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In 2021, this company was everywhere. Kapil Dev sir, old singers, cricketers, and our very own Jamie sir, favorite Rahul Dravid was also shouting. "I am the goon of Indiranagar." Only Cred could do this. At one time, the darlings of Indians. People were crazy about Kunal Shah, asking, "What has he created?" A valuation of over 6 billion dollars, and today the company is struggling. Do you know why? Because they don't have a business model, and India's regulations are becoming stricter. Today, we will decode how Cred launched itself. What problem does it solve in the market? And after solving the problem, perhaps that path is now lost. It is lost, and it is making huge losses. That is, despite a valuation of 6.5 billion dollars, incurring a loss of 1600 crore rupees every year is something not everyone can afford. So, what was the birth of Cred? What were the similarities between Cred and Paytm? What good things did Cred do? How many users did it acquire? What was the plan? How did it raise funds? And why is Cred struggling today? We will decode all of this today in this Cred business case study. But before starting the case study, I am your favorite Bavesh Gala, Business Mentor and Investor. From me to all of you, Jai Siya Ram, Radhe Radhe, Jai Jinendra. [Music] Now, let's understand Kunal Shah. This man is a "crazy genius." He has a very good network. People like him. He had also created a company before, named Freecharge. Now, what does this company do? There was a time when it was a craze to recharge your mobile, prepaid. And mobile recharge was boring. If you got some coupons while recharging, imagine a pizza coupon or a gifting coupon. College students and youth liked this. "Hey, recharge on Freecharge and get an extra coupon of 10, 20, 30 rupees, and redeem it." Brands also liked it because their marketing was happening. And with this business model, Kunal Shah raised millions of dollars. But times changed, emotions changed, the company shut down. However, Kunal Shah had built his goodwill, that this man knows his stuff. And as soon as he started Cred, the idea was very vague. From day one, people were saying, "What is he even doing?" It's very vague. But investors knew that he would double their money. So, he got the valuation. Cred's promise was one thing. I don't want to serve India. The target audience was very clear. I only want to serve the top 1% rich Indians. Those who enjoy luxury, who travel, who roam internationally, who spend a lot. Swipe, win, and I want to build discipline in these people. And I want to bring the aspirational middle class, who want to look cool, into financial discipline. I want to ensure they use credit cards, pay their credit card bills on time. And after this behavior, I will have the data of the country's best financially disciplined upper-middle class and rich class, and from that, I will earn. Cred's business model was "wow." And how did he do it? Gamification. Hey, in India, whenever anyone launches, the simplest way to win the hearts of Indians is cashback, coins, and games. And Cred did just that. You pay your credit card bill, you get coins equal to the amount of your credit card bill. You can use those coins for cashback, gifts, or coupons. Now, brands came on board, everyone together, because for them it was marketing. Banks came on board because their credit card sales would increase. Payments would be on time. Discovery would increase. And Cred was very happy in the middle. And to do this, imagine, for 1 rupee of revenue, Cred was losing approximately 730 rupees. Not profit, for revenue, 730 rupees loss in marketing, in customer acquisition cost. That is, the revenue for the first two years was under 50 lakhs, and losses were in crores, more than 300-400 crore, around 387 crore loss. Crazy! But people thought, "There's a promise in this, there's a promise." And Cred, slowly, slowly, slowly, with aggressive marketing, especially by putting funny ads in IPL, aggressively doing influencer marketing on digital, Cred created a "wow" moment. Many people were saying, "What is their business model?" But he was saying very shrewdly, "The top 1% of the country is with me. Their data is with me. Their purchasing pattern is with me. I will monetize them." In no time, 13 million active users, meaning 1 crore 30 lakh users, came to Cred. India has 150 crore people, and 1 crore came to Cred. But these will not be the top 1%. Some college youngsters will also be there who were exploiting free coupons and cashback. Now, pressure came on Cred because it launched in '18. It got a hyper-boost during COVID. A valuation of 6.5 billion dollars by good investors. But after that came the funding winter. 