Lendingkart’s Technology-Based SME Lending Strategy

Industry & Competitive Context

India's micro, small and medium enterprise (MSME) sector contributes close to 30% of the country's GDP and accounts for more than 35% of manufacturing output and over 45% of exports, yet a large share of this sector has historically remained outside the formal credit system because small businesses often lack collateral, audited financials, or a traditional credit bureau history. This gap created an opening for technology-led non-banking financial companies (NBFCs) to underwrite MSME loans using alternative data rather than conventional collateral-based assessment. Lendingkart Technologies Private Limited, founded in Ahmedabad in 2014 by Harshvardhan Lunia and Mukul Sachan, positioned itself in this space through its NBFC subsidiary, Lendingkart Finance Limited (formerly Aadri Infin Limited), which lends on its own balance sheet and, since the early 2020s, increasingly through co-lending arrangements with banks and other NBFCs.

The competitive set for MSME-focused digital lenders in India includes NeoGrowth, Indifi Technologies, FlexiLoans, Kinara Capital, InCred, and Yubi (formerly CredAvenue), among others, alongside traditional banks that have themselves built digital MSME lending arms. Within this set, Lendingkart's stated point of differentiation was its underwriting technology: a proprietary system built to analyse thousands of data points from banking transactions, GST and tax filings, credit bureau records, and other digital footprints in order to generate a creditworthiness assessment faster than a conventional bank could.

Brand Situation Prior to the Strategy's Full Rollout

At founding, Lendingkart entered a market where SME loan approvals through traditional banking channels commonly took several weeks and required physical documentation and collateral. The company's founding premise was that a technology-first, data-driven underwriting engine could compress this timeline substantially while extending credit to businesses that banks would otherwise decline for lack of a formal credit history. Public reporting from the company's early NCD fundraising in 2018 stated that its underwriting tools assessed over 10,000 data variables covering financial health, comparative market performance, social reliability, and compliance behaviour, and that by that point it had disbursed over 28,000 loans to more than 21,000 MSMEs across 26 sectors, at an average ticket size of roughly ₹5–6 lakh. By 2021, the company said it had disbursed cumulative loans of $1 billion since inception across six years of operation.

Strategic Objective

Lendingkart's publicly stated objective, repeated across company communications and investor announcements, has been to "simplify finance for small businesses" and extend formal credit to MSMEs that are underserved by traditional lenders, particularly in tier 2, tier 3, and smaller markets. Strategically, this translates into three objectives that can be read from the company's actions: first, build and continuously refine a proprietary, technology-based underwriting model that reduces turnaround time and expands addressable borrowers beyond those with strong conventional credit histories; second, scale loan disbursement without proportionally scaling balance-sheet risk, which the company pursued by shifting an increasing share of its loan book into co-lending partnerships with banks and NBFCs rather than funding all loans on its own books; and third, diversify revenue beyond pure interest income into commission-based income streams, including insurance distribution and co-lending fees.

Strategic Architecture & Execution

The underwriting engine as the core asset

The company's core technology asset is a proprietary algorithm, described in company and third-party reporting as analysing several thousand data points, drawing on banking transaction history, credit bureau records, tax filings, and other digital data sources to generate a rapid creditworthiness assessment. This engine underpins loan origination, evaluation, onboarding, and collections in what the company describes as an end-to-end digital process, supplemented by its own mobile application.

One independently documented feature of this model is notable from an inclusion standpoint: research published by Women's World Banking found that Lendingkart's credit-scoring algorithm produced similar credit scores for men and women loan applicants, a result the organisation highlighted as unusual in a market where algorithmic and human bias frequently disadvantages women-led businesses in accessing credit. This finding is one of the few third-party, non-company assessments of the technology's actual output rather than its stated design, and it lends some external credibility to the "unbiased, data-driven" positioning the company has used in its own communications.

