Care Ratings Ltd downgraded Kinara in August following delays in principal and interest payments on non-convertible bonds, saying defaults in certain segments had increased in 2024-25 and slippages remained high at 8%, the same level as 2023-24.
“This development also highlights the increasing stress on the company’s liquidity and overall financial profile,” Care Ratings said in its August 7 note. “Asset quality has deteriorated due to high defaults seen in certain sectors and geographies and loans extended with high ticket sizes.”
Kinara is not alone in attempting to clean up its books following the boom in unsecured loans. Mint reported On October 28, it was announced that non-bank lenders such as Kinara Capital, Lendingkart, Aye Finance and Ashv Finance had reduced unsecured loans after regulatory scrutiny tightened financing to the sector.
These lenders serving small businesses have either sold or securitized unsecured loans or are exploring such options.
