CRISIL

Non-bank financial company Arka Fincap, a part of Kirloskar Group on Wednesday announced that it had partnered with Central Bank of India to offer MSME loans.Under the co-lending arrangement, Arka will offer loans to MSMEs at competitive rates and further expand its reach across India.  As part of the collaboration, Arka will originate and process loan proposals for the MSME sector as per jointly formulated credit parameters and eligibility criteria.  The Central Bank of India will take 80% of the loans into its books under mutually agreed terms. Arka will service the accounts throughout the life cycle of the loans. As on 31st March 2024, Arka had an AUM of Rs 5,200 crore and 31 branches spread across 13 states with the retail AUM constituting 50% of the total AUM. It aims to grow its book to Rs 7500 crore for FY25 out of which Rs 5000 crore will come from MSME lending. The non-bank lender wants MSME loans to hold 75% weightage in its books. It also plans to be present across 45 branches.

Arka Fincap signs co-lending partnership with Central Bank of India for MSME loans

Arka Fincap Limited, a NBFC and subsidiary of Kirloskar Oil Engines Limited (KOEL), has been granted a Certificate of Registration to act as a Corporate Agent (composite) by Insurance Regulatory and Development Authority of India (IRDAI). This registration enables Arka to venture into insurance distribution, adding to its existing financial solutions portfolio to cater to the varied requirements of customers. With this announcement, Arka Fincap would broaden their product portfolio enabling diversification into a new category and capitalise on emerging opportunities. With one of their key values being ‘Customer centric, every time’, this will help the company to empower its customers to achieve business goals while protecting them from uncertainties.

Arka Fincap Ventures into Insurance Market

Arka Fincap Limited, a subsidiary of Kirloskar Oil Engines Limited (KOEL), has introduced a new product called ‘Uday’, offering Small Ticket Loans Against Property (STLAP). Targeted at micro, small, and medium enterprise (MSME) owners, these loans will range from ₹10 lakh to ₹30 lakh. The company aims to address the growing credit demands of small businesses in Tier II, III, and IV cities, providing crucial financial backing for their growth and expansion.  By offering loans against property, we can provide them with lower interest rates and longer tenures, which help with more sustainable growth. Our goal is to offer a diverse range of products that cater to the varying needs of different MSMEs across the country. Uday would be rolled out, initially, in five key locations in Tamil Nadu viz. Salem, Vellore, Tirupur, Porur, and Coimbatore, this launch marks the beginning of a broader, pan-India expansion deeper into Bharat. Arka Fincap Limited has plans to extend the product’s reach to MSMEs across the country, ensuring that small business owners in various regions can benefit from this accessible and flexible credit solution.

Arka Fincap launches loan service ‘Uday’ to serve MSMEs in smaller cities

As operations have only commenced in April 2019, they are still in the initial stage. The assets under management (AUM) witnessed strong growth in FY 24 (32% y-o-y) and stood at Rs 5,211 crore as on March 31, 2024 .

The issuer has made timely interest payments

Vimal Bhandari, CEO

KOEL wholly owns Arka and is expected to remain the majority shareholder over the medium term. Moreover, 3 out of 10 directors on Arka’s board are also on KOEL’s board. Promoters of KOEL also have representations in most of the key committees of Arka, viz., credit, asset liability, IT steering, risk management, etc. Arka is expected to benefit from the Kirloskar group’s expertise, especially in small and medium enterprise (SME) lending.

Arka derives strong support from its ultimate parent, KOEL, in the form of high strategic importance and strong moral obligations, being its step-down subsidiary. The financial services entity has been identified as a focus area for the parent’s overall diversification plans. KOEL has already infused around Rs 1000 crore till date (Rs 125 crore and Rs 130 crore were infused in fiscal 2021 and fiscal 2022 respectively; Rs 149 crore were infused in fiscal 2023), depicting strong financial support towards its subsidiary.

Arka benefits from funding support from the ultimate parent and has adequate capitalisation for current scale of operations. Till date, KOEL has infused around Rs. 1000 crore of the committed capital. Capital support from the parent is expected to keep capitalization of Arka adequate. With regular capital infusion and internal accruals, the net worth of the company has increased to Rs 1,177 crore as on March 31, 2024


Security Name: 9.65% Arka Fincap Limited 27 Dec 2026

ISIN: INE03W107249

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Arka Fincap Limited

Arka Fincap signs co-lending partnership with Central Bank of India for MSME loans

Arka Fincap Ventures into Insurance Market

Arka Fincap launches loan service ‘Uday’ to serve MSMEs in smaller cities

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