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Kredx, founded by experienced bankers, is betting on a financial product based on ‘receivables’, to help SMEs get collateral-free working capital.


The founders of KredX had always noticed – from their own business experiences – the problems that arose out of delayed payments from clients. “Delayed payments almost always resulted in cash flow issues and the existing working capital products were mostly collateral based,” says Manish Kumar, now the founder & CEO of Bangalore-based KredX, an invoice discounting fintech firm, explaining his early insight in spotting a business opportunity sometime in 2012.

Thanks to the founders’ background in banking, Kumar and his co-founders realized that there was potential to build a business around helping businesses raise working capital, using the ‘receivables’ on the balance sheet. “These receivables are nothing but in a way, a pledge by their client to pay them within a pre-agreed due date,” he explains.

In early 2013, the founders – Puneet Agarwal, Anurag Jain, Manish Kumar and Sankalp Mathur started researching the concept of receivables deeply, exploring its legal and regulatory aspects. Soon after, they came up with a way of making ‘Unpaid Invoices’ a financial product that could help businesses sell their receivables at a discount to get early payment on the dues, of course, with the usage of technology and data. Simultaneously, they also started working on a minimum viable product and were ready to launch the product in the market by 2015.

The Product

KredX is a unified invoice discounting platform that takes care of every aspect of the invoice discounting process right from sourcing, curating, rating and transaction to final settlement. The platform acts both as an exchange and a broker for this process, and it has been designed to have almost zero physical touch with the customers. Kumar, its co-founder, believes they have no competition in India in this particular space.

“Invoice Discounting is a complex product but not a new one – though it hasn’t gotten due credit till now. Our effort to setup a technology and data driven platform and eliminate the risk generally associated with such a financial product was a huge challenge for us,” says he. Getting a buy-in that this product can be effortless and one of the best ways to raise working capital for the companies was huge, considering Kredx was first and only one in the country doing this, he adds.Of course, the founders background in banking played a crucial role in helping conceptualize and design a relevant product that would find takers in the marketplace.

The startup, which raised $7 million in two rounds of funding from Sequoia India and Prime Ventures Partners, relies heavily on digital marketing and word of mouth/referrals to grow.

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The financial services landscape in India is largely controlled by banks and NBFCs. The role of private banks has been crucial and the government’s role in issuing new banking licences to the likes of Yes Bank, Kotak Mahindra Bank and Axis Bank was an important inflection point. However, there is still a huge gap between demand and supply of finance, especially for small and mid-sized companies. Of course, lending against collateral is one way to solve it. But invoice discounting, when implemented well, can be a game changer, believe the founders.

“With the advent of technology, the sector has immense possibility to solve huge problems for small and medium enterprises,” says Kumar.

Kumar believes this is potentially a USD 100 billion market in India alone, arriving at the market size. Post demonetization, the need for white money financing has increased tremendously, which has almost doubled the earlier financing gap of USD 60 billion existing in the market. “Over the years, invoice discounting can help bridge a sizable portion of this gap,” he adds.

To capitalise on this opportunity, the company is investing heavily on technology and, specifically its data platform, to create a seamless product for its customers.

Some Recommendations

The industry is at a very nascent stage right now and government should be in a wait and watch mode to see how this evolves. Any hard regulation from the government at this stage may kill the innovation and experiments that is happening in the sector. But I also believe that some kind of soft regulation is required to keep unwanted elements out of the sector.

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