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Finova Capital Raises Series A Funding from Sequoia India

Launched in 2016, the company has disbursed close to INR 45 Cr to over 500 small businesses till date. Currently operating out of five branches across Rajasthan, Finova plans to expand to 15 branches across India by the end of FY 17.

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Finova Capital, a Jaipur-based NBFC, has raised an undisclosed amount in Series A financing from Sequoia India. The MSME lending firm will use the funds to expand their presence across the country.

MSME finance in India is a largely unorganized sector, especially in smaller markets which have significant opportunities for small businesses, but lack access to formal credit. Most players in this space exist at two ends of a lending spectrum. Those who disburse low ticket loans – two to three lakh INR for a period of two to three years. And the larger players – who lend above 25L INR for 15 years or more.

Finova Capital aims to serve the ‘“missing middle”’ of the MSME segment, small businesses and services in small town and rural India who are looking for mid-ticket loans - eight to nine lakhs for a period of up to seven years. The loans are provided at customized interest rates and flexible tenure plans.

Given the sector it addresses, Finova looks at a borrower’s cash flow as opposed to formal documentation for credit assessment. The company has created customized templates which are used to analyze credit ratings across each sector. Finova also helps the financially excluded segments come in to the mainstream through financial literacy, thus enabling them for digital disbursement and repayment of loans.

Mohit Sahney, Founder and CEO, Finova Capital, said, “A large chunk of India’s MSME market falls into the service sector. And this is the segment we cater to - the electricians, plumbers, carpenters and chaiwallas. Those who don’t have access to much needed capital due to lack of formal documentation, financial literacy or presence of mid-level players. We currently work with 10 lenders and are looking to explore further partnerships to expand our lending portfolio. We expect to end the year at 100 CR AUM in our second year of operations and are profitable from the first year itself. We feel that a marriage of technology & brick & mortar would work well in a complex country like ours, so we are investing in technology to digitize everything right from loan application to disbursement.”

Finding locations which are cost effective, local experts who understand the framework, educating the borrowers who are used to working with money-lenders, and even creating customized templates for cash-flow analysis are some of the challenges Mohit and his team face on a regular basis.

Launched in 2016, the company has disbursed close to INR 45 Cr to over 500 small businesses till date. Currently operating out of five branches across Rajasthan, Finova plans to expand to 15 branches across India by the end of FY 17.

Speaking about the impact Finova Capital is making in the MSME lending industry in India, Mohit Sahney, Founder and CEO, Finova Capital, said, “Finova Capital is catering to the financially excluded MSME segment who are usually first time borrowers and do not have bank accounts. We enable them to enter the formal lending system, and move away from informal, and high-interest loans by money lenders for their working capital and business expansion requirements. We hand-hold borrowers through the end-to-end process of opening a bank account, repaying loans through digital platforms, thereby increasing financial literacy across this segment of the population.”

Furthermore, Finova Capital will use the funds to expand the presence across India. “We are looking at launching over 15 branches by the end of FY-17 and growing the strength of the company to 120 employees. Additionally, we aim to disburse over INR 100 crores by the end of FY-17,” says Sahney. In the immediate future, Finova is looking to lend in semi-urban and rural areas in Rajasthan, before expanding operations to other geographies. “We intend to invest in strengthening our in-house technology, and focus on segment specific financial products for MSMEs,” says Sahney.


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