The fintech company-backed by Nuveen Global Impact, Gaja Capital, British International Investment, the Michael & Susan Dell Foundation, Patamar Capital, and Gawa Capital-reported a loss of ₹350 crore in FY25, compared to a net profit of ₹62 crore the previous year.
The company has breached financial covenants on 91% on its debt across 25 parameters, including a sharp rise in bad loans, reduced security cover, and reported losses. These breaches give lenders the right to demand accelerated repayment and may trigger cross-default clauses. The company has not defaulted on any debt payments so far.
Kinara Capital is currently in discussions with lenders to obtain covenant waivers. As of March 31, 2025, only 4% of debt holders by value had agreed to waivers, leaving 87% of borrowings in breach without lender forbearance.
Out of the total ₹2,035 crore in outstanding principal debt, the company has breached covenants on ₹1,853 crore.
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Confirming the development, Kinara Capital said in an email response to ET: “We have engaged an investment banker to support us in raising equity. We are also actively exploring business correspondent (BC) partnerships.” The company added that with additional capital infusion, it aims to “expand our disbursement capacity through a balanced mix of secured and unsecured loan products.”
“If a large lender decides to pull the trigger, it could create liquidity issues. Hence, the company needs to infuse fresh capital at the earliest,” said a senior lender to Kinara Capital. “Getting an investor to square off existing debt will be a challenge,” the same person added. According to India Ratings on June 10, the company had ₹2,783 crore debt as of March 2025 from 45 lenders and investors. These include IDFC Bank, MAS Financial, ESAF Small Finance, Vivriti Capital, and SBM Bank.The company’s auditors, Nangia & Co, noted in the FY25 audited results: “The company’s ability to continue as a going concern is dependent on obtaining waivers from lenders for immediate repayment demands for at least twelve months from the balance sheet date, and/or securing sufficient funds through equity infusion, additional financing, or incremental co-lending relationships.”
Founded by Hardika Shah in 1996, Kinara Capital specialises in providing secured and unsecured loans to small businesses, provides co-lending facility and direct loan assignments. It has an AUM of ₹2,841 crore and operates through 80 branches.
The loan portfolio at risk (90+ days past due) stood at ₹202 crore, with a gross stage 3 ratio of 7.4% in FY25, indicating elevated delinquencies in the unsecured loan segment. The company sold ₹478 crore in loans to an asset reconstruction company and wrote off ₹341 crore. Total impairment of financial instruments doubled in FY25 to ₹393 crore.
India Ratings stated that in the near term, Kinara will need to raise additional capital beyond existing confidence capital to support its growth aspirations and absorb ongoing asset quality pressures.
In a statement, Kinara Capital said that its business correspondent partnerships will allow it to deploy surplus capital through direct disbursements, adding the resulting business loans to its balance sheet.
“We were also impacted by industry headwinds, including changes to the regulatory framework for unsecured lending and macroeconomic conditions that affected collections,” the company said.
