Jaipur-based non-banking financial company Finova Capital Pvt. Ltd has raised fresh capital from its existing investor Sequoia Capital as part of its Series A funding round.
This is the second tranche of the funding round, the company said in a statement. Sequoia has put in a total of $6 million (Rs 39 crore) over two tranches, it said.
Finova Capital had raised an undisclosed amount from Sequoia Capital in September last year, in its first round of external funding.
The firm will use the funds for expanding operations, investing in technology and acquiring talent as it seeks to tap the micro, small and medium enterprises (MSME) sector, which employs more than 111 million people and contributes 37% of the India’s GDP, it said.
Given the unorganised nature of the sector, there is a debt gap worth more than Rs 300,000 crore which is constraining MSMEs from expanding, the firm said.
“There is a dearth of organised credit available to MSME businesses largely due to lack of formal income, documentation and financial literacy,” said Mohit Sahney, founder and CEO, Finova Capital. “We are investing in technology as we believe it is an enabler to the traditional brick and mortar model, and the most efficient way to deliver credit to our target segment,” he said.
Founded in 2015 by husband-wife duo Mohit and Sunita Sahney, Finova lends to financially-excluded small-time manufacturers, handymen and service providers, such as electricians, plumbers and carpenters, besides paanwalas, milkmen and hairdressers. It offers loans of Rs 8-9 lakh for up to seven years and charges an annual interest of 21-25%.
The company, which has tie up with 13 lenders including IFMR, Reliance, DCB Bank and Capital First, claims to have disbursed loans of over Rs 90 crore to over 1, 100 customers so far.
GV Ravi Shankar, managing director, Sequoia India Capital Advisors, said Sequoia is encouraged to support Finova’s next leg of growth as it has scaled fast while maintaining high portfolio quality.
Unitus Capital acted as the financial adviser for the transaction.
The financial sector in India has gained a lot of traction in recent years with several players entering the payments, lending, insurance and personal finance space.
In 2017, the Indian fin-tech sector mopped up around $1.84 billion in total funding with online lending platforms accounting for the maximum investment deals by volume – around 45 of the total 75 deals in the space. Industry experts also expect that online lending platforms will continue to get a lot of investor attention in 2018 as well.
In January this year, Pune-based Social Worth Technologies Pvt. Ltd, which runs online lending platform EarlySalary, raised Rs 100 crore ($15.7 million) in a Series B funding round led by Eight Roads Ventures India.
Like this report? Sign up for our daily newsletter to get our top reports.