Navi’s FY26 loss widens fourfold on UPI investments; eyes FY27 profitability

Sachin Bansal’s Navi’s consolidated net loss widened nearly fourfold to Rs 466 crore in FY26 from Rs 126 crore a year ago as it increased spending on the unified payments interface (UPI) and newer businesses to build revenue beyond lending, cofounder and chief financial officer Ankit Agarwal told ET.

Revenue from operations rose 16% to Rs 2,982 crore and total income increased 15% to Rs 3,091 crore. The March-quarter break-even covered all costs without one-offs or investment cuts. Navi expects to turn in profits in FY27, Agarwal said.

Agarwal called UPI, the popular digital payments method among Indians, Navi’s customer acquisition engine and lending, insurance and investments its monetisation engines. While a bulk of lending customers use UPI, unsecured loans generate most profit at Navi Finserv, the group’s profitable lending arm, and remain the primary FY27 driver, Agarwal said.


ET exclusively reported on June 9 that Prosus and Accel Growth Fund were in talks to invest $250-300 million in Navi, its first external financing since inception. On July 6, ET reported that Prosus had ascribed a Rs 13,000-crore valuation for the fintech even as Navi planned a Rs 3,000-crore initial public offering (IPO) by March next year.

Agarwal declined to comment on the funding and IPO developments.

In 2022, Navi had shelved its plans to go public even after receiving approval from the Securities and Exchange Board of India (Sebi) for a Rs 3,350 crore issue.

MDR upside

Most of NAVI’s marketing spends are directed toward UPI. Its July transaction share almost doubled to 4%, making it the fourth-largest consumer app after PhonePe, Google Pay and Paytm.

Acquisition costs are falling and revenue per active user is rising, Agarwal said while talking about Navi’s UPI business. He said incremental spending to acquire and retain customers had declined over the past several months, while revenue per active user from bill payments, advertising and other UPI-linked services was improving month-on-month. The goal is for these revenues to recover a large percentage of customer acquisition spending even without cross-selling loans and insurance, he said.

Navi earns from recharges, bills, gift cards and advertising. FY26 insurance gross premium was Rs 200 crore and mutual fund assets about Rs 9,000 crore. Credit on UPI is another opportunity.

Earlier this month, the Indian Parliament passed a legislation amending the digital payments law to permit merchant discount rate (MDR) charges. MDR is the fee merchants pay banks and payment providers for processing digital payments. ET was the first to report on July 16 that the Indian government was considering a 5-7 basis-point fee on large-merchant UPI payments, while peer-to-peer transfers and small merchants would remain free.

Agarwal said it was too early to know how much MDR would flow to platforms such as Navi. “Whatever comes will be an upside for us.”

He said Navi was not relying on MDR to monetise UPI and had no near-term merchant-acquisition plan.

Diversification

Collateral-free personal loans comprise 88% of Navi’s portfolio. In November 2023, the Reserve Bank of India (RBI) raised risk weights by 25 percentage points, requiring lenders to hold more capital and making these loans costlier to grow.

Buy-now-pay-later (BNPL), short-term, low-documentation checkout credit, has shrunk over asset-quality and compliance concerns. ZestMoney shut operations, while Simpl sharply downsized before the RBI halted its payment operations.

Navi Finserv’s standalone net profit rose 32% to Rs 292 crore, assets under management increased 57% to Rs 13,138 crore and disbursals grew 73% to Rs 23,287 crore. Gross bad loans halved to 1.25%.

Crisil Ratings said net interest margin fell to 6.4% in April-December from 8.6% in FY25. Agarwal credited scale and tighter underwriting, saying a 4-5% return on assets was sustainable.

The RBI barred Navi Finserv from fresh lending from October 21 to December 2, 2024, citing excessive rates and spreads over funding costs. It lifted the curbs after Navi revamped pricing and systems.