Vegafin funding: Rs 1,000 crore from Premji Invest, others

Bengaluru: Premji Invest, Norwest and Lok Capital will invest up to Rs 1,000 crore in Vegafin, a micro, small and medium enterprises (MSME) lending platform founded by former ICICI Bank executive Bijith Bhaskar. The Vegafin funding round will begin with the acquisition of a majority stake in Bizloan, a Gurugram-based non-banking financial company focused on secured MSME lending.

The Vegafin investment will be deployed in stages. Part of the capital has already gone into the Bizloan deal, for which Vegafin has signed definitive agreements, according to a joint statement. The transaction is subject to regulatory approvals and customary closing conditions, and the remaining capital will fund platform development and expansion.

The Vegafin funding will combine AI-driven credit underwriting, digital workflows and data-led risk assessment with an on-ground distribution network. The goal is a hybrid "phygital" lending platform that widens credit access for underserved small businesses.

"The MSME sector is a cornerstone of the Indian economy, yet it faces a staggering credit gap, pegged at more than Rs 30 trillion," Bhaskar, the founder, chief executive and managing director of Vegafin, said in the statement. "There is a clear need for a pan-India player with a strong MSME focus, efficient cost of service and ability to price risk accurately."

What Vegafin funding will pay for

The first use of the Vegafin funding is the Bizloan acquisition. Founded in 2018 by veteran bankers Rahul Jain, Abhishek Mishra and Vikram Diwan, Bizloan operates more than 35 branches across five states and manages assets under management of about Rs 235 crore. It is currently backed by the Michael & Susan Dell Foundation, BLinC Invest and Mohan Enterprises.

Buying an operating lender saves 18 to 24 months compared with building one from scratch, and it gives Vegafin a working loan book and a branch network from day one. BLinC Invest will remain invested in Bizloan, while Mohan Enterprises and the Michael & Susan Dell Foundation will exit their investments.

The rest of the Vegafin funding goes into technology and the expansion of its MSME lending operations. The platform will use AI-driven underwriting and data from multiple sources to assess MSME borrowers faster and more accurately, targeting loans of Rs 8 lakh to Rs 30 lakh to businesses such as neighbourhood grocery stores and local pharmacies.

Why investors are backing Vegafin funding

Premji Invest is the family office of Azim Premji, the Wipro founder, and it is leading the round alongside US venture firm Norwest and impact investor Lok Capital. The value of each investor's share and Vegafin's valuation were not disclosed. The Vegafin investment brings together domestic and foreign capital behind a single MSME bet.

Bhaskar spent more than two decades at ICICI Bank, holding leadership roles across retail banking, digital banking, credit cards, consumer finance and merchant ecosystems, and he has also worked at Premji Invest itself. EY Investment Banking acted as the exclusive financial advisor on the transaction.

Vegafin aims to triple its assets under management within 12 to 18 months and enter two or three more states in the next six to 12 months.

The MSME gap behind the Vegafin funding round

The MSME credit gap in India stands at more than Rs 30 lakh crore, according to Bhaskar. That gap is what MSME lending firms aim to close: small firms struggle to obtain credit through traditional channels, and technology-led underwriting promises to reach them at lower cost.

"We intend to build a hybrid 'phygital' lending platform to democratise access to MSME credit," Bhaskar said. "Our ambition is to leverage AI and harness data from multiple sources to develop deeper insights into MSME businesses, enabling faster, granular and accurate assessment of credit risk." The Vegafin funding round gives the company the capital to try. Closing the MSME credit gap will depend on execution as much as capital.

The deal gives Vegafin an existing loan book, 35 branches and Rs 235 crore in assets under management from day one. The test now is whether the AI-led model prices risk better than traditional lenders, and whether the Vegafin funding delivers on its promise.