Lendingkart’s Existential Crossroads: Lawsuits, Exodus And An Industry In Crisis!

Lendingkart, once a poster child of India’s MSME fintech boom now finds itself perilously close to collapse. Co-founder Harshvardhan Lunia has dragged the startup’s Fullerton-led management to the National Company Law Tribunal, alleging that the majority owner slashed disbursals and mismanaged the business, leaving Lendingkart’s finances in tatters. With no new loans issued for months and an 850 crore rights issue looming to prop up its balance sheet, the fintech is staring down an existential crisis (its own internal filings show net losses outpacing revenue). In short, Lendingkart’s high-stakes legal battle and frozen lending pipeline have become a microcosm of a broader malaise: hyper-growth “unicorns” running aground.

Across India’s startup ecosystem, familiar storylines repeat where top-tier executives fleeing, colossal valuation markdowns, and rising losses that make once-dazzling companies appear shockingly vulnerable. Think of Ola’s sudden turnover atop its corporate hierarchy, or Byju’s boardroom upheavals and investor revolt, both leaving founders and financiers scrambling.

Like Lendingkart today, these “new-age” firms alternated between bombastic growth and grinding standstill, exposing how fragile rapid-scaling businesses can be. By contrast, decades-old corporations (with layered governance and steady leadership pipelines) have remained comparatively stable pillars amidst market turbulence. Why does this split exist? And what does Lendingkart’s plight of legal feud, hemorrhaging balance sheet, and flight of talent say about the fate of India’s startup generation?

We examine Lendingkart’s unravelling as a case study, weaving in parallels from Ola, Byju’s, Paytm and other tech challengers. We laid out the hard data behind Lendingkart’s losses, dissect the boardroom infighting at play, and ask why so many fintechs (and other “new-economy” ventures) implode, even while legacy firms hold firm. Citing audited filings, press reports and regulatory patterns, our narrative shows that at Lendingkart’s core lies a conflict between founders and backers, and an inability to keep the business humming.

With large investors demanding yet more capital infusions and minority shareholders balking, all against a backdrop of RBI curbs and asset-quality woes, the startup’s survival is in doubt. “With a legal battle underway and a stalled business, is Lendingkart is staring at an existential crisis?”

Financial Collapse at Lendingkart: From Profit to Red Ink

In FY2023 Lendingkart Technologies (the parent) showed promise as the company swung into the black with an FY23 profit of ₹119 crore after a pandemic-related loss, and eked out a small consolidated profit in FY24. But behind the facade of growth, trouble brewed in the lending arm (NBFC), Lendingkart Finance. By FY25, that arm plummeted into deep losses. FY25 net loss was a staggering ₹288.3 crore, compared to a profit of ₹60.1 crore in FY24. Revenues tumbled 24% to ₹862.2 cr (₹1,142 cr in FY24). The profit swing was brutal as there was a 97% year-on-year collapse in FY24 itself. And the free-fall continued into FY26.

The June 2025 quarter shows the trajectory. Lendingkart Finance posted a net loss of ₹84.8 cr on operating revenue of just ₹116.9 cr. That was a 60% year-on-year plunge in revenue (from ₹290.0 cr in Q1 FY25), coinciding with a 240% jump in quarterly losses (₹24.9 cr loss Q1FY25 to ₹84.8 cr Q1FY26). In effect, the business was almost completely frozen as sales (lending volume) collapsed by roughly two-thirds in one year. Such figures are unsustainable. Analysts say Lendingkart’s impairment and finance costs soared as defaults rose; in Q1FY26 alone impairment charges of ₹78.4 cr weighed on earnings.

Lendingkart filings blamed this collapse on tighter credit norms and rising costs. In late 2023, the RBI hiked risk weights on unsecured lending, ratcheting up funding costs for fintech NBFCs. Founder Lunia, in an Inc42 interview, admitted that FY24 profits fell 97% due to ballooning staff costs, higher credit expenses, and regulatory fees. He warned FY25 would be worse, with “dropping AUM” (less business) and “rising cost of funds” squeezing margins.

And indeed, Lendingkart’s capitalized loans-to-come fell off a cliff: disbursals fell from ₹340 cr in May 2024 to just ₹17 cr by August 2025. With new lending at a standstill, the only way to meet credit commitments was to shuffle the books – a near-zero supply of fresh revenues led legacy loans to sour into high NPAs. Gross NPAs ticked up to 4.3% (from 3.7%), further deepening losses.

