InCred Financial Services Ltd. is a non-banking financial company (NBFC) that offer a diverse portfolio of loans products including personal loans, education loans, SME (small and medium enterprise) business loans, and merchant loans to meet the varied credit needs of emerging India. The Corporate was formerly known as Kkr Capital Markets India Limited. It has recently acquired a unicorn status after a fundraising in November, 2023.

Company Overview

InCred Group stands as a prominent figure in the financial services sector, encompassing Financing, Investment Banking, Wealth Management, Asset Management, and Institutional Equities. It operates through two main entities: InCred Holdings Limited, acting as the parent company, and its subsidiary, InCred Financial Services Limited, which directly engages with borrowers.

InCred Holdings Limited is the parent company, established in 2011 under the name KKR Capital Markets India Limited. Following the merger with KKR India Financial Services in July 2022, it was renamed InCred Holdings. It doesn't directly offer financial products. Instead, it serves as the financial backbone for its subsidiary, InCred Financial Services.

On the other hand, InCred Financial Services Ltd. operates as a non-banking financial company (NBFC), offering a diverse array of loan products catering to various credit requirements in emerging India, including personal loans, education loans, SME business loans, and merchant loans. Renowned for its utilization of technology and data science, InCred streamlines the loan application process, often approving loans online, aiming to offer a more efficient lending experience compared to traditional lenders.

Recently, Crisil and Care ratings have improved the credit rating of InCred to AA-/stable.

Business Entities

InCred operates through three main business entities, each catering to a specific financial service area:

1. InCred Finance: offering personal loans, education loans, and SME business loans
2. InCred Capital: This arm deals with wealth management, investment banking, and equities
3. InCred Money: This entity focuses on retail bonds and alternative investments products

Management

Mr. Bhupinder Singh, Wholetime Director & CEO, Founder of the Incred Group

Prior to Incred:

• Co-headed the Investment Banking and Securities division of Deutsche Bank for the Asia Pacific region
• Head of the Corporate Finance division for Deutsche Bank in the Asia Pacific region
• Post Graduate Diploma in Management (PGDM) from IIM Ahmedabad

Mr. Vivek Bansal, Wholetime Director & CFO

Prior to Incred:

• Deputy Chief Financial Officer at Yes Bank
• He worked with Fidelity Investments in London and Standard Chartered in Mumbai
• Chartered Accountant and a CFA

Timeline

2016: Acquired NBFC License

2017: Raised INR 5.85 Billion

2018: Profitable in 1st year of its operations

2019: Raised INR 4.27 Billion

2020: Acquired Qbera, a fintech leading platform

2021: Partnerships with Amazon India & Flipkart to provide merchants loans

2022: Merger with KKR India & Partenered with food delivery apps to provide credit facilities

2023: Unicorn Status afer raising funds of INR 5 Billion

Product Mix

Merger with KKR

Incred Finance merged with KKR India Financial Services Ltd in 2021 in an all-stock deal. According to a joint statement by the companies, the merger created an NBFC with a $600-million (around ₹4,700-crore) balance sheet and an equity base of $300 million. Under the merger terms, KKR, along with two other investors, Teacher Retirement System of Texas, and Abu Dhabi Investment Authority, hold a 35% stake in the merged entity.

The transaction reaffirms the strength and quality of the retail lending platform built by InCred Finance, which has a sharp focus on strong risk-management and collections practices and incorporates innovative technology solutions to enhance operational efficiencies.

Fundraising

InCred has achieved a valuation exceeding 1 billion dollars following a successful funding round in November 2023, that raised 500 Cr. 

The funding round was spearheaded by:

1. Ranjan Pai of MEMG, contributed $9 million.
2. Ravi Pillai, the chairman of RP Group of Companies, infused $5.4 million
3. Ram Nayak, Head of Fixed Income & Currencies at Deutsche Bank, invested $1.2 million.
4. Varanium Capital Advisors and Sattva Group

The company additionally stated that the equity capital would be strategically allocated across its primary business segments, encompassing consumer loans, student loans, and lending to micro, small, and medium enterprises (MSMEs).

Financial Insights

(In Crs)

• The increase in revenue highlights a rapidly expanding business with a growing demand for its products or services
• The surge in EBITDA indicates efficiency improvements and potentially expanding profit margins, suggesting that the company is scaling effectively 
• The PAT is particularly noteworthy because it directly impacts reinvestment potential and signals strong net profitability
• The growth in EPS is an indicator of the company's increasing profitability on a per-share basis, making the stock more attractive

Incred Finance reported a total income (Net of Finance Cost) of ₹521 crore for FY23 and ₹838 crore for FY24.

Based on this growth, we project the total income for Incred Holdings to be approximately ₹1,390 crore for FY24. The company reported a PBT of ₹423 crore for FY24, which is a 204% increase from ₹207 crore in FY23. Assuming Incred Holdings will see a similar increase, we estimate their PBT will rise from ₹191 crore in FY23 to ₹390 crore in FY24.

For FY23, the PAT was reported to be ₹109 crore. Applying the same growth rate, we project the PAT for FY24 to be approximately ₹245 crore. Based on this PAT, we calculate the following:

• EPS: 4
• P/E: 37
• P/B: 3

The current net worth of the company is INR 3320 Crores.

Key Indicators

*As of FY24

• AUM at INR 9039 Cr indicates a substantial size of the portfolio 
• GNPA & NNPA metrics are indicators of the quality of the loan book and the underlying risk. It shows that the company has made adequate provisions to cover potential losses, highlighting prudent risk management. 
• PCR means that over half of the gross NPAs are covered by provisions, which is a healthy sign of asset quality and financial resilience
• Cost to Income Ratio indicates that the NBFC spends 44% of its income on operational costs. It's a reasonable figure that suggests the company is managing its expenses well relative to its income 
• CRAR and CAR both these ratios are well above the regulatory requirements, indicating  a strong capital position to absorb potential losses and support its growth 
• Collection Efficiency at 98% suggests that the majority of borrowers are repaying their loans on time, which is crucial for the liquidity and profitability

Revenue split from subsidiaries

(In Crs)

*Companies are a step down subsidiary of InCred financial services limited

Valuation

The company was recently valued at INR 8800 Crores during a fundraising event in November 2023, indicating strong investor confidence. This valuation pegs the company at 10 times its Revenue and 72 times its Profit After Tax (PAT), resulting in a price per share of INR 149. 

As of FY24

Particulars	Industry Avg	InCred
P/E Ratio	20.67	39
P/S Ratio	3.18