Cred in Talks to Raise New Funds as Valuation Slips by Over 30% to $4 Billion

Fintech startup Cred reportedly in talks for around $100–200 million new funding at around $4 billion valuation, less than half its $6.4 billion valuation last year. This comes as global fintech companies are recalibrating valuations in response to a broader recalibration of the global fintech sector.

Background

Cred was founded as a platform to pay credit card bills in 2018 as a platform by Kunal Shah that lets users earn by making their credit card bill payments on time. They also made it possible to pay for house rent and avail short-term credit lines. Although Cred’s growth has been fast and its user base is large, the fintech startup has been challenged to turn a profit like other fintech startups. 

Funding Details

Cred’s next funding round is also anticipated to be led by existing investors, including Singapore’s sovereign investment fund GIC, which was the one to spearhead a Cred’s funding round in 2022. Peak XV Partners, Tiger Global, Ribbit Capital and QED Innovation Labs would be other major stakeholders likely to participate.

It is in this context that Cred decided to seek additional funding at a lower valuation as a means of returning to the path of sustainable growth and profitability.​

Financial Performance

Cred’s total revenues stood at ₹2,473 crore in the fiscal year 2024 while operating losses were narrowed down to ₹609 crore, compared to ₹1,024 crore last year. However, the company has made some concentrated efforts to bring its cash burn down, reportedly halfing it in the past few years, and today has about ₹1,000 crore in cash in hand. There is a restoration of focus on a quest for operational efficiency in all these financial adjustments.

Market Context

Valuation corrections akin to Cred’s are not isolated to just Cred, but occurring across the fintech industry as companies like Stripe and Klarna are being hit with valuation corrections as well. With investors placing greater emphasis on profitability and investing in businesses that have strong, sustainable business models rather than just rapid growth, this is a bit of a global reset. ​

Strategic Outlook

Cred, however, looking forward to the horizon, is expecting to be in public markets within two years. The company expects a series of profitable quarters before it will IPO, for its valuation to align with public market standards. At the same time, Cred is diversifying its range of products beyond lending; for instance, having launched lending against mutual funds quite recently. ​

Further Ahead.

This is happening in a landscape where the global fintech ecosystem is seeing a radical switch from a ‘growth at all costs’ narrative to a ‘path to profitability’ narrative. For a company like Cred, that means investors will be looking at them all too hard and they will be forced to justify valuations with tangible financial metrics rather than just looking at user count.

However, this shift is particularly prevalent among down rounds — or funding at a lower valuation than a round prior — in late stage funding rounds. Cred’s openness to shift its valuation this much suggests pragmatism in pursing long term sustainability versus trying to match inflated market perceptions.

In addition, the recalibration allows Cred to win long term institutional capital that is interested in steady returns and corporate governance. Secondly, Cred already has a niche, but lucrative market of premium credit card holders as its user base.

Cred could become the model for fintech startups that wish to survive and thrive in a less capital flush time by tightening its unit economics, expanding its financial services involving lending, rent payment, and credit based on mutual fund, and trimming its non core expense.

Only time will tell whether this funding round will end with a successful IPO over the next two years, but Cred’s approach in the funding round is at least a sign that they are ready to align with the market realities.