Episode 12 – Fintech – Cred Avenue and a $90 mn raise!
Finally, Indian Debt market is getting the attention it needs
My phone is buzzing since the news came out. How come a Debt marketplace raise $90 mn in their Series A fund raise and that too, within a year of launch?
CredAvenue simplifies access to credit for borrowers, ranging from a BB to an AA rating, and improves access to multiple debt products, like bonds, supply chain financing, etc., on a single unified platform. CredAvenue connects enterprises with lenders and investors, and facilitates discovery, investment and fulfillment. The company claims to have facilitated transactions worth $9 billion through the platform, serving over 1,500 institutional borrowers and 750 investors.
Overall, CredAvenue is creating a vibrant secondary market for debt instruments and a digital ecosystem for all market participants, like banks and financial institutions, payment service providers, account aggregators, fintech lenders, and SaaS platforms, to integrate seamlessly and provide services to debt capital seekers. Something which has been missing in the Indian market since long (Lack of depth of Indian debt market is well documented (Indian debt market that never was).
For sure, it is targeting a previously neglected white space in the industry.
Interestingly, everyone related to the firm describe it as the Operating System of Debt market in India.
Founder, Gaurav Kumar has an interesting history as well. He worked with Northern Arc Capital for 9 years and previously co-founded Vivriti Capital, an online enterprise debt platform and lender, along with Vineet Sukumar. Vivriti Capital is a non-deposit taking NBFC and lends directly from its balance sheet. It has raised over $100 million and is now majority-owned by US-based Creation Investments.
Source: Internet
And the numbers for sure look impressive and early parallels to creating Zerodha for the Debt market cannot be avoided. Currently, as per various reports, CerdAvenue has raised loans worth $1.3bn on its loan platform called CredLoan. It has raised bonds worth $1.2bn on its Bonds platform Plutus. It has transacted pools worth $2.3bn. In terms of volumes, it has discounted 5000+ invoices on its CredSCF platform and it processes 450,000+ loans on CredCo. Separately, it manages portfolio worth $3.7 bn on its Pool Fulfilment platform.
Based on its H1 performance, CredAvenue is tracking $22 million in revenue for the current financial year. At present, the startup is investing in people and technological capabilities and is expected to turn profitable in FY24.
Hypergrowth – Check
Huge untapped market - Check
Second time founder – Check
Why is it a big deal?
Worldwide, debt market is a multiple of equity markets and liquidity provided by debt market is significantly deep.
India’s debt markets, valued at 65% of gross domestic product, are severely underdeveloped and well behind the global average of 150% of GDP. The size of India’s corporate bond market is a mere 16% of GDP — compared with 46% in Malaysia, and 73% in South Korea.
India’s banks and bond investors have long focused almost exclusively on large corporations with AA+ ratings, leaving the small and medium enterprises who make up the backbone of the Indian economy completely underserved. For these business owners the whole process of borrowing money is painful, from start to finish.
The Indian corporate bond market has low & unstable trading volumes. Sadly, the corporate bond market remains largely about top-rated financial and public sector issuances. The domestic debt managers have forgotten that the logic of the business of finance is “to price the risk". Essentially, smaller firms which are unable to get good credit ratings are largely deprived of a very large source of funding, which is non-dilutive in nature. Access to capital has consistently been a major issue in India. Bank loans are not accessible to everyone and is very thin.
The closest that someone has come to bringing debt markets to India is Zerodha’s attempt to let retail trade G-Secs. This further skew the debt market towards govt. securities.
What all the above essentially means is that there is a big fixed income, non-govt. market that is waiting to be disrupted by a serious player. Here enters CredAvenue. By building a platform that will effectively serve as an API/Operating System for financial data for a market that remains largely underserved, CredAvenue has a unique opportunity to become the single source of truth for borrowers and suppliers of capital.
So, what’s next?
It does look like that CredAvenue has started off well and will play an important role in bringing the investors and institutions looking for capital together. Going by the sheer size of market that can be created, their hypergrowth is not slowing down anytime soon. I, for sure, would be watching this firm very closely and excited about the deepening of India’s debt market. For all we know, this could be the start of what could eventually become the Zerodha of fixed income market!
Hirings in Fintech
CredAvenue is hiring for 80+ positions across every vertical imaginable. Loads of opportunities here. Do reach out to Gaurav here for the same. Checkout their team members on LinkedIn as well for opportunities.
Latest happenings in Fintech Industry
https://www.vccircle.com/buy-now-pay-later-platform-capital-float-raises-50-mn-led-by-lightrock/
Reach out to abhishekk.kumar@iiml.org in case you want to discuss anything in Fintech. Would love to be connected.
How does this impact the rating companies Abhishek? Are they redundant in this journey of deepening of fixed income market? Will the lenders internal risk assessment divisions suffice?