At present, Cred owns 20% stake in NewTap Technologies, with the rest owned by Shah himself, sources added.
Shah has discussed shoring up the funds from Cred’s existing investors including Sequoia Capital and Singapore’s sovereign fund GIC, which will value the NBFC unit at roughly at $250 million, sources added. Sequoia is one of the early backers of Cred, while GIC led a Rs 617 crore (about $80 million) funding in the fintech firm last year, which was a mix of primary and secondary raises.
Back in November 2021, ETtech had first reported that Shah through NewTap Technologies acquired Parfait Finance & Investment, which is a Reserve Bank of India (RBI) registered NBFC. Shah along with his brother Rohan Shah Naresh are named as the directors of NewTap Technologies.
People aware of Cred’s thinking said that the idea to infuse equity capital was to build trust towards its NBFC entity and raise debt capital to maintain equity to debt ratio, as most other NBFC businesses. Cred has been stepping on the gas for its Unified Payments Interface (UPI) product, as it looks to improve user engagement on its platform. It first launched UPI on its platform in October 2022.
The move of the infusion is well timed, i.e. when the regulator has given a green signal for the operation of pre-sanctioned credit lines at banks through UPI.
Discover the stories of your interest
“Cred is looking at an equity infusion for its NBFC business. While it is clear after the digital lending guidelines last year that fintechs have to be regulated, there is heightened action now since most players want to start lending from their own NBFC units and reduce dependency on partnerships. Co-lending and direct loans from books: it will be a mixture of both for fintech NBFCs moving forward. Also, with UPI opening to credit lines, it will open the floodgates to digital lending. The industry is waiting for the regulator’s order to be opened to NBFCs, too,” said one of the people above aware of Cred’s plans. Cred did not respond to ET’s queries until press time on Monday. At present, Parfait Finance and Investments powers Cred’s buy-now-pay-later offering, Cred Flash, which was launched for select users earlier in February this year. Its other credit products include Cred Cash, through which it doles out personal loans to its users directly into their bank accounts.
Online publication The Arc first broke the story on NewTap’s equity infusion on Monday afternoon.
Cred also runs a peer-to-peer (P2P) lending and investment product, Cred Mint, in partnership with P2P NBFC LiquiLoans. Through Cred Mint, users can provide loans to other Cred users and earn up to 9% interest. The fintech firm had also invested $10 million in LiquiLoans in September last year for a 5-6% stake, valuing the P2P NBFC at $200 million.
The news about Cred-bolstering NewTap comes at a time when several fintechs have been trying to build their lending businesses. Last week, ETtech reported exclusively that neobanking startup Jupiter has secured an NBFC) licence from the Reserve Bank of India (RBI), a development that will help it dole out credit from its books. Jitendra Gupta, founder of Bengaluru-based Amica Financial Technologies Ltd., which runs the startup, told ET that the Sequoia and Tiger Global backed-Jupiter intends to capitalise the lending business with around Rs 100 crore and raise an additional Rs 100 crore in debt to fund the NBFC’s credit operations. It aims to hit annual disbursements of Rs 600-700 crore in short- and medium-term personal loans.