How profitable InCred stands out among bleeding fintech lenders: Interview with Bhupinder Singh

Lending has turned out to be the most obvious money making channel for fintech startups in India. Right from large to small fintech companies are resorting to distributing loans through own and third party lenders such as banks and NBFCs. 

Most growth stage fintech startups have been lending aggressively, but they still bear huge losses on a consolidated basis. However, the eight-year-old InCred is an exception as the firm’s operating revenue spiked 48% to Rs 1,267 crore in FY24. At the same time, its profit grew 160% to Rs 316 crore in FY24.

InCred claims to have offered credit to 3,50,000 borrowers since its inception in 2016. InCred group operates three companies – InCred Finance, InCred Capital, and InCred Money. 

To understand InCred’s growth across segments, startup investments including Oyo and collection (recovery) among others, Entrackr spoke to the company’s founder and chief executive Bhupinder Singh. Here are the edited excerpts. 

How has the size of asset under management (AUM) across personal, education and business loans grown? 

Our asset under management or AUM grew 49% in FY24 and we closed FY24 with over Rs 9,000 crore in AUM, spread across personal loans which accounts for 44% of our AUM while micro, small and medium enterprises (MSMEs) contributed 35% of the total disbursal. Educational loans formed 21% of the entire loan book including third-parties capital.

Can you talk about growth numbers across three segments: personal, business and educational in the last fiscal year? 

We have had strong growth across all three segments in FY24: Personal loans grew at 57% whereas educational loans spiked at 86%. Business (MSMEs) borrowing increased 32% during the last fiscal.

Which factors led to the upsurge in educational loans?

Strong preference to study abroad for superior exposure and growth prospects, along with growing awareness in terms of universities and courses through social media and internet are some of the key driving factors, which have accentuated further over the last few years.  

InCred has started equity investment across startups. Why has it entered into what’s widely dubbed as risky equity investment? 

We invest in startups through InCred Capital where we focus on  identifying attractive investment opportunities in private companies. However, we only put money in startups which are available at reasonable valuations and have long-term structural growth potential. Besides InCred Capital, we also have a private equity fund providing growth capital to startups and other businesses.

You said that InCred Capital looks for reasonable valuation while investing into startups. InCred capital recently invested in Oyo at a $2.38 Bn valuation. Do you think this is the right valuation of Oyo?

Any investment opportunity we identify for our clients is based on our fundamental thesis of providing an attractive risk-return profile for our wealth clients. We believe that Oyo falls in that category and provides an opportunity for long term value creation.

Collection is the hardest part of any form of lending be it traditional or digital. How did InCred solve this and what’s the size of NPA?

Agreed. I think it starts right from our strong, proactive focus on risk and analytics, and then collections, which is more reactive.

We have over 150 pan-India collections teams across products that track repayments and employ multiple modes, depending upon the product-specific requirement and level of customer delinquency. For early defaulters, we use techniques like tele-calling to educate them about default implications such as credit score deterioration. For late-stage defaulters, focus is more on limiting losses through field visits, vendor engagement among others. We also use mechanisms like setting up escrow accounts for superior collections.

InCred efficiency has been consistently tracking at 98%. Our March 2024 NNPA stood at 0.8% and was among the best in the industry.

InCred merged with KKR Financial services in 2022. How has the merger panned out in terms of business?

 Let me start by giving you some context. While technically it was a reverse merger of InCred with KKR India’s credit arm, substance over form, InCred acquired KKR’s corporate loan book.

It was a win-win for both InCred and KKR. What KKR got was a profitable exit from its corporate book, which they were looking for, and the opportunity to be part of a successful and long-term lending growth story with InCred in the driver’s seat. For InCred, the deal was purely an equity raising exercise with KKR joining our cap table and our net worth swelling 3X to over Rs 3,200 crore as of December 2023. 

At the same time, we were able to quickly wind down the corporate loan book and focus on building a granular retail franchise, which is our broad vision for InCred Finance.