Startup Deep Dive : NeoGrowth — a $1 billion card-swipe lender now facing a ratings downgrade

NeoGrowth Credit has lent more than $1 billion to over 150,000 small merchants since it began, wiring repayments straight out of their daily card and UPI settlements so collection is almost automatic. In November 2025, ICRA downgraded the same company’s long-term rating to BBB(Negative), after loan losses tripled from FY24 to FY26.

That contradiction is the whole story of NeoGrowth: a lending model built to remove the oldest problem in small-business credit, sales verification, without removing the newer one, that a merchant’s card swipes can dry up faster than any collateral can be seized.

Quick facts

What they do

NeoGrowth lends working capital to small and medium retailers, mostly shops, restaurants and service outlets that run point-of-sale machines or sell online, and it does so without asking for collateral. Instead of a balance sheet or a property deed, it reads the merchant’s card, UPI and e-commerce settlement history to size a loan, then recovers it as a small daily deduction from the same settlement flow. The pitch to a shopkeeper is speed and simplicity: no financial statements, a same-day or next-day disbursal, and a repayment that never shows up as a lump-sum EMI. The company has since layered on GST-based, vendor-finance and a small secured-loan line, but the card-and-digital-receivable model remains its core identity.

The origin

Dhruv Khaitan and Piyush Khaitan were not first-time entrepreneurs when they started NeoGrowth. The brothers had already built Venture Infotek, a card-payment transaction-processing company that grew into an infrastructure backbone for Indian card payments and was eventually sold to Atos, the French IT major, according to the company’s own founder profile. That earlier business gave them a vantage point most SME lenders did not have: they could see, transaction by transaction, how much revenue was flowing through a small retailer’s card machine, long before any bank credit officer could. The founding insight was simple to state and hard to execute: if a merchant’s card swipes are a truthful, tamper-resistant record of sales, they are also a better underwriting signal than the paperwork Indian SME lending had relied on for decades. NeoGrowth was incorporated in September 2012 and began disbursing loans against exactly that signal from FY2013, registered with the Reserve Bank of India as a systemically important non-deposit-taking NBFC.

The struggle years

The model was not proven quietly. Two episodes, four years apart, show how directly a swipe-based loan book is exposed to the swipes themselves.

The first came in FY2018, when NeoGrowth’s gross NPAs plus write-offs climbed to 11% of its gross loan book, more than double the 5.2% recorded in FY2017, as underwriting from the company’s early growth phase came due, per ICRA’s rating history. It took better-quality origination and tighter collections through late 2017 and 2018 to bring gross NPAs back down to 4.8% by September 2018.

The second came after the pandemic. NeoGrowth posted a net loss of ₹39.4 crore in FY22, against a loss of similar scale a year before, as small-merchant collections buckled under pandemic-era lockdowns and demand shocks, according to entrackr’s review of the company’s FY23 filings. For an unsecured lender with no collateral to fall back on, two loss-making years in a row is close to the edge of what a balance sheet can absorb without fresh capital.

The turning point

The turn came in the same window that fresh money arrived. NeoGrowth closed FY22 with that ₹39.4 crore loss and revenue of ₹361.5 crore. A year later, in FY23, revenue had grown only 5.3% to ₹380.8 crore, but the company was back in profit, at ₹17.2 crore, largely because impairment charges on financial instruments fell 52.6%, to ₹69.6 crore from ₹147.3 crore, as collections normalised, per entrackr’s and Inc42’s reporting on the FY23 results. That turnaround landed alongside a capital event: in December 2022, NeoGrowth closed a ₹300 crore Series D round, with the Dutch development bank FMO alone putting in ₹160 crore, and the company said the proceeds would fund expansion into new markets and product innovation. Loss to profit, and a recapitalised balance sheet, arrived in the same twelve months. FY24 then compounded that turn sharply: profit after tax rose to ₹71.37 crore, up 313.5% year on year, as revenue jumped 57.6% to about ₹599 crore, according to standalone results reported by Business Standard’s capital-markets desk.

The money behind it

NeoGrowth has been funded in the pattern typical of an impact-oriented Indian NBFC: early venture and impact capital, then rounds anchored by development finance institutions as the loan book matured.

