India’s KreditBee Successfully Refinances Secured Loan from ADM Capital
ADM Capital is pleased to announce the exit from its November 2019, USD20m secured debt financing to KreditBee, a Bangalore based fintech company, who used proceeds to facilitate the loan book expansion of its consumer lending business.
KreditBee was founded in 2016 by a group of experienced entrepreneurs and finance professionals seeking to tackle some of India’s most pressing social challenges in the domestic lending space. KreditBee is a ‘systemically’ important non-banking financial company (NBFC) as defined by its regulator, the RBI.
ADM Capital’s exit was funded via a combination of refinancing and operating cash flow as India continued to battle Covid-19 challenges, highlighting the importance of lending to experienced and astute management teams, capable of delivering positive business performance in even the most difficult of operating environments. ADM Capital invested in KreditBee in late 2019, when the company sought growth capital to expand its business strategy of lending to underbanked young professionals in India.
Given ADM Capital’s integration of Environmental, Social and Governance in its investment process and our focus on supporting positive social and environmental outcomes – whilst prioritising returns to investors – we were attracted by the commercial gap in the market that KreditBee addressed, and the impactful benefits of providing financial inclusion to a significantly underbanked segment of the population.
KreditBee ’s data rich credit appraisal process and disciplined underwriting standards allow instantaneous and high quality credit decisions, both imperative considerations in a competitive, highly demand-driven market environment. KreditBee ’s ability to quickly achieve breakeven profitability while maintaining a low delinquency rate were key aspects supporting ADM Capital’s underwriting.
Within months of ADM Capital’s funding, the Company was confronted with challenging macro and regulatory conditions which KreditBee ’s management managed to overcome to its advantage. The breakout of Covid-19 in March 2020 initially appeared to many fintech players as an opportunity to consolidate market share from more traditional ‘brick and mortar’ counterparts. KreditBee ’s management on the other hand, amid the ongoing uncertainty, adopted a more prudent strategy and completely stopped loan disbursements until they obtained sufficient visibility on the nature and length of the crisis. Instead, the company prioritised collections and sought to protect its the balance sheet. Simultaneously, KreditBee embarked on a strategy to raise primary and secondary equity, both to increase funding flexibility and to build a strategic capital table containing marquee global investors. Management also worked hard to increase debt funding sources. None of this was imminently required given the slowdown in business; yet, KreditBee management was prudent and forward thinking enough to accumulate liquidity and position itself aptly to capitalise on growth opportunities in a more stable macro environment.
Being a relatively young company with a progressive management team, KreditBee was able to remain flexible and as such has not suffered in the aftermath of Covid-19 as much as more established Indian peers. As an Observer to the company’s Board of Directors, ADM Capital gained sufficient confidence in the company’s performance and ability to mitigate risk that we purchased a small, minority equity stake in the business which we continue to hold.
Sourced via an existing portfolio borrower in another market, our disbursement to KreditBee also validates the strength of ADM Capital’s proprietary origination networks, formed over a 23 period of Asia Pacific credit investing.
In our opinion, it takes experience and strategic discipline to patiently look beyond the immediate crisis and position oneself optimally to take advantage of expected turns in the cycle. In this case, KreditBee was not only able to move quickly and decisively to increase the diversity of its funding base, but also reduce their overall funding costs, as investors began to get more comfortable around KreditBee ’s funding options, lending strategy, and capability in managing through Covid-19 difficulties. We believe KreditBee is in a great position to capture the growth potential offered by India as soon as the external environment settles.