Indian fintech CRED seeks funds at $5.5 billion valuation

·3 min read

CRED has begun to engage with investors to raise money at a valuation of $5.5 billion as the Indian fintech startup eyes international expansion and inorganic growth, a source familiar with the matter told me.

The startup has received a number of inbound requests from investors and has also held talks with some in recent days to raise capital at a pre-money valuation of $5.5 billion, the source said. This is just weeks after the three-year-old startup was finalizing an investment of over $200 million at a pre-money valuation of about $3.75 billion from Tiger Global and Falcon Edge Capital among others, according to multiple people familiar with the matter.

Deliberations for the new financing round are at a very early stage and the terms may change, the source said.

The Bangalore-based startup, which was valued at $2.2 billion in an April round and $806 million in a round it disclosed in January, disputed the claims.

In conversations with investors, CRED founder and chief executive Kunal Shah has said that he plans to deploy at least part of the new capital to invest in -- and acquire -- other fintech startups, people familiar with the matter said.

The startup has already engaged with several firms. It recently invested $5 million in CredAvenue, which recently unveiled a $90 million Series A funding, and is in talks to back fintech startup Uni at a valuation of over $300 million, according to three people familiar with the matter. (Shah is also one of the most prolific angel investors in India and has backed more than 150 startups.)

CRED, which helps people improve their credit score by paying bills on time and has amassed over 7.5 million members, has this year also explored aggressively expanding its e-commerce platform.

On its app, the startup offers its members access to a range of premium brands. Earlier this year, CRED explored whether it should acquire some of those brands, said people familiar with the matter, who like everyone else, spoke on the condition of anonymity, as the matter is private.

The startup, unlike most others in India, doesn’t focus on the usual TAM of India — hundreds of millions of users of the world’s second-most populated nation — and instead caters to some of the most premium audiences.

“India has 57 million credit cards (vs 830 million debit cards) [that] largely serves the high-end market. The credit card industry is largely concentrated with the top 4 banks (HDFC, SBI, ICICI and Axis) controlling about 70% of the total market. This space is extremely profitable for these banks – as evident from the SBI Cards IPO,” analysts at Bank of America wrote in an earlier report.

“Very few starts-ups like CRED are focusing on this high-end base and [have] taken a platform-based approach (acquire customers now and look for monetization later). Credit card in India remains an aspirational product. The under penetration would likely ensure continued strong growth in coming years. Overtime, the form-factor may evolve (i.e. move from plastic card to virtual card), but the inherent demand for credit is expected to grow,” they added.

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CRED has also expressed intentions to expand outside of India to potential investors. Shah told one investor that he has identified one international market where CRED is exploring to launch its offering, another person familiar with the matter said. TechCrunch couldn’t determine the name of the market.

CRED — backed by Tiger Global, Ribbit Capital and Sequoia Capital India — has been aggressively expanding to new categories in recent quarters. The startup lends to its members, giving them the option to pay their rent and tuition fee from the app itself.

In August, it launched Mint, a service through which it allows its members to lend to one another at an interest rate of up to 9% annually.

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