Lendingkart Crisis: Why This Fintech Founder Is Suing Its Largest Shareholder And What Happens Next?

Lendingkart’s challenges are mounting, with a courtroom dispute now emerging between co-founder Harshvardhan Lunia, holding firm Lendingkart Technologies, and its majority shareholder, Fullerton Financial Holdings, according to a report in The Economic Times.

Harshvardhan Lunia, who co-founded the company alongside Mukul Sachan in 2014, lodged a petition with the Ahmedabad bench of the National Company Law Tribunal (NCLT) on Nov. 19. 

He accused Fullerton of breaching the conditions under which it progressively gained a 56% stake in Lendingkart.

As per the ET report, Fullerton Financial, backed by Temasek, has proposed a Rs 850 crore rights issue that calls for funding from every investor and founder. This capital raise is understood to be the immediate cause behind the ongoing legal conflict.

The NCLT petition, which ET reported it has seen, claims the current Lendingkart leadership under Prashant Joshi has experienced a slowdown in business, which may cause the company to breach the restructuring plan submitted to the Reserve Bank of India (RBI).

Sources familiar with the situation revealed that Lendingkart has failed to honour its commitments to the regulator. Despite carrying a legacy loan portfolio, the company has not made any new disbursements in recent months.

Lendingkart’s challenges are mounting, with a courtroom dispute now emerging between co-founder Harshvardhan Lunia, holding firm Lendingkart Technologies, and its majority shareholder, Fullerton Financial Holdings, according to a report in The Economic Times.

Harshvardhan Lunia, who co-founded the company alongside Mukul Sachan in 2014, lodged a petition with the Ahmedabad bench of the National Company Law Tribunal (NCLT) on Nov. 19. 

He accused Fullerton of breaching the conditions under which it progressively gained a 56% stake in Lendingkart.

As per the ET report, Fullerton Financial, backed by Temasek, has proposed a Rs 850 crore rights issue that calls for funding from every investor and founder. This capital raise is understood to be the immediate cause behind the ongoing legal conflict.

The NCLT petition, which ET reported it has seen, claims the current Lendingkart leadership under Prashant Joshi has experienced a slowdown in business, which may cause the company to breach the restructuring plan submitted to the Reserve Bank of India (RBI).

Sources familiar with the situation revealed that Lendingkart has failed to honour its commitments to the regulator. Despite carrying a legacy loan portfolio, the company has not made any new disbursements in recent months.

"LTPL ( Lendingkart Technologies Private Limited) strongly disagrees with the baseless allegations and will strenuously defend its rights and will take action to protect its interests. We have full faith in the judiciary of the country and in the honourable NCLT," a company spokesperson told ET. 

Documents submitted to the corporate affairs ministry show that Rs 510 crore will be invested by Fullerton Financial Holdings, Rs 70 crore by Bertelsmann, Rs 62 crore by Mayfield India, and Rs 46 crore by Saama Capital.  

According to the NCLT petition, Lendingkart expanded over 10 years to become a leading digital lender for micro, small and medium enterprises through its NBFC subsidiary. Fullerton gradually increased its stake, eventually gaining majority control in October last year.

The petition claims that after gaining control, Fullerton and its nominees mismanaged the company, greatly diminishing its value. It also alleges that Lendingkart’s monthly loan disbursals fell sharply from Rs 340 crore in May last year to just Rs 17 crore by August this year.  

Examples of alleged value erosion cited include the issue of Rs 100 crore in non-convertible debentures to InnoVen Capital, a related-party venture debt fund, at a high interest rate without sufficient disclosure.  

It highlighted the purchase of Upwards Fintech Services for Rs 75 crore, including Rs 50 crore recorded as goodwill, alleging that the transaction lacked a valid commercial rationale. Those filing the petition sought the NCLT’s involvement to defend the rights of minority investors.