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Norwest Ventures-backed lending tech startup Finova Capital recorded an 11% year-on-year (YoY) decline in its net profit for the fiscal year FY26 to ₹165.3 Cr from ₹185 Cr in the previous fiscal year. 

Operating revenue grew 21% to ₹921.4 Cr from ₹762.3 Cr in the previous year. Interest income accounted for ₹901.7 Cr of its revenue while a further ₹10.6 Cr came from fees and commissions. It earned the remainder ₹9.1 Cr revenue from net gain on fair value changes (profit on investments). 

Notably, Finova’s loan disbursements fell sharply by 17% to ₹1,161.9 Cr in FY26 from ₹1,396.9 Cr in the previous fiscal, while its gross assets under management (AUM) grew 10% to ₹3,827.8 Cr. 

Gross and net NPAs also saw a slight increase. Gross NPAs grew from 2.39% to 3.22% while Net NPAs grew to 1.94% from 1.41%. 

In its annual report for the fiscal year, the NBFC said that the results reflect its resilience and ability to navigate challenges even in a complex and challenging external environment.

“The moderation in profit was driven by challenging macro environment and market conditions in the retail and MSME lending sectors across the industry. The company consciously prioritised asset quality, prudent provisioning and portfolio resilience over short-term profitability supported by disciplined underwriting and calibrated credit growth,” the report read.

It noted that NBFCs are facing challenges in terms of asset quality resulting in delinquencies inching higher, particularly within unsecured segments like microfinance, personal loans, and SME loans. 

These asset quality concerns are weighing on the credit costs of NBFCs and would result in a moderation in profitability for FY26. Despite this, Finova said that it expects pressure on asset quality in FY27, attributing credit rating agency ICRA. This is expected to help lower credit costs and thus improve profitability from the current levels.

To protect its asset quality, the startup has undertaken measures like restructuring its operational framework to separate its sales and risk verticals.

It also revamped its collections function and adopted a micro-market-focused approach to calibrate its exposure to specific geographies facing regional challenges impacting borrower cash flows and collection efficiencies. 

From a tech perspective, the startup said it is implementing AI solutions to automate collections strategy and machine learning-based predictive models for collections. It is also evaluating the use of AI for automated Personal Discussion (PD) processes, photo de-duplication to detect frauds, document processing, file verification, and multilingual voice AI for collection processes. 

Finova Capital is a middle-layer NBFC founded in 2015 by the husband-wife duo of Mohit Sahney and Sunita Sahney. 

The startup offers MSME business loans and home loans, with a focus on the unorganised sector in semi-urban and rural areas. It has a network of over 450 branches across Delhi NCR, Rajasthan, Haryana, Punjab, Uttar Pradesh, among 16 states. 

It has raised over $270 Mn in equity and debt funding from investors like Faering Capital, Avaatar Venture Partners, Peak XV Partners, Sofina, among others. 

While cofounder Mohit Sahney commands 38% equity share capital of Finova, Peak XV owns 20% and Norwest holds 14%. 

Despite the growth in its topline, Finova’s total expenditure surged by more than a third to nearly ₹700 Cr as compared to ₹513.8 Cr in the year-ago period. Here are the top expenses of the NBFC. 

Employee Benefits Expense: Finvoa spent ₹268.4 Cr on employee benefits in FY26, with this line item growing by 23%. 

Finance Costs: Coming in at ₹243.6 Cr in FY26, Finova’s finance costs zoomed 22% on a YoY basis. 

Impairment On Financial Instruments: The cost of impairment tripled YoY to ₹126.1 Cr from ₹42 Cr. 

Other Expenses: Finova’s spending under this line item, which includes costs like marketing, tech expenses, rose by 18% to ₹53.7 Cr in FY26. 

Depreciation, Amortization and Impairment: It amounted to ₹8.2 Cr in FY26, rising 16% compared to the previous year. 

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