Kinara Capital raises Rs 380 crore in equity round led by Nuveen; to disburse Rs 10,000 crore MSME loans in 3 years

Kinara Capital founder Hardika Shah.

Bengaluru-headquartered non-banking finance company (NBFC) Kinara Capital has raised Rs 380 crore via equity in a Series E funding round led by two foreign investors, Nuveen and Triple Jump, it announced on April 19.

“This round of equity financing for Kinara Capital comes from Nuveen's Global Impact Fund which focuses on transformative companies’ impact value chains for low-income consumers and from the ASN Microkredietfonds, a listed and regulated Dutch microfinance fund advised by Triple Jump,” it said.

With this equity round of fund raise, two new members from Nuveen-- Managing Director and Co-Head of Private Equity Impact Rekha Unnithan and Director of Private Equity Impact Stephen Lee—will join the Board of Kinara Capital.

Kinara Capital is a mid-sized NBFC focussing on credit to micro, small and medium enterprises and plans to disburse Rs 10,000 crore of MSME business loans in the next three years.

Speaking to Moneycontrol on April 19, Kinara Capital Founder and CEO Hardika Shah said the NBFC expects bond rates to fall by 100 basis points in the current fiscal as the sector is undergoing consolidation and lenders including banks, large NBFCs and foreign financial institutions are looking to extend loans to NBFCs that are profitable, stable and growth oriented.

“There is consolidation happening and more of it is likely to happen as people traverse through COVID-19 and into this year of raising capital, equity, liabilities and chasing growth. Those that have strong balance sheet and performance metrics will hopefully live to fight another day.”

Kinara Capital started FY22 with a loan book of Rs 900 crore and closed it at around Rs 1,300 crore, registering a rise of 44 percent. In FY23, the NBFC will achieve 100 percent YoY growth, Shah said.

Further, the NBFC will focus on structured finance, revolving finance, and revolving credit type products that are relevant to its customers in the current fiscal. As on March-end, around 15 percent of the NBFC’s AUM came from co-lending partnerships that it has signed with six lenders, Shah said.

Commenting on the biggest development in the NBFC sector-- Housing Development Finance Corp’s merger with HDFC Bank--Shah said that it made sense for HDFC to convert into a bank-like structure because they were already being governed like one.

When asked whether the RBI’s recent moves to introduce prompt corrective action and November 12 circular on asset upgradation are making the compliance cost harder for small sized non-bank lenders, Shah said the timing for the introduction of these guidelines could have been better.

“It was really poor timing from the regulator on the back of COVID-19 and everything that is happening in the country to then slap this on…I am not saying they are wrong in asking it, I am just saying the timing could have been better,” she said.