In short, Lendingkart’s finances have gone into free fall, turning an (ultimately modest) profit-making startup into a money-losing firehose. The data tell the story: revenues are collapsing and costs (especially loan impairments and financing charges) have surged. No wonder, then, that its valuation has cratered – sources say Fullerton is now bargaining to raise a capital round at roughly a $100 million valuation, down from $350m four years earlier. This 70% haircut mirrors the financial reality, and it was only the prospect of a massive rights issue – further diluting dissenting investors – that lit the legal fuse.

Now Comes The Legal Battle Of Founder vs. Backers

At the heart of Lendingkart’s crisis is an ugly boardroom war. In October 2024 Temasek’s subsidiary Fullerton Financial injected ₹252 crore to become majority owner (over 56%). At first, this seemed a lifeline. By FY24, Fullerton had already put in over ₹722 crore across years of investment. But in mid-November 2025, co-founder and former CEO Harshvardhan Lunia filed suit in the NCLT. His claim: Fullerton “burnt the business to the ground” by slashing disbursals and breaching their deal terms.

Lunia’s petition alleges that under Fullerton’s watch, Lendingkart’s lending pipeline was choked – from ₹340cr in May to ₹17cr by August, as noted above. He argues this deliberate slowdown violated acquisition covenants, and precipitated a financial collapse. He also calls out strategic flubs: last year Lendingkart paid ₹75 cr to buy Upwards Fintech (its consumer lending arm) – largely counted as ₹50cr of goodwill – “without a clear commercial rationale”.

By contrast, insiders say Fullerton was loath to fund any more losses: within weeks of the NCLT petition, the firm proposed a rights issue of ₹850 cr to recapitalize Lendingkart. The problem: every shareholder must pitch in or lose stake, and minority investors are balking at throwing good money after bad. Caught in the middle, Lunia and other minority backers are effectively being forced into a corner – if they refuse, they forfeit their entire equity.

This legal impasse has frozen Lendingkart’s world. The co-founder claims that because of “slowdown in business under the current management led by Prashant Joshi” (the Fullerton-nominated CEO), the company may breach its restructuring plan with the RBI. He even flagged questionable financing decisions: issuing high-cost NCDs to InnoVen Capital, for one. Lendingkart’s management vehemently denies all charges – a spokesperson vows to “strenuously defend” against these “baseless allegations” – but regardless of eventual verdict, the dispute itself heralds deep dysfunction.

Governance sources say Fullerton’s plan would have forced minorities either to inject more cash or see their stake erased. In other words, a co-founder and legacy investors are now being pitted against the majority in a fight over control and capital – a classic standoff that seldom ends well for company stability.

To borrow Lendingkart’s own alarmed language: commitments to the RBI have already been missed, and no fresh loans have been made in recent months. That means the core business – lending to thousands of small businesses – is effectively frozen. Meanwhile, regulatory filing shows Fullerton and co-investors want to pour in ₹850 cr, but half the money (over ₹500cr) must come from Fullerton itself. Notably, one corner fund (Bertelsmann) has already signaled it won’t contribute. The upshot: the rights issue is on shaky ground, and Lendingkart’s survival depends on this boardroom clash being resolved.

Exodus at the Top: A Bad Omen

The last year at Lendingkart has seen a parade of departures from its senior ranks – a classic harbinger of deeper trouble. In early 2025 co-founder Lunia relinquished his role as Managing Director of the NBFC arm, effective June 30. Others followed: Mukul Sachan, co-founder and erstwhile COO, had already left in 2019.

More recently, at least eight high-level executives resigned in the past year – from finance chiefs to product leads. Each exit drained experience and continuity. The full-time CEO of Lendingkart Technologies stepped down (replaced in April 2025 by ex-DBS banker Prashant Joshi), while the lending NBFC sat leaderless for weeks. In short, Lendingkart’s “top deck turmoil” paralleled its cash crisis. Company insiders admit the shifts were more than normal churn – signaling unrest.

This leadership exodus is not unique to Lendingkart. Across India’s tech scene, departures at the top have preceded trouble. Consider Ola. In May 2024, CFO Kartik Gupta quit just two weeks after then-CEO Hemant Bakshi resigned. Both had joined as part of a cost-cutting “restructuring” – Gupta himself told one of the news media house that his departure was intended to “strengthen cost structures” as Ola pushed for profitability. Nonetheless, the optics were stark: “Kartik Gupta, Ola’s CFO since November 2023, is stepping down just two weeks after CEO Hemant Bakshi left the firm”. (Within days, founder Bhavish Aggarwal resumed active control.)

Ola had already retreated from international markets and cut 200 jobs, yet the back-to-back exits flashed warning signs to investors about the ride-hailer’s growth woes. Notably, even though Ola’s parent ANI Technologies lost ₹1,082 cr in FY23, management touted an EBITDA profit. Still, newsroom analysts flagged that upheaval in its leadership team — from CEO to CFO — reflected deeper challenges in a fiercely competitive home market.

