Exclusive: CRED projected operating revenues of over Rs 100 Cr in FY21

Kunal Shah’s credit card payment app CRED finally appears to have found a revenue stream that has worked for them in FY21. The firm, which has managed to divide the world into those who believe Shah is on to a game-changer, and those who can’t swallow its high valuations, had projected a staggering growth in its operating revenue for the last fiscal year.

According to documents submitted along with its regulatory filings, CRED projected a 208X growth in its operating revenues to Rs 108 crore during the fiscal year ending March 2021. 

Notably, these figures are not from the audited statements as the fiscal has just ended, rather projections based on the provisional financial statements of the first two-quarters of FY21.

If the firm gets anywhere close to these numbers, it would be a massive improvement in terms of revenue as the company reported operating revenue of just Rs 52 lakh in FY20.  Those numbers have been a cause for huge discussions in the ecosystem, as people struggle to swallow the lofty valuations the firm has managed from storied investors. 

While CRED didn’t respond to Entrackr’s queries around projected numbers, it seems the lending vertical has worked well for the company in FY20-21.

At the beginning of FY21, CRED had rolled out two credit products: CRED RentPay and CRED Cash (previously CRED Stash).  The former allows users to pay recurring household expenses and bills, and monthly rent payments using credit cards whereas the latter offers a low-interest instant credit line.

Between September and February, CRED had disbursed over Rs 1,000 crore in loans to its users, as per a report by The Morning Context. Started as a short term loan product, CRED Cash has been evolving into a personal loan product where borrowers could pay loans in tenure starting from a month to four years.

According to industry estimates, CRED makes somewhere between 1 to 2% commission from its lending partner IDFC Bank on every loan disbursal. Besides lending, the company also makes money via brand partnerships.

To its credit, the firm has not fallen for the easy way of showing gross transaction values to show traction, which could easily bloat up the numbers for it.  Be it in terms of goods sold through the platform or loans aggregated here. Shah clearly hasn’t needed to do that thanks to the confidence he enjoys from his investors, both past and present. 

What the firm has achieved is significant penetration in the country’s top tier of credit card users, with anything between 20-30% using the app to clear off their outstandings, thanks to the gamification the app has done there.   

In FY21, CRED also floated two subsidiaries Dreamplug Advisory Solutions and Dreamplug AA Tech Solutions to foray into investment advisory and account aggregation business. It’s not known how these two subsidiaries have been helping the company in revenue generation.

Unlike bumper growth in operating revenue, operating expenses are estimated to grow by about 79% to Rs 677 crore in FY21 from Rs 378.4 crore in FY20. As per the projections, annual losses are slated to be around Rs 562 crore in FY21, growing by 55%  as compared to Rs 363.2 crore lost in FY20.

Following the two-year trend, marketing is slated to be the largest cost center for the company, making up nearly 61% of operating expenses. These costs are estimated to jump by 130% to nearly Rs 410 crore in the previous fiscal. 

High customer acquisition costs were expected already as the company has been aggressively advertising on television and digital channels.

So far, CRED has scooped up over $230 million in total funding from the likes of DST Global, Coatue, Sequoia, Hillhouse among others. According to media reports, it’s also in talks to raise $200 million from existing investors at a valuation of about $2 billion. The new round will also have a secondary component and Chinese backers including Hillhouse and Morningside along with angels may exit from the company.