Lendingkart Finance slashes losses, but revenue plunge signals strategic pivot

The first quarter of FY27 has seen Lendingkart Finance, the fintech’s NBFC arm, slash its loss by 62% to ₹32.4 cr. Yet, the same period witnessed a 55% drop in operating revenue, a stark reminder that a shrinking bottom line does not automatically translate into a healthy business model.

A Tale of Two Numbers: Losses Shrink, Revenue Slumps

While the headline‑grabber is the impressive loss reduction, the underlying story is more nuanced. Interest income fell 20% year‑on‑year, and fee‑and‑commission revenue collapsed by 78%, pulling total income down 54.5% to ₹54.5 cr. The company’s operating revenue dipped to ₹52.7 cr from ₹116.9 cr a year earlier, even though it grew 15% quarter‑on‑quarter. This divergence points to a strategic shift: Lendingkart Finance is aggressively trimming its risk‑laden portfolio, but in doing so, it is also curtailing the very volume that feeds its revenue engine.

The expense side tells a parallel story. Total costs fell 58% to ₹97.5 cr, largely driven by an 83% drop in impairment charges and a 53% reduction in finance costs. Employee benefit expenses also eased by 18%. These cuts are symptomatic of a company that is moving from a high‑growth, high‑risk phase to a more disciplined, profitability‑oriented operating model.

The Strategic Shift: From Volume to Profitability

Under new CEO Prashant Prakash Joshi, the company appears to be recalibrating its growth trajectory. The transfer of ₹94.7 cr of stressed loans to an asset reconstruction company for a nominal ₹2 cr underscores a willingness to write down bad assets and clean up the balance sheet. This move aligns with the RBI’s tighter prudential norms for stressed assets, which have forced many NBFCs to tighten underwriting and reduce exposure to high‑risk MSME borrowers.

However, the shift comes at a cost. The sharp decline in fees and commissions suggests that Lendingkart Finance has either tightened its pricing or is losing a share of the market to competitors such as Indifi and CredX, which have been aggressively courting the same MSME segment with flexible terms and lower processing fees. If the company cannot recapture its lost fee income, the loss‑cutting gains may be short‑lived.

Implications for the MSME Lending Ecosystem

India’s MSME sector is the lifeblood of the economy, and fintechs are the primary channel for credit. Lendingkart’s pivot reflects a broader industry trend: the push for higher asset quality in the face of rising NPAs and a tightening regulatory environment. While the company’s tighter risk parameters may improve its capital adequacy ratios, it also risks alienating small businesses that rely on quick, flexible financing.

Moreover, the reduction in fee‑based income could signal a price war in the MSME credit space. If Lendingkart reduces its rates to regain market share, other players may follow suit, squeezing margins across the sector. In a market where the average profit margin on micro‑loans hovers around 5–7%, any erosion could have systemic implications for the sustainability of fintech‑led MSME credit.

Market Dynamics and Investor Sentiment

Lendingkart’s financials come at a time when the NBFC sector is under scrutiny. The RBI’s recent directive to limit the exposure of NBFCs to the MSME segment, coupled with the introduction of a new capital adequacy framework, has prompted many lenders to reassess their risk appetite. Investors, wary of the sector’s high leverage, are likely to interpret the loss reduction as a positive sign of risk mitigation, but the concurrent revenue slump may temper enthusiasm.

Fullerton Financial Holdings’ takeover has brought in fresh capital and a seasoned banking veteran at the helm, which could restore confidence. Yet, the company’s ability to generate sustainable cash flow remains uncertain. The quarterly loss of ₹70 lakh on fair‑value changes and ₹80 lakh on loan assignments indicates that there are still hidden risks lurking in the balance sheet.

Forward Look: Balancing Growth and Sustainability

What will Lendingkart Finance need to do to turn this cost‑cutting exercise into a sustainable turnaround? First, it must rebuild its fee‑income base without compromising on risk. This could involve developing new product lines—such as revenue‑share financing or supply‑chain financing—that command higher margins. Second, the company should focus on digital efficiency, leveraging AI to streamline underwriting and reduce processing costs further.

Third, a clear communication strategy will be essential. The company must articulate how its new risk framework protects both lenders and borrowers, thereby restoring confidence among its MSME clientele. Finally, the NBFC should keep a close eye on macro‑economic variables—particularly interest rates and inflation—which directly affect borrower repayment capacity and the cost of capital.

In a market where fintechs are increasingly vying for a share of the same MSME pool, Lendingkart’s next move will either cement its position as a disciplined, high‑quality lender or see it slip into the background of a crowded field. The next quarterly report will be the litmus test.

Closing

Lendingkart Finance’s 62% loss reduction is a textbook case of a company turning the tide of a crisis by tightening its belt. Yet, the simultaneous plunge in revenue signals that the cost‑cutting strategy may have been over‑aggressive or misaligned with market realities. For Indian fintechs, the lesson is clear: profitability cannot be achieved at the expense of revenue growth, especially in a sector where speed and flexibility are paramount. The coming quarters will reveal whether Lendingkart can strike that delicate balance.