Even bigger beasts have stumbled. Byju’s, for example, saw board members and auditors resign en masse amid governance strife in 2023. Peak XV’s GV Ravishankar, Prosus’s Russell Dreisenstock and CZI’s Vivian Wu all exited Byju’s board over a “breakdown in trust and communication” with cofounder-CEO Byju Raveendran. Prosus and others were especially irked by plans to sue lenders – moves they felt bypassed board consensus.

The mass exodus followed by auditor Deloitte’s walkout citing years of delayed filings laid bare the crisis. In Byju’s case, those departures were followed by a $21B valuation imploding to roughly $1B in months. They exemplify how, once confident investors tear up trust, veteran helmsmen bail out, and even external watchdogs lose faith. Lendingkart’s leadership drift, in this light, is eerily parallel as we see a signal that something critical has broken in the company’s foundations.

Why are top-tier exits such a red flag? In a healthy company, founders and senior management embody strategy; their abrupt departure often means power struggles, loss of know-how, and shaken morale. In Lendingkart’s case, the exits track closely with its financial pain: most took place after Fullerton’s takeover and as losses mounted. When investors lose confidence, they often engineer leadership changes – but those changes can spark more uncertainty. Indeed, would we be wrong to note that Lendingkart’s legal fight and cash crunch “symbolised India’s digital lending boom”, which is now spiralling into a bruising crisis. The broader lesson for startups could be, if a high-growth venture can’t retain its senior talent, it rarely bodes well for its future.

(While Paytm’s situation is more regulatory than internal, the urgent departure of capital and external board disputes there echoes the theme that upheaval often follows when crisis hits.)

Why New-Age Startups Bleed

Why do so many “unicorn” startups suffer these implosions? The answer lies partly in their growth-at-all-costs DNA and partly in regulatory/geopolitical turbulence. Startups scale fast on investor capital, often eschewing profits to capture market share. But when the funding spigot slows or economics sour, the very metrics they preached turn against them.

Lendingkart’s case is textbook of skyrocketing non-performing assets (due to a stressed MSME credit segment) swelled impairments, while a sudden bond market squeeze drove up borrowing costs. The result are losses far larger than in any leaner period and forced painful cutbacks. For older firms, by contrast, growth is more measured and usually debt is backed by decades of credit history. Hence, “legacy” companies often weather downturns through steady cash flows and conservative balance sheets, whereas tech startups are often overleveraged and undercapitalized for prolonged stress.

Another factor is internal conflict and governance. Fast-growing startups often have loose processes at first, centered around charismatic founders. That lack of structure can become a weakness: disagreements are more likely when there’s no clear succession plan or oversight. Lendingkart’s war shows what happens when contract terms collide: the agreement that binds minority investors to a rights issue became a poison pill, igniting a courtroom fight.

In Byju’s, boardroom feuds erupted when founders clashed with VCs over control and transparency. Even Ola’s shakeup involved questions of investor expectations (profitable ride-hailing in a mature market) vs founder vision. Startups, built on rapid innovation, often under-invest in compliance and risk management; when regulators (like RBI) step in, these companies are sometimes caught flat-footed. Conversely, regulated, incumbent firms have entrenched risk controls and veteran management who can navigate bureaucratic hurdles – making them more stable, pillar-like in the eyes of markets.

Industry analysts confirm this shift. The Economic Times recently noted that India’s startup scene is “long associated with young founders” but is now hiring older, more experienced leaders to “build sustainable and profitable businesses”. Veteran CXOs bring discipline and reassure investors that growth is built to last. It is telling that Lendingkart’s investors replaced co-founder Lunia with Prashant Joshi – a DBS banking veteran – as CEO. The implication is clear: without experienced reins on the tiller, high-growth bets are riskier. Conversely, decades-old companies have ingrained C-suite succession and mature boards (as startup coaches put it, “experienced leaders instill confidence…view it as an indicator of stability”).

In effect, startups burn out when the narrative outruns the fundamentals. If an uber-startup can’t quickly pivot to profitability or at least sustainability, its valuation falls, capital dries up, and internal cracks widen. We’ve seen these lessons play out: the dot-com bust was littered with flashy companies that had to abruptly downsize or die once funding turned conservative. India’s 2021-23 startup slowdown has echoes of that. Fintech lenders in particular are under scrutiny globally (with peers like Navi or Oxyzo hit by NBFC slashing).

