NeoGrowth Experiences Loss in FY26
MSME-focused lender NeoGrowth has reported a loss for FY26, primarily driven by a significant drop in interest income that impacted its financial outcomes. The company saw its revenue decrease over the year, with a reduction in costs failing to counterbalance this downturn, leading to a substantial loss in the fiscal year ending March 2026. Official financial statements submitted to the Registrar of Companies (RoC) reveal that NeoGrowth’s revenue from operations fell to Rs 591.07 crore in FY26 from Rs 750.31 crore in the prior fiscal year.
Decline in Interest Income
Interest income, which serves as NeoGrowth’s main source of revenue, dropped by 21.4% to Rs 566.97 crore in FY26 from Rs 721.04 crore in FY25, constituting about 96% of its operating revenue for the year. Additionally, income from fees and commissions decreased by 21.9% to Rs 12.63 crore, while revenue from the derecognition of loan assets plummeted by 53.2% to Rs 3.14 crore. Conversely, NeoGrowth did see a 40.1% increase in gains from short-term investments in liquid mutual funds, reaching Rs 7.1 crore.
Expenses Overview
On the expense front, the impairment on financial instruments, including provisions for potential loan losses, remained relatively stable at Rs 277.32 crore in FY26 compared to Rs 279.54 crore in FY25. The company’s second-largest expense, finance costs, decreased by 19.5% to Rs 228.88 crore from Rs 284.19 crore. However, employee benefit expenses rose by 3.8% to Rs 109.78 crore, alongside an increase in depreciation and amortisation expenses from Rs 10.71 crore to Rs 12.42 crore. Other operational costs also climbed to Rs 59.29 crore from Rs 58 crore.
Total Expenses and Profitability
Overall, NeoGrowth’s total expenses decreased by 6.8%, amounting to Rs 687.69 crore in FY26 down from Rs 738.19 crore in FY25. Nevertheless, this reduction was insufficient to make up for the lack of revenue, resulting in a considerable loss. The company reported a net loss of Rs 72.34 crore in FY26, in stark contrast to a net profit of Rs 9.02 crore in FY25.
Unit Economics and Margins
In terms of unit economics, NeoGrowth spent Rs 1.17 to generate each rupee of operating revenue in FY26, compared to Rs 0.99 in the previous year. The net interest margin (NIM) decreased to 17.11% from 17.52%, while the EBITDA margin fell to 24.33% from 40.79%.
Recent Fundraising Efforts
Recently, NeoGrowth successfully raised Rs 85 crore through a combination of debt and equity financing, led by the Dutch development bank FMO and involving contributions from existing investor LeapFrog Investments.
Competitive Landscape
NeoGrowth competes in the MSME lending space with players like Lendingkart, FlexiLoans, Kinara Capital, and Aye Finance. In FY26, these competitors reported an operating revenue of Rs 1,567 crore and a profit of Rs 194 crore.
Challenges in MSME Lending
NeoGrowth’s performance in FY26 illustrates the difficulties in maintaining profitability within MSME lending when revenue growth declines and operating costs persist. The slight reduction in impairment expenses contrasted with rising employee costs leaves minimal capacity to address pressures on interest income. Although the recent fundraising offers capital to bolster lending, recovery will hinge on enhanced revenue growth and the ability to manage credit costs while preserving asset quality.