InCred Financial Services Limited

Strong capitalisation position supported by high pedigree of investor base

It is well-capitalised, with networth of Rs 2,300 crore with a low gearing of 1.6 times as on September 30, 2022. This marks a significant improvement from Rs 595 crore of networth as on March 31, 2019.

Most recently, the company’s networth increased from Rs 1,112 crore on March 31, 2022 to Rs 2,300 crore as of September 30, 2022 – benefitting from the implementation of the scheme of corporate reorganization and internal accretions over H1 FY 2023.

Experienced promoters and senior management team

Incred was promoted in 2016, by Mr Bhupinder Singh, Whole Time Director and Chief Executive Officer. Having been associated with Deutsche Bank with his last stint as head of the Corporate Finance division and the co-head of the Fixed Income, Equities and Investment Banking divisions for the Asia Pacific region, Mr Singh has a professional experience of over two decades. Over its operating history, the company’s senior management team has gained strength, and now comprises renowned professionals from various industry sections.

To name a few more - Mr Vivek Bansal, Incred’s Chief Financial Officer (CFO), has experience of two decades, which include leadership stints in Fidelity Investments (London) and Standard Chartered (Mumbai). The business side is headed by Mr Saurabh Jhalaria who has almost 20 years of work experience and was earlier Managing Director – Singapore operations at Deutsche Bank. Mr Prithvi Chandrasekhar (Chief Risk Officer), has held various positions across several companies, including Capital One and McKinsey over a professional stint of over 25 years.

Diversified loan portfolio

It had a diversified loan portfolio of Rs 5,052 crore as on September 30, 2022 which marks a half-yearly growth of 33%. This growth was driven by addition of erstwhile KKR India’s wholesale loan portfolio to Incred’s overall AUM as part of the corporate reorganization.

As on September 30, 2022, the AUM mix consists of personal loans (38%), secured school financing (10%), student loans (16%), lending to NBFCs (10%) and anchor & escrow backed business lines (19%). Apart from these, erstwhile KKR India’s wholesale portfolio also constitutes 6% of the AUM however, this share has declined from 13% as of June 30, 2022. This book is spread across 5 group accounts and is expected to run down in the near to medium term.

Moderate earnings profile

Owing to the nascent scale of operations, operating expenses of Incred, though correcting, have remained high attributed to support costs, especially employee and technology-linked expenses.Furthermore, on-boarding of senior management to lead respective asset segments has also contributed to the high employee expenses.

In fiscal 2020, the company focused on optimizing cost and overall operating expense increase was controlled at 19%. However, the business growth was less than what was budgeted, as AUM grew at 17% over the year on account of cautious origination in some segments and overall challenging macroeconomic environment for most part of the year. Disbursements in the last quarter of fiscal 2020 were also impacted because of the lockdown. Resultantly, the operating expense ratio for the year remained high at 6.9%.

Moderate scale of operations and market position with limited seasoning

As on September 30, 2022, Incred’s AUM stood at Rs 5,052 crore, as compared to Rs 3804 crore, two quarters ago - registering a growth of 33% over this period. However, the AUM is spread across seven asset classes. While this gives Incred the benefit of diversity, scale of operations and market position remains moderate within each asset class.

In the aftermath of the pandemic’s second wave, the AUM dipped marginally towards the end of Q1 2022 however, the growth has restored since then. As the portfolio continues to gain vintage, the company’s ability to profitably scale the portfolio across diverse segments remains to be demonstrated.