Chennai-based NBFC Prayaan Capital has raised ₹110 Cr (about $12.1 Mn) in its Series A funding round led by Peak XV Partners

It will use the capital to build its lending platform, deepen its footprint in the Indian MSME markets, and for hiring

Prior to this, it raised $1.2 Mn in its seed funding round led by Accion Venture Lab in 2020 to improve its technology and expand its operations

Chennai-based NBFC Prayaan Capital has raised ₹110 Cr (about $12.1 Mn) in its Series A funding round led by Peak XV Partners.

It will use the capital to build its lending platform, deepen its footprint in the Indian MSME markets, and for hiring.

Founded in 2018 by Madhan Mohan and Akash Chelvam, Prayaan Capital offers business loans to small and medium enterprises via its technology-enabled platforms. Its business loan offerings are tailored for MSMEs from manufacturing, trading and services sector, while it also provides long-term secured loans by mortgage of commercial and residential property.

Rangarajan Krishnan, the former MD and CEO of Five Star Business Finance, recently acquired a controlling stake in Prayaan Capital, the NBFC said in a statement. Krishnan is currently heading Prayaan Capital as its MD.

Prayaan Capital said it aims to leverage digital tools to improve credit access and serve small businesses.

Prior to this, it raised $1.2 Mn in its seed funding round led by Accion Venture Lab in 2020 to improve its technology and expand its operations.

The funding announcement comes days after Peak XV said it has closed commitments to the tune of $1.3 Bn for its three funds – India Seed, India Venture and APAC Funds – its first independent funds after separating from Sequoia Capital in 2023. Peak XV also counts Five Star Business Finance in its portfolio.

Despite rising digitisation and increase in credit penetration, Indian MSMEs continue to face a massive credit gap. In a report released last year, NITI Aayog said only 19% of MSME credit demand was met formally by FY21, leaving an estimated ₹80 Lakh Cr unmet.

New-age NBFCs like Indifi Capital, Techfinoamong others, are leveraging technology to address this issue and provide credit to MSMEs. These NBFCs are raising funding from investors who are looking to capitalise on this opportunity. Earlier this month, MSME-focused NBFC Aye Finance made its public market debut.