Shift toward a co-lending model

A defining strategic move, well documented in exchange-linked and credit-rating commentary, is Lendingkart's shift from primarily on-balance-sheet lending toward a co-lending model. Under Reserve Bank of India norms, co-lending arrangements allow a fintech or smaller NBFC to originate and underwrite loans that are largely booked on a partner bank's or larger NBFC's balance sheet, with the co-lender retaining a smaller share, commonly in the 20% range, and receiving commission income on the remainder. By March 2024, according to ICRA's rating commentary reported by the business press, Lendingkart's assets under management (AUM) had grown 46% year-on-year to approximately ₹7,254 crore, and off-book AUM originated through co-lending had risen to roughly 70% of the total portfolio, up from about 39% a year earlier, spanning agreements with 25 bank and NBFC partners. This is a significant strategic pivot: it allowed the company to keep growing disbursement volumes while limiting how much credit risk sat directly on its own books, but it also structurally compressed net interest margin, since a large share of loans now generate commission income rather than full interest income for Lendingkart itself.

Product and portfolio expansion

Beyond its core working-capital loan product, the company diversified its offering over time to include term loans, lines of credit, and, following its 2023 acquisition of retail lender Upwards Fintech Services (reported at an estimated value of ₹100–120 crore), small-ticket personal loans marketed under the Upwards brand, alongside credit cards and insurance distribution. Insurance commission income, in particular, grew sharply, rising from roughly ₹9 crore to about ₹65 crore year-on-year in FY24, according to company financial disclosures reported by Inc42, indicating a deliberate push to build fee-based revenue lines alongside its core lending business.

Capital and ownership evolution

Lendingkart has raised well over $300 million in cumulative equity and debt funding since inception, from investors including Fullerton Financial Holdings (FFH, a wholly owned subsidiary of Singapore's Temasek), Bertelsmann India Investments, Saama Capital, Mayfield India, Sistema Asia Capital, India Quotient, and later debt investors such as EvolutionX Debt Capital, Stride Ventures, BlueOrchard Finance, and InnoVen Capital. FFH first invested in 2018 and built its stake to roughly 38% by 2024. In October 2024, amid what business press described as a cash-flow strain in the unsecured lending market and a sharp markdown in the company's valuation (reportedly from around $350 million in 2020 to approximately $100 million), FFH agreed to infuse ₹252 crore and take a controlling, majority stake in Lendingkart Technologies, a transaction the Reserve Bank of India approved in March 2025.

Positioning & Underlying Insight

Lendingkart's positioning rests on a specific insight about the Indian MSME credit market: that the binding constraint on lending to small businesses is not necessarily creditworthiness itself but the cost and speed of assessing it through conventional means. By substituting bank statements, GST filings, and digital transaction data for collateral and lengthy manual underwriting, the company sought to make MSME lending both faster for the borrower and, in principle, more scalable for the lender. This positioning was reinforced through award recognition, including a "Best Fintech Award" from the Financial Express in 2022, and through the company's consistent public messaging around financial inclusion for underserved MSMEs across smaller cities. As of company-reported figures from its FY24 disclosures, Lendingkart Finance served customers across more than 4,100 cities and towns spanning 34 states and union territories, with over 225,000 customers and more than 1.1 lakh active loan accounts as of a September 2023 reference point, indicating that the "reach beyond metro India" positioning was substantiated by actual geographic distribution rather than being aspirational alone.

Media & Channel Strategy

No verified public information is available on Lendingkart's advertising or brand media spend, agency partnerships, or campaign-level media strategy. What is publicly documented is its distribution and origination channel mix: direct digital origination through its own app and platform, a network of selling agents (the company's FY24 disclosures show commission paid to selling agents rising 58% year-on-year to ₹125.6 crore), and, increasingly, origination for co-lending partners such as Mahindra Finance and, through Yubi's 2gthr platform, a wider set of banks and NBFCs. This suggests the company's primary "channel strategy," to the extent it can be evidenced publicly, was B2B2C in nature: building origination and underwriting capacity that could be sold to or shared with larger balance-sheet lenders, rather than a consumer brand-media strategy in the traditional marketing sense.

