Finova Capital Secures $135M in Series E Funding to Fuel MSME Lending Growth

Finova Capital, a Jaipur-based non-banking finance company (NBFC) and prominent MSME lender, has successfully raised $135 million in a Series E funding round. This investment was led by Avataar Venture Partners, along with significant contributions from Sofina and Madison India Capital. The new funding is poised to support Finova’s ambitious plans to expand its loan portfolio and enhance its technological infrastructure, further solidifying its position in the MSME financing landscape.

The Series E round also saw continued participation from existing investors, including Norwest Venture Partners, Peak XV Partners, Faering Capital, and Maj Invest, who collectively increased their stakes in the company. Notably, some early investors achieved partial exits as part of this transaction. This round is particularly significant as it marks Avataar Venture Partners’ inaugural investment in India’s financial services sector, indicating a growing interest in the potential of fintech and NBFCs in the country.

Founded in 2015 by Mohit and Sunita Sahney, Finova Capital has carved out a niche by providing tailored financial services to micro-entrepreneurs and semi-skilled professionals. These segments often face hurdles in accessing traditional banking services, making Finova’s offerings critical for their growth and sustainability. The company currently operates across 16 cities, has established partnerships with over 400 brands, and manages assets worth approximately Rs 3,000 crore.

Finova’s innovative approach to credit assessment focuses on analyzing borrowers’ cash flow, allowing it to serve clients who typically lack formal credit histories. This method is particularly advantageous for its target market, where conventional documentation may not be available. To facilitate credit underwriting, Finova employs sector-specific templates and has partnered with Bengaluru-based Unitus Capital as their financial advisor.

Prior to this funding round, Finova had already raised approximately $125 million, with its last reported valuation standing at $376 million in March 2022, according to Tracxn data. Among its investors, Faering Capital is noteworthy as a mid-market private equity firm founded by Sameer Shroff and Aditya Parekh, the latter being the son of HDFC group chairman Deepak Parekh. Additionally, Sofina is recognized as a global investment company listed on the Euronext Brussels.

Anirudh Singh, Partner at Avataar Venture Partners, expressed enthusiasm about the investment, stating, “As Avataar’s first investment in the financial services sector, we are delighted to be partnering with Finova, which is the market leader in MSME financing across North, Central, and West India.” This strategic partnership aims to further elevate Finova’s capabilities, ensuring it remains at the forefront of the MSME financing market in India.

Disclaimer: The information provided in this article is based on publicly available sources and statements made by the involved parties. The financial performance and future success of Finova Capital are subject to market conditions and various risks. Readers are encouraged to conduct their own research and analysis before making any investment decisions.