NBFC Kinara Capital Eyes INR 200 Cr Funding To Avert Debt Crisis

Troubled non-banking finance company (NBFC) Kinara Capital is reportedly looking to raise nearly INR 200 Cr from external strategic investors to avert its debt crisis.

Founder Hardika Shah told Economic Times that the existing investors are unlikely to infuse new capital into the company right now. 

To avert the mounting credit payments, Shah reportedly said that the NBFC has signed a standstill agreement with its foreign creditors to seek more time for restructuring an INR 1,150 Cr debt. The pact, which includes overseas lenders such as ResponsAbility, BlueOrchard, and Symbiotics, will last till the end of January 2026. 

She added that the NBFC is simultaneously in the final stages of implementing a one-time settlement with domestic lenders. 

Under the standstill agreement, the creditors have reportedly agreed to not take any legal action against the company to recover their dues for a set period. Meanwhile, the debt recast plan for domestic lenders includes repayment of the entire principal debt and some interest payment.

This follows Kinara reportedly delaying payments in the June quarter, which resulted in certain creditors recalling loans and rating agencies downgrading the NBFC to the ‘default’ status. At the end of June, Kinara owed INR 1,853 Cr to 45 lenders. 

However, the company has been settling some of these loans. Despite this, the NBFC’s outstanding debt still reportedly currently stands at more than INR 1,200 Cr payable to 20 lenders. 

Amid the churn, the NBFC plans to stick to its mainstay, unsecured loans. Shah reportedly added, “I started this with strong conviction on unsecured lending. I’ve stayed the course for 15 years on the same path. I do think that all of us trying to become secured lenders is not the solution”.

Most NBFC suddenly began grappling with high stress in their unsecured loan books after the Reserve Bank of India (RBI) last year increased risk provisions on such loans. However, the RBI reversed this directive in February this year.

Kinara Capital, too, took the blow and witnessed a sharp rise in its unsecured loans. The company even reportedly sold INR 478 Cr worth of stressed loans to an asset reconstruction company (ARC) in FY25.

As a result, the company stopped dishing out new loans starting FY26, and is currently solely focussed on collections. Shah reportedly said that Kinara would ring-fence cash flows as it prefers “securing risk rather than securing property.”

How Kinara Capital Faltered?

Once a rising star in India’s NBFC space, Kinara Capital’s fortunes took a stumble after it slipped into the red in FY25 (INR 351 Cr loss) for the first time in ten years. Largely to blame for this was rise in bad loans, increase in credit cost and decline in assets under management (AUM). 

Making matters worse, the NBFC, which provides collateral-free loans via both online and offline channels, was hit by a rise in write-offs over the last few years. As a result, the company’s gross non-performing assets (GNPA) and net NPA (NNPA) soared while increased customer overleveraging further pummeled its bottom line. 

Due to the rising technical write-offs, Kinara’s cost on credit shot up to 14.5% in FY25 from 7.1% in the previous year. The rise in bad loans also led to the company taking a cautious approach in disbursing loans, which resulted in its AUM contracting 9.6% to INR 2,841 Cr at the end of FY25 from INR 3,142 Cr a year ago. Subsequently, income dwindled and the company slipped into the red in FY25.