Lendingkart is emblematic: it tapped cheap venture funds when credit was easy, then got hammered as RBI tightened policy in 2023. The combination of heavy leverage, aggressive expansion into unsecured loans (skyrocketing NPAs), and lack of legacy income left it vulnerable to a sudden stop.

A Tale of Two Worlds: Startups vs. Established Firms

An underlying question emerges: why do generations-old companies often emerge unscathed when their young counterparts falter? The answer lies partly in corporate design. Traditional firms like banks, manufacturing giants, diversified conglomerates have multiple layers of scrutiny (boards, risk committees, regulatory compliance) and established cash flows. They also have institutional investors who value steadiness. In contrast, startups trade heavily on narrative and potential. During boom times, money rushes in, easing burdens of capital costs. When sentiment sours, those expectations evaporate overnight.

For example, compare a company like State Bank of India or a decades-old NBFC with Lendingkart. SBI has weathered many credit cycles with capital raised through IPOs, retained earnings, and government backing. Its credit underwriting follows decades of data; leadership is chosen through bureaucratic or slow-track processes. Lendingkart’s underwriting, however, relied on fledgling credit models and tech-lending gambits. When COVID hit or policy tightened, SBI and peers could absorb shocks via provisioning buffers and state recapitalization, whereas Lendingkart had none of that margin for error.

Just see this shift: once, investors “bet on founders,” but now they insist on “experienced talent to help build strong foundations,” especially in finance and compliance roles. In times of crisis, those seasoned executives can “steer the situation” using their experience. Lendingkart’s lack of such depth – a tech-born founder, a young leadership group, and rapid scaling – arguably meant there was no mature hand on deck when waters got rough. The result: internal conflicts moved to the fore, and no one could hold the fort.

Indeed, Lendingkart’s saga is reminiscent of past crises in India’s tech world. The dispatch notes that “Lendingkart’s long-simmering tensions have finally spilt into the open,” and cautions that “with business shrinking, jobs being cut, and a legal fight now underway, the fintech that once symbolized India’s digital lending boom is staring at another bruising chapter.” The implication is stark: even as traditional banks build capital over decades, these fintech newcomers can unravel in a matter of months when growth stops.

Prophecy of a Bust or a Turnaround?

Where does this leave Lendingkart, and what does it foretell for the sector? If current trends continue, the prognosis is grim. The company’s own documents reportedly warn that failure to inject fresh capital could violate RBI-mandated revamp plans. Jobs have been slashed and lenders won’t touch more sub-par loans. If the NCLT dispute erodes investor confidence further, Lendingkart may be forced into insolvency – a fate other fintechs have narrowly avoided.

But every crisis is also a crossroads. Lendingkart’s moment could yet trigger fundamental changes. Perhaps the legal battle compels a restructuring: new management, fresh capital (if Fullerton or new backers step up), and a scaled-back business model. Or regulators might demand a sale to protect borrowers. Some insiders even whisper of merger talks with peer fintechs. (Lendingkart’s industry is littered with consolidation deals, from co-lending tie-ups to outright acquisitions.) On the human side, the high-profile conflict might make other startups more cautious about investor-founder terms – strengthening minority protections or exit clauses.

Sector-wide, Lendingkart’s plight is already echoing through fintech corridors. It joins a lineup of recent cautionary tales: NBFCs like Navi that lost lending licenses, payment banks like Paytm’s being curtailed by RBI, and buy-now-pay-later startups recalibrating after regulatory scrutiny. All underscore that a “money printer goes brr” model can jam when the central bank presses stop. In fact, early signs hint this could influence policy. There are reports the RBI will continue policing venture-led lenders more strictly after seeing how defaults and governance lapses at firms like Lendingkart impact the system.

Historically, boom-and-bust cycles purge weaker players. The dot-com bubble left survivors like Amazon stronger; in India, some early unicorns have matured (Zomato and Nykaa are profitable or approaching it). For Lendingkart, survival likely demands a pivot to core strengths, beefed-up risk management, and perhaps shedding non-core parts of the business. The full narrative will take time to unfold, but for now the message is clear: a broken governance pact and faltering loan engine have forced Lendingkart to the brink.

Ultimately, the human drama — founders at war, staff demoralized, investors wrangling — is a mirror to the numbers. When Harshvardhan Lunia files a petition saying his startup is “burning down”, it’s more than rhetoric; it’s the consequence of ambition unmoored from realism. Lendingkart’s journey serves as a stark cautionary tale for the entire startup ecosystem: growth and hype cannot indefinitely mask underlying fragility. As one veteran investor might put it, this is the price of an “existential crisis” in the digital age – a reminder that in finance, if you spend too long reaching for the sky without solid roots, the fall can be swift and unforgiving.