Looks like investors are not worried, at least yet, of the balance sheet that credit cards rewards app CRED brings along. And a validation of that, is the $215Mn that the company has raised today, despite of some really menial revenue numbers and an ever rising expense bill.
Having said that though, the two-year-old fintech start-up, which operates an app that rewards customers for paying their credit card bills on time, has come a long way since January. And when we say long, we mean long. Serial entrepreneur Kunal Shah’s CRED has become the youngest Indian start-up to be valued at $2 billion or higher after raising $215 million in its Series D funding round led by Falcon Edge Capital and existing investor Coatue Management, an internal memo revealed. Shah had earlier founder FreeCharge, which was later sold in an undervalued deal to Axis Bank.
The funding round also saw participation from Insight Partners, DST Global, RTP Global, Tiger Global, Greenoaks Capital, Dragoneer Investment Group, and Sofina.
This new round has raised the valuation of the Bengaluru-based start-up from around $800 million in January (when it raised $80 million in a Series C funding round) to $2.2 billion (post-money), charting an unprecedented growth trajectory in just a few months.
“I’m very happy to share that three months after our Series C, continued interest from leading institutional investors has resulted in us closing a Series D,” Shah said in a note.
“While valuation is a milestone that many celebrate, we view it as a responsibility and an opportunity to create member value. We’ve grown rapidly over the past 2.5 years, with 35% of premium credit card holders and processing 22% of all credit card payments in India on a monthly basis. As the credit card category continues to grow rapidly in India, our opportunity is to imagine new use-cases, empower CRED members to use credit responsibly, and reward them for good financial behavior,” the memo read.
The sixth start-up to become a unicorn this year after Meesho, Digit, Innovaccer, Infra.Market and NBFC firm Five Star Business Finance, CRED has revealed plans to initiate a buyback of Employee Stock Option Plans (ESOPs) with a total value of $5 million. This is the second ESOP executed by CRED since the $1.2 million-worth ESOP from existing and former employees in January. Shah said that the proceeds would be used to scale CRED’s existing line of products, which it launched last year, and engage in more experimentations. He also added that almost 70% of the current round was subscribed by existing investors.
“While most of you were keen on retaining your stock options during the Series C, we are committed to a culture of creating wealth for stakeholders and are therefore offering another ESOP buyback opportunity to you,” Shah said in the internal memo.
“We’ve grown rapidly over the past two-and-a-half years, with 35% of premium credit card holders and processing 22% of all credit card payments in India on a monthly basis. As the credit card category continues to grow rapidly in India, our opportunity is to imagine new use-cases, empower CRED members to use credit responsibly, and reward them for good financial behavior,” he added.
CRED has come a long way from letting users easily pay their credit card bills while earning additional rewards. It has expanded its services to lending through its credit line CRED Cash, online commerce, and brand discovery through its “Discover and WIN” platform, rent payments through ‘CRED RentPay’ on its platform.
Individuals need to keep their credit score at least 750 to be able to sign up for CRED. While many see this as counterproductive, as most startups in India tend to cater to the huge population of the country, CRED poses as a premium offering.
In fact, the company says that its criteria will inspire people to maintain good credit scores, and over the years, its clientele will increase.
Today, the two-year-old start-up has more than 6 million customers in India. This means that CRED alone counts about 22% of all credit card holders and 35% of all premium credit card holders as its customers.
CRED ended the fiscal year ending March 2021 with operating revenue of ₹ 108 crores, an increase of 208 times.