Kinara Capital Lenders Issue Loan Recall Notices

SUMMARY

ICRA downgraded Kinara Capital’s bonds and loans after some of its lenders appropriated fixed deposits and issued loan recall notices

The credit rating agency said, the NBFC is contemplating various options, including sale of assets and the corresponding transfer of liabilities

As of June, the company had a total debt of INR 1,853 Cr from 46 lenders, ICRA said

Kinara Capital is facing a liquidity crunch after some of its lenders appropriated fixed deposits and issued loan recall notices, prompting credit rating agency ICRA to downgrade the company’s bonds and loans.

ICRA said that the severe deterioration in the liquidity profile faced by Kinara Capital following the loan set-off against its bank balances and appropriation of lien-marked fixed deposits by some lenders and the requests from other lenders for early redemptions of their loans.

The credit rating agency highlighted that this action from a few lenders would direct the other lenders to also trigger an early redemption, hurting its liquidity profile in the near term.

It further noted that Kinara Capital is contemplating various options, including sale of assets and the corresponding transfer of liabilities.

In June, credit rating agencies India Ratings and Care Ratings also downgraded their respective ratings for Kinara Capital, citing concerns over its financial stability.

As of June, the company had a total debt of INR 1,853 Cr from 46 lenders, ICRA said.

Responding to Inc42 queries, Kinara Capital said in a statement that, “We have strong, long-standing relationships with our lenders who understand our mission, market cycles, and consistent track record. In line with our focus on financial resilience, we are actively and constructively engaging with them to explore solutions that support long-term stability.”

Founded in 2011 by Hardika Shah, Kinara Capital offers business loans to MSMEs. Users can avail these loans through Kinara Capital’s app – myKinara app.

The Bengaluru-based fintech company claims to have disbursed loans worth over INR 8,501 Cr to more than 1 Lakh MSMEs. It also claims to have over 130 branches.

Kinara Capital has raised around $178 Mn in funding since its inception. The lending company is backed by Singapore-based Impact Investment Exchange (IIX), BlueOrchard Microfinance Fund, British International Investment, Nuveen and Triple Jump’s AMP fund, among others.

On the financial front, Kinara Capital recorded a standalone net loss of INR 351 Cr in FY25 against a profit of INR 62 Cr in the previous fiscal year.

Kirana’s swelling bad loans also led to the company taking a cautious approach in disbursing loans, resulting in its AUM contracting 9.6% to INR 2,841 Cr at the end of FY25 from INR 3,142 Cr a year ago.

The NBFC’s total income also fell by 18% to INR 601 Cr in FY25 from INR 734 Cr in the previous fiscal year.