Business & Brand Outcomes

The documented financial trajectory shows a company that scaled disbursement and AUM meaningfully but experienced volatile and, more recently, deteriorating profitability. Lendingkart Finance (the NBFC subsidiary) first reported full-year profitability in FY23, with a net profit of approximately ₹115.66 crore (reported elsewhere as ₹118.8 crore) on standalone sales of about ₹802.89 crore. In FY24, standalone sales rose 33.5% to ₹1,071.66 crore, but standalone net profit fell 48% to ₹60.08 crore, which the company's founder attributed in an interview to rising staffing costs, higher credit costs, and fees tied to credit-guarantee scheme registrations and portfolio renewals. At the consolidated parent level (Lendingkart Technologies), total revenue including other income rose to ₹1,217.9 crore in FY24 from ₹858 crore in FY23, while consolidated net profit collapsed 97% year-on-year to approximately ₹3.25 crore, driven by a 128.6% jump in impairment losses on financial assets to ₹256.3 crore and a 75.6% rise in employee costs to ₹199 crore.

The deterioration continued into FY25: Lendingkart Finance's operating revenue fell 24.5% to ₹862.2 crore, and the company swung to a standalone net loss of ₹288.3 crore, compared with the ₹60.1 crore profit of the prior year, a result the company linked to a decline in AUM, RBI's late-2023 tightening of risk weights on unsecured lending (which raised the cost of funds for NBFCs in this segment), and broader macroeconomic pressure on the unsecured MSME loan book. This financial stress coincided with, and by most public reporting preceded, the FFH majority-stake acquisition and a subsequent leadership turnover: founder Harshvardhan Lunia stepped down as CEO of Lendingkart Technologies following the transaction and was succeeded in April 2025 by Prashant Joshi, a 30-year banking veteran and former Managing Director and Head of Consumer Banking Group at DBS Bank; Lunia also stepped down as Managing Director of Lendingkart Finance effective June 30, 2025. Press reports also documented the departure of at least eight senior executives across the group within roughly a year of the ownership change, alongside co-founder Mukul Sachan's earlier exit in 2019.

Strategic Implications

Lendingkart's trajectory illustrates both the promise and the structural limits of a technology-first underwriting strategy in SME lending. The proprietary data-driven credit model appears to have genuinely differentiated the company in its early years, enabling rapid scale-up of loan disbursement and, per the Women's World Banking research, a demonstrably lower gender bias in credit outcomes than is typical in the sector. However, the shift toward co-lending as the primary growth engine, while it reduced on-balance-sheet risk concentration, also structurally shrank the company's own interest margin and made its profitability increasingly dependent on managing credit costs on the smaller book it does retain, and on maintaining a wide network of bank and NBFC co-lending partners on favourable terms. The FY24–FY25 results show that when systemic pressure on unsecured lending arrived, in the form of RBI's tightened risk-weight norms, rising impairment costs, and macro stress in the unsecured MSME segment, a technology-enabled underwriting edge alone was not sufficient to protect profitability. The subsequent change in majority ownership and the wholesale replacement of founding leadership with a career banker suggest that Lendingkart's next phase will likely be measured less on technology-led growth narratives and more on conventional NBFC discipline: asset quality, cost of funds, and capital adequacy, under a controlling shareholder, FFH/Temasek, with a longer institutional track record in emerging-market financial services. For MBA analysis, the case is a useful illustration of how a fintech's core technological differentiation and its financial sustainability are related but distinct questions, and how governance and ownership structure can shift rapidly once a growth-stage lender encounters a credit cycle.

Discussion Questions

To what extent can a proprietary credit-scoring algorithm serve as a durable competitive advantage in SME lending, given that competitors can adopt similar data sources and machine-learning techniques over time?

Evaluate Lendingkart's shift from on-balance-sheet lending to a predominantly co-lending model. What are the trade-offs between growth in AUM and compression of net interest margin, and how should a lender balance these under regulatory risk-weight changes?

The Women's World Banking finding on gender-neutral credit scoring suggests a potential source of both social impact and competitive differentiation. How might a lender make an algorithmic fairness outcome a more central and monetizable part of its market positioning, if at all?

Lendingkart's profitability collapsed in FY24–FY25 even as revenue and AUM grew for part of that period. What does this divergence suggest about the risk management discipline required in technology-led unsecured lending, compared with the discipline required in customer acquisition and underwriting technology?

Following Fullerton Financial Holdings' acquisition of a controlling stake and the replacement of founding leadership with a career banking executive, what strategic priorities would you expect a majority institutional owner to impose on a founder-built fintech lender, and how might these priorities differ from the original founders' growth-first strategic architecture?