2022, 23, 24 were bad for tech companies. Byju's is losing its steam. Tech companies are failing. And a new craze has started, called quick commerce and AI. Now, Cred has neither a strong AI model nor quick commerce. So, Cred is not getting funding. So, the pressure came on them: "How will we monetize? How will we earn money?" So, he thought deeply and said, "Indians lack one thing, and that is instant funding. If I have your civil score, your credit history, and your behavior, then I can give you instant loans." Cred went to banks and told them very simply, "Our business is very clear. We will provide funding, and we will charge a 1 to 1.5% commission." Now, this seemed to make everyone happy. Banks were happy, and young Indians, the rich class, could easily get personal loans. This is a business model of "first loss default guarantee." That is, if someone skips an EMI, Cred will assume the first loss. It is the default guarantor. So, banks were also happy that even if they are taking 1.5%, credit risk is reducing, customers are onboarding with us, our business is growing, customers are also happy, Cred is also happy. When the husband and wife agree, what can the judge do? But in this case, the judge was the RBI, and in 2024, the RBI rang the bell, saying, "Cred and other apps, you are putting India in danger. You are giving unsecured personal loans, and you are giving loans to people who do not have the capacity, the discipline, the track record, and this can become a crisis, there can be defaults." And like Lehman Brothers and these financial institutions shook America and the world in 2008, India could be at risk. Because a pattern was seen here: what were people doing with these loans? They were investing in IPOs, or investing in Dream11, or spending lavishly. The stock market is also rising, so they will earn money from there. But giving personal loans without a guarantor, without collateral, without discipline, the RBI put a stop to this, and their business model was shaken. That is, their revenue increased significantly, losses also increased, but 80% of the revenue was coming from lending. Good revenue was coming. The RBI put the brakes on, saying, "Strict norms, good discipline." The RBI did a good job. But Cred innovated further. It said, "Oh, you are stopping this, what else can we launch?" They said something sexy: "You cannot pay rent with a credit card. Can you pay rent with a credit card?" Imagine you have to pay rent. You are paying rent with a credit card. You get a credit period of 40, 50, 60 days. And when you repay your credit card, you get credit card points, cashback. You get features like credit card lounge access. And then, don't pay that credit card bill directly. Pay through Cred. So, you get double cashback, double points. It's the icing on the cake. This also became a hit. But the RBI also put a brake on this, saying, "Keep rent payments regulated too." And we Indians are resourceful. We are smart. We played this game too. Many people looted Paytm with this. Vijay Shekhar Sharma himself said on The Kapil Sharma Show that I spent crores of rupees educating people about what a digital payment wallet is. But what was the use? Where is Paytm's market share? Where are its profits? Coming back to Cred. The same happened with Cred. There were rent payments, so what did people do? They made their father the landlord. They showed their friends as landlords. They paid them, took cashback, and settled internally. That is, credit card companies and Cred suffered a double loss. And they were circulating money in internal settlements, doing circular transactions. This is very common in India. So, now Cred wasn't getting revenue. Cred launched new products. Launched digital gold. The RBI said this is not regulated, there is risk. Work thoughtfully, like Gullak. Brought many third-party financial inclusions, insurance, mutual funds, lending. But now, slowly, slowly, revenue is coming from this. But its promise was to combine financial discipline and financial exclusivity. Like Sharan Hegde sir wants to do in the 1% club. So, competition is also slowly coming into this space. But today, Cred has opened a car garage. Register your car. Did you pay its PUC? Are there fines on it? Is there insurance on it? It is doing this. So, what is Cred? Even investors are confused. And for survival in 2025, Cred itself raised 72 to 75 million from GIC at a valuation of 3.5 million. That is, down 45% from its peak valuation of 6.5 billion dollars. And I think it could go down further if they don't generate cash flow. If they continue to incur losses of 1600-1800 crore this year too, then where is the bloody profit and where is the business model? People say Kunal Shah is a genius. I think he gets easy valuations. He tries, he adapts, but he hasn't been able to build a profitable, successful, sustainable company. And now the trend is AI, semiconductors, and all this, and Cred hasn't shown sharp usage of AI yet. It could have jumped on AI. So, what is Cred? Sometimes it feels like an e-commerce platform where you get a deal of the day. You take that thing. Sometimes it feels like a super app, that it does everything. Sometimes it feels like a behavior finance rewarding app. Sometimes it feels like a confused app. Its business model lacks clarity. My personal prediction is, if they don't firm up their business model in 2 years, don't capture a niche, and don't generate operating profit and cash flow, then like Freecharge, Cred will also shut down, and everyone will clap for Kunal Shah, saying, "Wow, he was a good entrepreneur, but the business didn't work." What do you think? Will Cred be able to see 2028? Will it get more valuation and funding, or will it pivot and become a confused app and lose steam? Tell me in your comments, and for such brilliant business case studies on strategy, finance, business, and fundraising, keep following Business with Bavesh. [Music]