MSME-focused digital lender NeoGrowth slipped into the red in FY26, posting a net loss of ₹72.34 crore against a net profit of ₹9.02 crore in FY25, as a sharp fall in interest income exposed the thin margin for error in small-business lending — a cautionary data point for startup funding in India, according to its annual financial statements filed with the Registrar of Companies and reported on October 16, 2026.
Revenue fell 21% while costs stayed sticky
Revenue from operations fell to ₹591.07 crore in FY26 from ₹750.31 crore a year earlier. Interest income — NeoGrowth's primary revenue source at around 96% of operating revenue — declined 21.4% to ₹566.97 crore, while fee and commission income fell 21.9% to ₹12.63 crore. Total expenses declined only 6.8% to ₹687.69 crore, so the company spent ₹1.17 to earn every rupee of operating revenue, against ₹0.99 the previous year.
Impairment provisions on financial instruments stayed largely flat at ₹277.32 crore, and the net interest margin slipped to 17.11% from 17.52%. There are signs of stabilisation: the June 2026 quarter showed a much smaller standalone net loss of ₹3.52 crore versus ₹19.98 crore a year earlier. The lender also recently raised ₹85 crore in debt and equity led by Dutch development bank FMO with LeapFrog Investments.
Peers are navigating the same headwinds differently: Aye Finance reported ₹1,567 crore in operating revenue and ₹194 crore in profit in FY26, while Lendingkart's net loss widened 16% to ₹333.3 crore, per reports this month.
Why it matters for founders
Startup funding in India is favouring lenders with proven asset quality — when revenue growth weakens and costs stay sticky, profitability can vanish fast. Founders in MSME credit need unit economics that survive a down-cycle.