Cred, the Bangalore-based fintech and ecommerce startup which facilitates credit card premium repayments and redemption of accrued reward points, has now entered the exclusive unicorn club, which includes firms that have reached a billion-dollar valuation.
Cred received fresh funding from new investor — Falcon Edge Capital and the existing Coatue Management, and raised $215 million, thereby increasing its valuation 3x from $800 million to $2.2 billion, astonishingly in a matter of just 3 months.
Cred has become the 6th entrant to the unicorn club this year, the others being Digit Insurance, InnovAccer, NBFC Five Star Finance, Meesho and Infra.Market.
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The Founder’s Statement
Founder and CEO Kunal Shah, who also founded Freecharge later sold to Snapdeal for $400 million in 2015 , stated that this development adds to the firm’s potential to shape and reward responsible financial behavior and use of credit.
He also wrote in a company-wide release that his firm processes “22% of all credit card payments in India on a monthly basis”.
Other Avenues To Explore
Of late, Cred has been extending its tentacles into ancillary services such as building an ecommerce platform, the Cred Store, and Cred Pay which allows users to redeem reward points across online stores and avail discounts.
The startup is in the last stages of closing deals with the likes of BigBasket, Dineout and ixigo after a pilot project where it tested the waters with merchants including Vahdam Teams, The Man company, Epigamia and Man Matters.
Cred reported that the latter few benefited from increased customer satisfaction and growing basket sizes.
The way forward for Cred is with Cred Pay through which it can cash in on its high-value and high-end user base having an average credit score of 750.
Presently one can join Cred only after being screened for their credit score. The collection of this data hints at the startup utilising it for lending services apart from its ecommerce play.
Cred is already offering loans partnered with IDFC First Bank with 48 months tenor and a 12-15% interest rate which is the industry standard.
Cred claims to have achieved growth to the tune of 5.9 million premium users with an average credit score of 830 in the last 2 years alone.
Anomaly
Despite the steady growth, the same has not been reflected in its revenues.
FY2020 had Cred reporting revenues at just Rs 52 lakh, the majority of it driven by interest revenue from fixed deposits than from operation revenues.
Expenses also grew from Rs 63.90 Cr in FY19 to Rs 378.39 Cr, a near 500% increase.
Upon extensive calculation it was found that in order to earn every single rupee in revenue, the firm has had to spend over Rs 770.
Shah has likened Cred to a high-end gated community, accessible to only the rich and mighty.
In this vision Cred is never going to go after user base scaling or reaching out to hundreds of millions. Rather the focus will be on acquiring high net-worth customers of which there are tens of millions in India.
Present State Of Indian Startup Ecosystem
Commenting on the Cred story, Utkarsh Sinha, managing director Bexley Advisors, observed that despite apprehensions and slowdown in late stage startup funding, developments of late have indicated a “fairly rich landscape in terms of large rounds.”
Cred’s new unicron status shows that Indian consumption is as strong as ever and there is enormous growth potential.
Also for the startup world at large it points to “significant appreciation (and some exits) for early investors, which is always a healthy sign, helping VCs raise and deploy more capital ”
Indian startups are certainly flourishing in an encouraging environment with nearly 40 unicorns till date.
In the backdrop of a funding spree and deal activity termed by industry experts as a “funding party”, NASSCOM expects the number of unicorns to rise to 50 in this year.
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