• Total raised across all rounds stands at roughly $147 million from 37 investors, per Tracxn’s funding aggregation.
• Omidyar Network came in as an early impact investor and has stayed on the cap table through multiple later rounds.
• Aspada Investment Company was an early backer alongside Omidyar Network and Khosla Impact in a July 2016 round, and returned to co-lead the January 2018 raise.
• LeapFrog Investments led a $47 million (about ₹300 crore) round in January 2018 that arrived right after the FY2018 asset-quality stress, with Aspada and Quona Capital also participating, per Dealstreetasia’s reporting at the time.
• FMO, the Dutch entrepreneurial development bank, had already extended a ₹65 crore debt facility to NeoGrowth between October 2017 and March 2022, then led the equity Series D in December 2022 with a ₹160 crore cheque as part of a ₹300 crore round that also drew Lightrock, Khosla Impact, Quona Capital, IIFL Seed Ventures Fund, WestBridge and LeapFrog.
• Debt lines have supplemented the equity: $20 million from the US International Development Finance Corporation in November 2022 and $10 million from MicroVest in January 2023, both reported by Inc42 and related trade coverage.

NeoGrowth has not disclosed a fresh valuation since the December 2022 round, and no single public source confirms one with confidence, so this piece does not print a number.

How it makes money

The mechanics are straightforward for a lender, and that is deliberate.

• Money in: interest income on the outstanding loan, plus processing fees charged upfront and penalty charges on missed instalments.
• Collection mechanism: repayment is deducted automatically as a fixed daily share of the merchant’s card, UPI or e-commerce settlement, rather than collected as a monthly EMI.
• Money out: the cost of borrowed funds from banks, NBFCs and development-finance lenders, credit/provisioning costs on a fully unsecured book, and the technology and collections infrastructure needed to score thin-file merchants.
• Where the margin sits: in the spread between risk-based pricing on unsecured retail loans and NeoGrowth’s own cost of wholesale funds, a spread that widens in good years and is the first thing credit losses eat into in bad ones.
• What people get wrong: the automated, card-linked collection mechanism reads like it removes credit risk. It does not. It only removes the friction of collecting; the underlying repayment capacity still depends entirely on the merchant’s daily footfall and transaction volumes, which is exactly what falls first when small-business demand turns down.

The numbers

Figures below are standalone, as reported in company filings compiled by Business Standard’s capital-markets database and cross-checked against Inc42 and entrackr’s reporting of the same fiscal years. Unit: ₹ crore.

• The FY24-to-FY25 swing shows the pattern clearly: revenue kept growing 25%, but PAT fell almost 87%, because loan-loss provisioning rose from 6.5% of assets under management in FY24 to 10.3% in FY25.
• That deterioration continued into FY26: NeoGrowth posted a standalone net loss of ₹23.84 crore for the quarter ended 30 September 2025, and loan-loss charges reached 13.0% (annualised) of AUM in the first half of FY26, per ICRA’s November 2025 rating note.

Where the money comes from

NeoGrowth’s own FY24 disclosures give the clearest segment picture the company has published, and it holds a genuine surprise: the geography and demographic mix looks diversified, but the stress that followed did not land evenly, it concentrated in the smallest loans.

• Total loan disbursals of ₹2,863 crore in FY24, across 25-plus cities and 75-plus MSME industry segments, per the company’s disclosures reported by SME Street.
• Assets under management stood at ₹2,750 crore at the end of FY24, rising to ₹2,893 crore by December 2024, before moderating to about ₹2,700 crore through FY25 as the company pulled back lending in response to rising stress, per ICRA.
• Tier-II cities accounted for ₹835 crore, roughly 29%, of FY24 disbursals.
• Loans to women-owned MSMEs came to ₹650 crore, 23% of FY24 disbursals and up 34% year on year, reaching over 3,600 women entrepreneurs.
• 41% of FY24 loans went to businesses that had been operating for five years or less, a younger and thinner-credit-file borrower base than a typical secured SME lender would carry.
• The surprise: when asset quality turned, ICRA specifically flagged that collections were hit hardest in the lower-ticket-size retail loan segment, not in the larger vendor-finance or secured lines, even though the retail book is the one built on NeoGrowth’s original, most-automated collection mechanism.

The risks

• Unsecured, cyclically exposed book: gross stage 3 assets including annualised write-offs rose from 7.6% as of March 2024 to 14.7% as of March 2025 and 18.9% as of September 2025, per ICRA. The mechanism is direct: because repayment is skimmed from the merchant’s own card and UPI settlements, any slowdown in a small retailer’s footfall shows up in NeoGrowth’s collections almost immediately, and there is no collateral to recover against once it does.
• Write-offs doing the heavy lifting: NeoGrowth wrote off ₹216 crore, net of recoveries, in FY25 alone. Large write-offs improve the headline NPA ratio by removing bad loans from the book, which means the reported ratio at any single date can understate the true credit cost the company has actually absorbed over the year.
• Funding and rating sensitivity: ICRA downgraded NeoGrowth’s long-term rating to [ICRA]BBB(Negative) in its November 2025 review, citing near-term asset-quality pressure, at a time when overall gearing (debt to net worth) stood near 3.5 times as of March 2025. A weaker rating raises the cost, and can narrow the availability, of the wholesale and development-finance borrowing the entire lending model depends on, right when the business needs cheap capital the most.

