Incred Holdings Limited

Strengths:

1. Strong Capitalization: As of September 30, 2024, InCred's net worth stood at ₹3,512 crore, with a comfortable capital adequacy ratio of 29.3%. This robust capitalization supports business growth and provides a buffer against potential losses. ​

2. Diversified Loan Portfolio: InCred maintains a well-diversified loan book, reducing concentration risk. As of June 30, 2022, the portfolio included personal loans (35%), secured school financing (11%), student loans (12%), lending to NBFCs (11%), and anchor-backed business lines (18%). Such diversification helps mitigate risks associated with any single segment.

3. Experienced Leadership Team: The company benefits from a seasoned management team with extensive experience in financial services. For instance, the Chief Risk Officer, Mr. Prithvi Chandrasekhar, has held positions at Capital One and McKinsey over a 25-year career, contributing to effective strategic planning and risk management.

4. Technological Integration: InCred leverages advanced technology to optimize investment solutions and enhance client services, ensuring efficient and seamless operations. This technological focus allows the company to offer innovative financial products and maintain a competitive edge.​

Weaknesses:

1. Moderate Earnings Profile: Despite improvements, InCred's return on managed assets (RoMA) was 3.2% (annualized) during the first half of fiscal 2025, compared to 3.6% in fiscal 2024. While this indicates a positive trend, the company continues to focus on enhancing profitability. \

2. High Operating Expenses: The company's operating expenses remain elevated, primarily due to investments in technology and workforce expansion. For the nine months ended December 31, 2023, operating expenses were 4.9% (annualized) of average managed assets. Achieving greater operational efficiency is essential to improve profitability. 

3. Asset Quality Concerns: The unsecured nature of a significant portion of InCred's loan portfolio poses inherent credit risks. As of September 30, 2024, the 90+ days past due (dpd) stood at 1.9%, with adjusted figures accounting for write-offs at 2.5%. Maintaining stringent credit assessment and monitoring processes is crucial to manage potential defaults. ​

4. Limited Physical Presence: Operating primarily as an online platform, InCred may face challenges in attracting customers who prefer in-person banking services. In 2022, only about 21% of consumers in India used online lending services, indicating a significant portion still favors traditional banking methods. ​

5. Intense Competition: The Indian fintech space is highly competitive, with over 2,000 startups vying for market share. This competition has led to declining margins, with average personal loan interest rates dropping to 10-12% in 2023, potentially impacting profitability.