New Delhi, Aug. 17 -- Pahal Financial Services Pvt Ltd, a microfinance-focussed non-bank lender backed by impact investors such as GAWA Capital and Proparco, is close to acquiring a troubled non-bank lender, three people familiar with the matter told VCCircle.
Ahmedabad-based Pahal, which also counts Base of Pyramid Asia (BoPA) and Dia Vikas Capital amongst its investors, lends primarily to low-income women in rural and semi-urban India through microfinance and MSME loans.
The lender has signed documents to acquire troubled non-banking financial company (NBFC) WheelsEMI Pvt Ltd, the parent of Bike Bazaar, one of the people said, requesting anonymity.
"It (the agreement) is a stock swap deal though not lucrative from WheelsEMI's perspective. It is a distress sale, and the valuation must be close to 1x price-to-book," the person added.
A second person said the deal is not a favourable one for Pahal as well. "Frankly, the Bike Bazaar deal is bad for Pahal even if they are acquiring the former at a throwaway price."
VCCircle could not independently ascertain the cost of acquisition.
Responding to VCCircle's queries, Pahal Financial said it continues to evaluate strategic opportunities that can support and enable its long-term growth objectives.
"There is nothing concrete to report or announce as of now. We will make the appropriate disclosures in accordance with applicable regulatory requirements should there be any material development in future," co-founder and managing director Purvi Bhavsar said.
WheelsEMI did not respond to VCCircle's queries till the time of publishing this article.
WheelsEMI under pressure
Pune-headquartered WheelsEMI provides financing for both new and pre-owned two-wheelers and electric vehicles. It is promoted by Srinivas Kantheti and V Karunakaran, who entered the lending business in 2017 through the acquisition of Nanded-based Vardnarayan Savings and Investment Co.
The company is backed by investors such as Elevar Equity, Faering Capital, and German development finance institution DEG.
In 2023, it completed the final close of its Series D funding round at $30 million (around Rs 250 crore then). In the first tranche, the company had raised around $20 million from Women's World Banking Asset Management and Lending Partners, followed by the remaining $10 million from DEG in the second tranche.
The proposed deal comes at a time when WheelsEMI has seen a deterioration in its liquidity profile due to weak performance.
It posted a provisional standalone net loss of Rs 45 crore in the financial year ended March 2026, compared with a net profit of Rs 3 crore in the previous year, according to documents reviewed by VCCircle. Although asset quality had improved in FY25, its gross non-performing asset ratio rose sharply to 14.5% as of March 31, 2026, from 1.7% a year ago. In FY25, WheelsEMI's consolidated loss had narrowed to Rs 1.4 crore from Rs 2.2 crore a year ago, VCCIrcle has learnt.
WheelsEMI also halted fresh loan disbursements in December 2025, resulting in a decline in the loan book. Assets under management fell to Rs 839 crore as of March 31, 2026, from Rs 1,455 crore a year ago.
Analysts attributed the deterioration in WheelsEMI's solvency to weak financial performance and continued delay in raising equity capital, adding that a timely equity infusion would be essential to its prospects.
Its subsidiary BluBird Auto Trade, established in 2019, specialises in vehicle leasing and rental services, primarily catering to logistics companies. Earlier this year, WheelsEMI's shareholders approved a special resolution to transfer up to a 100% stake in BluBird to the company's existing shareholders.
Pahal's vehicle loan push
Pahal Financial was founded in 2011 through the acquisition of Lok Vikas Nidhi, a Gujarat-based trust operational for over two decades, by Kartik Mehta and Purvi Bhavsar.
The two promoters acquired Lok Vikas Nidhi's Rs 2.6 crore microfinance portfolio spread across 15 branches, along with its field staff. Later, the business was transferred to non-banking financial company (NBFC) Kelkar Leasing Company, which was renamed Pahal Financial.
The Ahmedabad-based company posted a net loss of Rs 89.5 crore loss in FY26 after posting a net profit of Rs 6.4 crore in FY25. The decline in the non-bank lender's earnings was primarily due to elevated credit costs amid sustained stress in the microfinance sector and pressure on asset quality.
The company recently said it is focussing on returning to profitability this financial year, aided by an improvement in loan collections across the microfinance industry and steady loan growth.
In 2025, it acquired the business correspondent portfolio of Sub-K Impact Solutions for Rs 50 crore, helping expand its assets under management to around Rs 2,056 crore as of March 31, 2026, from nearly Rs 1,773 crore a year ago.
Going ahead, Pahal plans to focus on strengthening its individual loan and vehicle loan portfolios, including segments such as electric vehicles, three-wheelers, used commercial vehicles, and used cars.
Published by HT Digital Content Services with permission from VC Circle.