InCred gets Anshu Jain, other top investors

The company is going to start operations soon with a capital base of Rs 600 cr

InCred, the non-banking financial company (NBFC) floated by former Deutsche Bank senior executive Bhupinder Singh, has garnered high-profile backers including the bank’s former co-chief Anshu Jain. It will start operations soon with a capital base of Rs 500-600 crore.

The NBFC has created its fair share of media buzz considering Jain’s involvement. Jain has invested about Rs 50 crore and would be the chairperson of the advisory board, said Singh in an interview with Business Standard.

Singh and Manipal Group’s managing director and CEO Ranjan R Pai have contributed about Rs 150 crore each.

The NBFC, which would focus on financing to small and medium enterprises (SMEs), low-cost housing, education and healthcare sectors have also garnered strategic investments from Gaurav Dalmia, founder and chairman of Landmark Holdings (Dalmia Group), IDFC PE and Alpha Capital. Dalmia and IDFC PE have also invested Rs 50 crore each in the venture. Singh, the promoter of the company, also reached out to his friends and collected “lots of small cheques”.  

The NBFC will start business with SME financing and three retail-focused ventures - unsecured consumer finance, mortgages and education loans.  The business model of the NBFC is quite unique in India, but a proven one nevertheless globally.

Singh is banking on the “goodness of the borrowers,” and the aversion to be labelled a defaulter. While Singh has spent most of his career outside India, the Bhopal-born Indian Institute of Management (Ahmedabad) graduate is deeply familiar with the middle class Indian sensibilities.

The basic premise of banking on the integrity of the borrowers will be based on rigorous analytic by his team, and will be pursued by soft follow-ups every now and then once a loan is disbursed.

“We’ll keep a tab on the student’s progress and would wish her on every successful milestone. It would be a personal touch, much like a family affair,” said Singh.

The parents of the students will not need to furnish any collateral, but could be required to stand as a guarantor for the loan amount. Singh doesn’t see a chance of default unless the whole intention is to defraud.

Before disbursing a loan, the NBFC will see the study record of the student, the institution he is joining, and the even the past placement record of the institution and the stream the student has chosen.  In case of SME financing, the company will be far more cautious. It will take first lien on the cash flow by tying up with the merchant bank and will disburse loans based on the flow generated from transactions through point of sales machines.

The margin of the business would naturally be on the higher side, considering the unsecured nature of the loans being disbursed, said Gaurav Dalmia. Investors won’t hesitate to pump more money if the business does well. “If business is doing well, money is not going to be a problem,” said Dalmia, who was one of the key investors in IndiaBulls back in 2000.  Other investors are confident that the business will scale up considerably.

“We have always looked for investment opportunities in this space and we seized it when we met Bhupinder Singh and the high quality team he has put together,” said Ranjan R Pai, managing director and CEO of Manipal Education and Medical Group.

Manipal Group has had very successful legacy in the banking space as founders of the Syndicate Bank. Dalmia sees huge potential for the financial sector and sees the financial sector outperforming aggregate business sector, if the Indian economy does well.

“The risks in this sector come from leverage, falling underwriting standards in the quest for growth or market share, and for investors there is an additional risk because of high and often unrealistic valuations which tend to assume near-perfect business conditions going forward,” said Dalmia, a veteran of investing in the financial sector for the past 15 years, including in niche NBFCs.

Singh, a banking veteran of about 20 years, he has no plan to apply for a banking licence. His aim is to make InCred one of its kind success model in India. He’s willing to learn from established players in the segments he is venturing into.

For example, his education model has borrowed elements from Credila Financial Services and InCred has even hired Prashant Bhonsle, former chief of Credila, to head the education vertical. The firm's Consumer vertical will be run by Nikhil Sama, founder of Instapaisa — a peer-to-peer platform which Singh acquired. The chief operating officer and chief architect for technology is Nitin Agarwal — one of the founders of e-commerce platform Yebhi.com.