Education-focused non-banking finance company (NBFC) Varthana has raised 75 crore rupee (US$8.7 million) in debt funding.

The investment was co-led by B2B ecommerce startup OfBusiness and its financial services arm Oxyzo, as per regulatory filings.

Varthana plans to use the funds to expand its loan portfolio, focusing on financing solutions for low-budget private schools and students seeking higher education.

The company reported a 48% year-on-year growth in its loan book, reaching INR 1,896 crore (US$221.57 million) in FY25, with a target of a 50% increase by March 2026.

Founded in 2013, Varthana offers low-cost, collateral-free loans and operates in 40 cities across 15 states.

🔗 Source: Inc42

🧠 Food for thought

1️⃣ Education finance emerges as specialized segment in India’s lending landscape

India’s education financing sector has evolved beyond traditional banking, with specialized players addressing specific market niches to serve the massive educational ecosystem.

Varthana’s approach of offering loans specifically tailored for affordable private schools demonstrates the sector’s specialization, with competitors similarly focusing on distinct segments, such as Leap Finance on international education, Eduvanz on skill development, and Auxilo on broader educational infrastructure 1.

This specialization reflects a market response to the unique cash flow patterns of educational institutions, which often can’t meet conventional lending criteria despite serving over 400 million students in India’s education system 2.

The sector’s growth shows substantial unmet demand. Varthana’s loan book expanded 48% year-over-year to ₹1,896 crore in FY25, following similar expansion from ₹900 crore in FY23 to ₹1,280 crore in FY24, according to company data.

Leading players in this specialized lending category are demonstrating that deep sector-specific understanding creates competitive advantages. Varthana, for instance, leverages technology and data analytics to develop tailored financial solutions for educational institutions 3.

2️⃣ Asset quality management remains critical challenge for education lenders

Education-focused lenders face unique asset quality challenges that require specialized approaches to risk management and collections.

Varthana’s experience highlights this reality. Their 90+ days past due loans stood at 5.8% as of September 2023, an improvement from a pandemic peak of 11.2%, demonstrating the sector’s vulnerability to economic disruptions 4.