In response to Business Standard’s queries, Aiswarya Ravi, CFO, Kinara Capital, said, “We have been proactively engaging with all our lenders, ensuring timely communication regarding our strategic shifts and expected plans. Further, our capital to risk-weighted assets ratio (CRAR) remains well within adequate levels to sustain our planned expansion”.
According to rating agency ICRA, as of June 30, 2024, Kinara’s lender profile consisted of 29 per cent debentures from foreign portfolio investors, followed by 28 per cent from external commercial borrowings, 28 per cent from non-banking financial companies (NBFCs) and financial institutions, 25 per cent from term loans from banks, and 2 per cent from alternative investment funds (AIFs).
In a September 2024 note, ICRA had said that the company was in breach of some financial covenants with its lenders and had received temporary relaxation from a few lenders for the same.
Media reports on Tuesday stated that the lender was grappling with financial challenges and has breached financial covenants, primarily due to elevated gross non-performing assets (GNPAs), profitability etc.
“Our long-standing relationships with lending partners are built on transparency and a deep understanding of our business cycle which is reflected in the ₹700 crores of fresh borrowings across different lenders this year,” said Ravi.
Ravi added the company’s Asset-Liability Management (ALM) position remains positive, and there is no need for any restructuring. “Our focus remains on strengthening financial discipline, maintaining liquidity, and sustaining long-term growth, all of which continue to reinforce lender confidence.”
Ravi clarified that they are not facing any “financial difficulties”.
In the third quarter of financial year 2024 (Q3FY24), the lender had identified early warning signals of rising delinquencies and higher-than-average leverage within certain customer segments.
As a result, it implemented proactive measures in FY25, tightening underwriting standards to ensure new disbursements are aligned with higher credit quality criteria. This resulted in low disbursement and a higher GNPA ratio.
“We have refined and aligned our disbursement engine with the revised credit underwriting norms, ensuring better risk assessment and portfolio quality. Similarly, on the collections front, we have implemented a well-balanced architecture with in-house teams and outsourced agencies, dedicated call centres and field support, and precision-driven data science models to enhance recovery focus,” Ravi said.
Meanwhile the lender is also looking to sell some of its stressed assets to strengthen its financial position.
“Our focus currently is on enhancing portfolio quality and building long-term resilience. We are looking at maximising recoveries through a structured sale process for our stressed assets while maintaining a prudent risk management approach to strengthen our overall financial position,” Ravi said.
As of June 2024, Kinara Capital’s gross stage 3 (GS3) assets or gross non-performing assets stood at 6.6 per cent.
 "Aiswarya Ravi, CFO, Kinara Capital")