Finova Capital raises $135 million in series E funding led by Avataar Venture Partners, others

Jaipur-based Finova Capital, a non-banking financial company (NBFC) focused on lending to micro, small, and medium enterprises (MSMEs), is raising $135 million (around RFs 1,120 crore) in a Series E funding round.

The round was led by Avataar Venture Partners, Belgium-based Sofina, and Madison India Capital. Existing investor Norwest Venture Partners also participated in this round, which includes a secondary component, allowing early investors to make a partial exit. 

This marks Avataar’s first venture into India’s financial services sector, highlighting the increasing focus on supporting underserved segments in the country’s lending market.

Funds to fuel expansion, technology, and loan book growth

Finova Capital plans to use the raised capital to grow its loan book, expand geographically, and enhance its technology infrastructure.

The firm also aims to scale up its operations to support financial inclusion, especially in semi-urban and rural areas.

What does Finova do?

Founded by Mohit Sahney and his wife, Sunita, in 2015, Finova provides secured MSME loans backed by immovable assets and home loans for borrowers often excluded from formal banking due to a lack of conventional income documentation.

“Our new investors share our vision for financial inclusion, which is focused on empowering entrepreneurs across the heart of Bharat,” said Mohit Sahney, founder and managing director of Finova Capital. 

Strategic investment in Finova’s technology-driven model

The investment underscores the confidence of Avataar, Sofina, and Madison in Finova's technology-driven lending model.

Finova utilizes its in-house technology to assess borrower cash flows instead of traditional credit scores, targeting micro-entrepreneurs and semi-skilled professionals who are often excluded from formal financing.

The firm's portfolio is concentrated in semi-urban and rural regions, with 91% of its loans directed at these areas.

Anirudh Singh, partner at Avataar Venture Partners, said, “Finova has demonstrated exceptional execution, building a profitable, technology-driven platform that has grown sevenfold over the last four years. We believe Finova is well-positioned to emerge as a market leader across India.” 

Expanding footprint across India

Finova currently operates across 16 states with over 400 branches and has a customer base exceeding 100,000.

The firm has recently expanded to states such as Karnataka, Andhra Pradesh, Telangana, and Himachal Pradesh, broadening its reach from its base in Rajasthan and other northern states.

According to a report from Care Ratings, Finova is expected to continue its geographic expansion to bolster its impact on financial inclusion.

Sofina’s principal, Tanya Sen, said, “We are delighted to support Finova in scaling its operations nationally and believe in their prudent approach to financial inclusion.”

Strong financial performance and asset quality

Despite catering to a high-risk MSME sector, Finova has managed to maintain high asset quality and profitability. The firm's disbursements saw a 50% year-on-year increase, growing from Rs 897 crore in FY23 to Rs 1,349 crore in FY24, contributing to improved net interest margins.

Finova reported a profit after tax of Rs 151.5 crore for FY24, a 71% increase from the previous year, while its revenue rose by nearly 60% to Rs 530 crore.