NeoGrowth may raise Rs 500 crore by September, eyes 40% loan growth

NeoGrowth, a digital lender focused on micro, small and medium enterprises (MSME), will raise equity capital of Rs 250 crore to Rs 500 crore by September end, chief executive officer Arun Nayyar said.

Following this, the non-banking finance company’s capital adequacy ratio will improve to almost 50 percent from 23.2 percent in March, he told Moneycontrol on June 1.

“We are looking to raise capital and are in advanced talks with a few players. We plan to conclude the equity raise process in the first half of the current fiscal. We would have liked to have completed it by March 2022 itself, but could not do so due to disruption in the external environment,” Nayyar said.

Nayyar said the incremental capital will be used for growth purposes.

Disbursement target

NeoGrowth’s disbursements were sharply affected by the Covid-19 pandemic as small and medium businesses closed on account of lockdowns. In August 2020, as the country struggled through the first wave of Covid-19, the fintech platform’s disbursals came down to Rs 3.1 crore. Subsequently, disbursements rose to a high of about Rs 145 crore in March 2021.

Business was impacted again during the second wave of the pandemic in May 2021, when its loans disbursed fell to Rs 5.9 crore.

“After the Covid-19 second wave eased out and business resumed, we have been growing at around 3 percent to 3.5 percent month-on-month, so you can say an annualised growth rate of close to 40 percent,” Nayyar said.

NeoGrowth will target 30 percent to 40 percent loan growth during FY23, he added. As of March end, the Mumbai-based lender’s assets under management stood at Rs 1,559 crore.

“We have been profitable for the last two quarters, but for the full year we made a loss. Our view is that going forward, since Covid-19 issues have been fully absorbed, we should continue to remain profitable,” Nayyar said.

However, NeoGrowth’s loan growth rate target of up to 40 percent in FY23 is below average.

On an aggregated basis, major fintech companies reported disbursing 26.6 million loans amounting to over Rs 18,000 crore in FY22, doubling from the previous year, according to a report by the Fintech Association for Consumer Empowerment dated May 31. Both small and large non-bank lenders followed this growth trajectory, it said.