Kinara Capital raises $14.5M in Series C funding, to expand portfolio and invest in technology

Bengaluru-based Kinara Capital, a non-banking financial company (NBFC), has raised $14.5 million in Series C funding from multiple investors including existing investors Michael & Susan Dell Foundation and Patamar Capital and new investors Gaja Capital and GAWA Capital.

The fresh round of funding will be deployed to expand the product portfolio in existing and new geographies in India and increase investment in technology to improve efficiency in field operations.

With this round, the cumulative total goes up to approximately $20 million. This round also provided exits to Shriram City Union Finance Ltd and investors of IIX's Impact Partners platform.

Hardika Shah, Founder and CEO of Kinara Capital, said, "This new investment will help us deepen our reach in existing geographies and enhance our technology solutions to improve our efficiency. Our aim is to extend our support to more than 50,000 entrepreneurs across 100 cities in India by the end of 2019.”

The platform wants to fill the gap between microfinance and commercial capital by providing mid-sized loans to micro and small businesses.

Kinara works with network partners (buyers, trade organisations, franchisors, etc.) across supply chains to source and fund micro and small businesses in manufacturing, artisan products, and agri-retail. Kinara, which acquires reliable borrowers by plugging into existing supply chains, provides loans to sole proprietor firms, artisan groups, partnership firms, and village-level entrepreneurs.

Kinara’s current lending portfolio is claimed to be $40.23 million across over 9,000 customers. It currently provides local services in 50 locations across five states (Karnataka, Maharashtra, Tamil Nadu, Andhra Pradesh, and Telangana) and is in the process of expanding to Gujarat in Q3 2017.

Rahil Rangwala, Portfolio Director – Family Economic Stability, Michael & Susan Dell Foundation, said, “Kinara’s loan portfolio has not only demonstrated a 20 percent increase in entrepreneur income but also created two jobs for every loan provided. Hardika and her team are changing the lives of financially excluded micro-entrepreneurs and helping them achieve their true potential. This strongly aligns with the Michael & Susan Dell Foundation’s mission of transforming lives of urban poor families.”

Agustín Vitórica, Co-founder and Co-CEO of GAWA Capital, who has joined the board of Kinara Capital, said, “At GAWA, we strive to identify leaders who can compel a transformational shift in an industry. Kinara Capital’s Hardika Shah has proven to be able to do just that with successful MSME lending initiatives. We see a tremendous opportunity in contributing to filling the MSME credit gap in India and we strongly believe Kinara Capital is the right company to meet this mission.”

Kinara Capital’s typical customer is often a first-generation entrepreneur with five years of work experience and an average business turnover of Rs 1–20 lakh per month. Kinara funds a wide range of MSMEs with a focus on manufacturing businesses in sectors such as auto parts, machine components, electrical components, kitchen appliances, food products, packaging products, plastics, and more for asset purchase and working capital needs. More than 90 percent of Kinara’s portfolio is in urban and semi-urban regions. Kinara Capital provides loans in the range of Rs 1–20 lakh to the MSME sector, which is the largest contributor to the national GDP.

According to the RBI, this year, NBFC loans have grown at 16.6 percent, compared to 8.8 percent for the banking sector.

The RBI's Financial Stability Report (December 2016) shows a 33.1 percent increase in loans and advances given by deposit-taking NBFCs and a 12.5 percent increase in advances given by non-deposit-taking NBFCs.

Besides Kinara Capital, recently Lendingkart raised $25 million in debt and equity funding and InCred claimed to have a Rs 100 crore loan book.