CRED revenue soars 170X in FY21, losses past Rs 523 Cr

Credit card payments platform CRED has been the cynosure of all within the startup ecosystem after raising successive funding rounds and being valued at over $4 billion within three years of operations.

While there’s much speculation about CRED’s business model in the ecosystem, it has unveiled multiple revenue verticals including its e-commerce platform, peer to peer lending and house rental payments over the past year and more.

After recording revenue of only Rs 52 lakh during FY20, CRED had projected operating revenues of around Rs 108 crore for FY21 at the end of the previous fiscal (April 2021).

The company has finally revealed its annual financial statements and Fintrackr has analysed the numbers to understand how the new revenue drivers worked out for the fintech unicorn during the fiscal year ending March 2021.

The Bengaluru-based company has managed to grow its revenue from operations over 170X in a single year to Rs 88.6 crore during FY21. CRED is primarily a credit card payment app but since it charges no fees for these payments, it generates revenue from other ancillary services using its technology and distribution platform. Targeted at this user base of what it claims is the cream of the credit card customer base in India since CRED accepts every member on the basis of a high credit score cut off.

CRED facilitates house rental transactions via credit cards and collects convenience fees for the service and also generates revenue from the sale of advertising space and collects commission from product sellers on the platform. It also operates peer to peer (P2P) lending vertical “CRED Mint”, earning a share of interest on loans and processing fees from servicing of loans.

The Tiger Global-backed firm also generated a non-operating income of Rs 7 crore from its financial assets during the fiscal ended March 2021.

CRED has also been flooding media channels with its series of advertisements featuring Bollywood and sports celebrities to promote its credit card payment platform and cashbacks for every payment made on the platform. As a result, advertising and business promotion stood out as the largest cost centre for the company, accounting for 52.3% of its annual expenditure. Such expenses grew by 85.5% to over Rs 324 crore during FY21 from Rs 174.7 crore spent on the same in FY20.

Further, the company has increased its employee base to harness the growth of the scale of operations and launch of new revenue verticals. Staff costs have grown 85% YoY to Rs 134.7 crore in FY21. These make up 21.7% of the company’s annual expenditure and also include share-based payments of Rs 44.1 crore during FY21.

Last month, the Kunal Shah-led company had increased its ESOP pool size to around $500 million after announcing its third ESOP buyback event worth Rs 100 crore during November last year.

The company’s IT and communication expenses also grew by 85.6% to Rs 56.3 crore in FY21 from Rs 30.3 crore in FY20. Payment processing and other related direct costs account for only 9.3% of its annual expenses, dropping by 11.4% YoY to Rs 57.3 crore during FY21.

Professional and consultancy fees of Rs 30.6 crore pushed CRED's annual expenses to Rs 619.4 crore in FY21, registering a 63.3% growth as compared to the aggregate expenses of Rs 379.3 crore in FY20. CRED spent Rs 7 to earn a single rupee of revenue during FY21, improving significantly from FY20 when it spent Rs 729.3 to earn the same.

On account of growth in revenue, its EBITDA margins have also improved massively from -1966.2% in FY20 to -538.3% in FY21.  

As the cashburn continues in search of scale, CRED’s annual losses have grown by 45.1% to Rs 523.85 crore during FY21 from Rs 361.1 crore in FY20 and outstanding losses amounted to Rs 946 crore at the end of March 2021.

CRED’s collections have improved significantly during FY21 but even as it has missed its revenue projection by about 19% (on the Rs 108 crore projection), there is little doubt that the firm has done much more than win over investors to its vision. The promise of a deep understanding and connect with the biggest, and most valuable cohort of credit card users in India has won over investors clearly, and as the slowly emerging revenue picture shows, the beginning of a long revenue runway too. 

As anyone who has followed CRED’s emergence and growth will attest, the company has already converted many naysayers who could not fathom the business model till 2020, to grudging admiration for the strides it has made. Based on the numbers from 2021, momentum looks very strong for 2022 to be the year of validation and more expansion.