CRED remains an enigma for many startup watchers. Recently, it became one of the rare growth-stage unicorns to scoop up a new round with over 65% premium over its last valuation in the consumer fintech space: a Series F round at a $6.4 billion valuation in a challenging funding environment. The up-round for the Bengaluru-based company had come on the back of an over 4.4X surge in its total revenue during FY22.
The numbers have started to show a picture of the plans and promises CRED has been built on, a story that has clearly resonated strongly with large investors. Evidently, CRED is building its fintech wall, brick by brick.
CRED’s collection from operations jumped to Rs 393 crore in FY22 as compared to Rs 89 crore in the previous fiscal year (FY21), according to the company’s internal documents seen by Entrackr.
The Kunal-Shah-led firm also has a non-operating income of Rs 29 crore from its financial assets during the fiscal year ended March 2022. It’s worth noting that CRED is yet to file an audited financial statement for the fiscal year ending March 2022 with the Registrar of Companies (RoC). CRED declined to comment on queries sent by Entrackr.
While CRED doesn’t make money on its core credit card payment business, the company makes money via interest on peer-to-peer lending vertical “CRED Mint” and convenience fees collected on payments of house rental via credit cards.
Clearly, the card payment business which it put together on the back of a sustained push using cashbacks, and special offers, was meant to aggregate a user community that it calls the “top 1%” of card users in India. It is the mining of this core, high quality user base that is beginning to show now.
With a spurt in its scale, the company’s expenses also jumped 2.7X to Rs 1,702 crore in FY22 from Rs 619 crore in FY21. Marketing expense remained the largest cost center for CRED with Rs 973 crore in FY22. This cost recorded a 3X jump in FY22 and formed 57% of its total expenses in FY22.
The marketing cost is quite apparent as CRED featured several television advertisements featuring notables including Rahul Dravid, Ravi Shastri, Neeraj Chopra and Jim Sarbh, after its nostalgia trip last year.
Employee benefit expense is the second largest cost element for the company which increased 2.3X to Rs 307 crore in FY22. As the overall expenses surged 2.7X, CRED’s losses soared 2.4X to Rs 1,279 crore in FY22.
CRED has raised a little over $600 million across three funding rounds during 2021 and 2022 from the likes of Falcon Edge, Tiger Global, DST Global, Insight Partners and Coatue. Besides back to back fundraises, the company also invested in LiquiLoans which manages CRED’s own P2P offering in the backend.
In October 2021, it acquired Chennai-based liquor purchase and delivery startup HipBar and expense management startup Happay.
With its UPI feature recently, CRED has finally gone head on against most other fintechs in the space, even as it uses the same playbook of cashbacks to drive usage. But its standout success remains its loans business, linked to the P2P platform, where it has seen massive volumes by all accounts, the big differentiator being the high credit quality of its borrowers and ‘lenders’. Contrast that with PayTm, which has also been a tear with its small loans business, without risking its own capital. However, it is safe to bet that the portfolio quality of CRED will be better, both in terms of default rates as well as ticket size of loans. Thus, that is the number to watch out for when they finally do come out.