Dugar Finance is a Chennai-based non-banking financial company. Dugar Finance has raised raised $5 million in its pre-Series A funding round. This funding round was led by HegdInvst. HegdInvst is a Category II Alternative Investment Fund with a focus on growth equity investments. The company will also be using the funds to improve its analytics-based underwriting techniques.
Fund utilization and focus on human capital
The recent equity infusion is the culmination of several successful debt funding rounds undertaken by the NBFC in the recent past. In December last year, Dugar Finance had secured $18 million in a debt funding round led by the Swiss-based investor Symbiotics.
In this particular round, several prominent financial institutions based in India also participated, including the Union Bank of India and the Karur Vysya Bank. In June this year, the company secured yet another $3 million in debt funding in the form of a $75 million Green Basket Bond issued by Symbiotics Investments.
The company has outlined its roadmap for the utilization of the $5 million secured in the pre-Series A equity funding round. According to the official press release issued by the company, the fresh capital infusion will be utilized in four main areas of development. A significant portion of the funds will be utilized to improve the technology infrastructure of the company. By focusing on these areas, the company is looking to improve the efficiency of its lending operations.
Apart from this, the funding will also allow the company to establish a centralized risk system. It will provide a high level of institutional risk management capabilities. The funding will also allow the company to hire senior talent in various critical areas of its business.
Core business operations and expansion
Led by Ramesh Dugar, Dugar Finance operates as a non-deposit-taking NBFC with a strong focus on impact investing. The company has a strong presence in tier 3 and tier 4 markets.
The company operates in secured MSME lending and commercial vehicle lending, focusing on segments where there is a high level of income generation potential. The key clients of Dugar Finance include micro-entrepreneurs, small business owners, and first-time commercial vehicle drivers who face a high level of difficulty in accessing formal financial services.
Though traditionally, Dugar Finance has focused on commercial vehicle and passenger vehicle lending, the current business strategy of the firm is in a phase of significant expansion. Dugar Finance is in a phase of significant growth in secured MSME lending.
The long-term objective of this strategy is to build a balanced and diversified loan book with high resilience in any given credit cycle. The firm is looking to strike a balance in its loan book by focusing on both commercial vehicle lending and secured MSME lending, which will help in mitigating risks while continuing its growth trajectory.
Currently, Dugar Finance has operations in six states in India. However, the company has major plans for geographical expansion. The company plans to grow its business to ten states within the next three years. The company has a larger vision of Assets under Management of ₹2,000 crore over the next three to four years. The company is dedicated to achieving this vision without compromising on its high standards of financial health.
The firm has developed certain financial parameters to help guide its growth trajectory in the coming years. Dugar Finance aims to keep its Gross Non-Performing Assets below 2%, which will help the firm sustain a high-quality loan book despite its high growth rate.
The firm is looking to achieve a high Return on Assets in the 4% to 5% range. By moving closer to a balanced book between its secured MSME business and commercial vehicle business, the firm is confident of navigating through economic cycles and delivering value to its stakeholders.
Conclusion
The $5 million pre-Series A round led by HegdInvst is a defining moment in Dugar Finance’s growth trajectory as it transforms into a more technologically advanced and geographically dispersed firm. By focusing on serving the underserved in tier 3 and tier 4 locations, Dugar Finance is using both equity and debt to help fuel its growth ambitions.
Through its efforts in improving its underwriting analytics, risk management capabilities, and diversifying its loan book, Dugar Finance is well-positioned to become a major player in the secured lending space in India while maintaining its approach to its asset quality and financials.
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