Cred Valuation: Indian Fintech Seeks Funding at $5.5 Billion

CRED Seeks Funding for Global Expansion and Acquisitions

CRED has initiated discussions with potential investors to secure new funding, aiming for a company valuation of $5.5 billion. This move signals the Indian fintech company’s ambitions for international growth and strategic acquisitions, according to a source with direct knowledge of the situation.

Investor Interest and Recent Funding

The company is currently responding to numerous investment inquiries and has been engaged in preliminary talks with several firms. These discussions center around raising capital at a pre-money valuation of $5.5 billion.

This development follows closely on the heels of a recent investment round, finalized just weeks prior, where CRED secured over $200 million from investors including Tiger Global and Falcon Edge Capital. The previous pre-money valuation in that round was approximately $3.75 billion.

Early Stage Deliberations and Potential Shifts

It’s important to note that the current financing discussions are in their initial phases. Consequently, the specific terms and conditions are subject to change as negotiations progress.

Disputed Valuation Claims

Despite reports, the Bangalore-based startup has publicly contested claims regarding the $5.5 billion valuation. The company, which achieved valuations of $2.2 billion in April and $806 million in January, maintains a different perspective on its current worth.

Strategic Acquisitions and Fintech Investments

Kunal Shah, founder and CEO of CRED, has communicated to investors a plan to allocate a portion of the new capital towards investments in, and potential acquisitions of, other fintech startups.

The company has already demonstrated this strategy through a $5 million investment in CredAvenue, which recently completed a $90 million Series A funding round. Furthermore, CRED is reportedly in discussions to invest in Uni, a fintech startup valued at over $300 million. Shah’s extensive experience as an angel investor – having backed over 150 startups – underscores this proactive approach.

Expansion of E-commerce Platform

This year, CRED has also been actively exploring opportunities to expand its e-commerce platform. The app currently provides members with access to a curated selection of premium brands.

Sources indicate that CRED even considered acquiring some of these brands earlier in the year, though these discussions were kept confidential.

Focus on a Premium Market Segment

Unlike many Indian startups, CRED doesn’t target the mass market. Instead, it focuses on a more affluent customer base.

Analysts at Bank of America highlighted this strategy in a recent report, noting that India has 57 million credit cards compared to 830 million debit cards. The credit card market is dominated by major banks like HDFC, SBI, ICICI, and Axis, which collectively control approximately 70% of the market share. This segment is particularly profitable for these institutions.

Platform-Based Approach and Growth Potential

The report further emphasized CRED’s platform-based approach – acquiring customers with the intention of monetizing them later. Credit cards remain an aspirational product in India, and continued growth is anticipated due to low penetration rates.

Analysts predict that while the form factor may evolve, the underlying demand for credit will continue to increase.

International Expansion Plans

CRED has also conveyed its intentions to expand beyond India to potential investors. Shah reportedly identified a specific international market for potential launch, though the details remain undisclosed.

Expanding Service Offerings

Backed by prominent investors like Tiger Global, Ribbit Capital, and Sequoia Capital India, CRED has been rapidly expanding its service offerings. The company now provides lending services to its members, enabling them to pay rent and tuition fees directly through the app.

In August, CRED launched Mint, a peer-to-peer lending service allowing members to lend to each other at interest rates of up to 9% annually.