The takeaway

NeoGrowth’s founders solved a real problem: a card swipe is a harder record to fake than an SME’s self-reported turnover, and wiring the loan repayment into the same settlement flow makes collection close to automatic. But automatic collection is not the same as diversified risk. It only removes the friction of asking for money back; it does nothing to change what determines whether that money is there to collect. When small-merchant demand softens, the same daily settlement that made underwriting easy also transmits the slowdown into the lender’s books almost in real time, across thousands of borrowers at once, rather than one at a time. The lesson travels well beyond one NBFC: any lending model built on a single, elegant data signal is only as resilient as the economic activity that signal is measuring, and the more automated the collection, the faster that fragility shows up in the numbers.

Frequently asked questions

What does NeoGrowth Credit do?

It is a Mumbai-based NBFC that gives unsecured working-capital loans to small retailers and service businesses, sized and repaid against their card, UPI and e-commerce sales rather than collateral or financial statements.

Who founded NeoGrowth, and what did they do before?

Brothers Dhruv Khaitan and Piyush Khaitan founded it in 2012. They had earlier built Venture Infotek, a card-payment processing company that was eventually sold to French IT major Atos.

Who are NeoGrowth’s key investors, and how much has it raised?

Backers include Omidyar Network, Aspada Investment Company, LeapFrog Investments, FMO, Lightrock, Khosla Impact, Quona Capital and WestBridge, among others. Tracxn puts total funding raised at roughly $147 million across 16 rounds.

Is NeoGrowth profitable?

It turned profitable in FY23 after two loss-making years, peaked at a profit after tax of ₹71.37 crore in FY24, then profit fell to ₹9.02 crore in FY25 and the company swung to a standalone net loss of ₹23.84 crore in the quarter ended September 2025, as unsecured-SME stress rose.

What is NeoGrowth’s current credit-rating status?

ICRA downgraded NeoGrowth’s long-term rating to [ICRA]BBB(Negative) in November 2025, reflecting pressure on asset quality after gross stage 3 assets, including write-offs, climbed to 18.9% as of September 2025.

Sources

Figures are as of September 2026. Currency converted at $1 ≈ ₹96.0 as of 18 September 2026 (Trading Economics).

• Entrackr, “NeoGrowth crosses Rs 380 Cr revenue in FY23, turns profitable,” July 2023
• Inc42, “NeoGrowth In The Black In FY23, Posts Profit Of INR 17.2 Cr,” July 2023
• Business Standard, “NeoGrowth posts Rs 28 crore net profit in Q3FY24, revenues up 67%,” February 2024
• Business Standard Capital Market News, “Neogrowth Credit Pvt standalone net profit rises 115.13% in the March 2024 quarter,” May 2024
• Business Standard Capital Market News, “Neogrowth Credit Pvt standalone net profit declines 73.76% in the September 2024 quarter,” December 2024
• Business Standard Capital Market News, “Neogrowth Credit Pvt reports standalone net loss of Rs 8.23 crore in the March 2025 quarter,” June 2025
• Business Standard Capital Market News, “Neogrowth Credit Pvt reports standalone net profit of Rs 9.02 crore in the year ended March 2025,” June 2025
• Business Standard Capital Market News, “Neogrowth Credit Pvt reports standalone net loss of Rs 23.84 crore in the September 2025 quarter,” November 2025
• Entrackr, “NeoGrowth raises Rs 300 Cr in Series D round led by FMO,” December 2022
• Inc42, “NeoGrowth Raises INR 300 Cr Equity Investment From FMO, Others,” December 2022
• YourStory, “MSME-focused fintech startup NeoGrowth closes Rs 300 crore Series D round,” December 2022
• DealStreetAsia, “India: Fintech firm NeoGrowth raises $47m funding round led by LeapFrog,” January 2018
• SME Street, “NeoGrowth Supports Women MSMEs with INR 650 Crore in Loans,” 2024
• FMO project disclosure, NeoGrowth Credit Pvt Ltd, financing effective October 2017 to March 2022
• ICRA, “NeoGrowth Credit Private Limited: Ratings downgraded to [ICRA]BBB(Negative) and [ICRA]A3+,” November 2025
• ICRA, “NeoGrowth Credit Private Limited: Ratings reaffirmed,” September 2025
• NeoGrowth, company founders and about-us pages, neogrowth.in
• NeoGrowth, “Arun Nayyar appointed as Chief Executive Officer” announcement, ng.neogrowth.in
• Tracxn, NeoGrowth company and funding profile, 2026

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