Rating Rationale

Key Rating Drivers & Detailed Description

Strengths:

Adequate capitalisation with a track record of raising capital from marquee investors: The company’s capital position is adequate for its scale of operations, backed by its demonstrated track record of raising capital from marquee investors, such as Lightrock, Ribbit Capital, Elevation Capital, Amazon, Sequoia Capital, Creation Investments and Aspada Investments. Since its inception, it has raised around Rs 1315 crore as capital, of which the latest was a tranche of Rs 166 crore that was raised in August 2024. The management plans to raise another round of equity in near to medium term, which will further support capitalisation levels.

At a consolidated level, reported networth and gearing stood at an estimated Rs 459 crore and 1.5 times, respectively, as on September 30, 2024 (Rs 368 crore and 2.3 times, respectively, as on March 31, 2024). On a steady-state basis, gearing is expected to remain below 3.5 times while overall capitalisation would remain adequate over the medium term, primarily supported by the proposed capital raise. In the long run, the company’s ability to sustain capitalisation through steady and adequate internal generations remains instrumental.

Extensive experience of the leadership and board of members: Having commenced operations in 2013, CapFloat benefits from the extensive experience of its co-founders and management team that have worked in the lending and allied financial businesses for around 15-20 years. The team has experience across the risk, credit, technology and operation segments.

The company was founded by Mr Gaurav Hinduja and Mr Sashank Rishyasringa. The founders are alumni of Stanford University and have diverse operating experience in India. They closely monitor the overall performance of the company and play active role in forming the key strategies of the company

The company also benefits from the experience of its investors. CapFloat has seven board members, three of whom have been nominated by key investors (Elevation Capital, LightRock india, Amazon). They provide guidance and support by connecting with global peers, bringing in partnerships, establishing best practices and enhancing governance standards. All of this should stand the company in good stead as it scales up its business hereon.

Weakness:

Moderate asset quality and profitability: CapFloat, being in its growth phase, is yet to break even. At a consolidated level, the company incurred an overall loss of Rs 18 crore on a total income of Rs 384 crore for fiscal 2024 against losses of Rs 138 crore on total income of Rs 250 crore in fiscal 2023. On a standalone basis, the company has started to generate an operational surplus, it reported a pre-provisioning profit of Rs 81 crore for fiscal 2024 whereas for the first half of fiscal 2025, pre-provisioning profit was Rs 24 crore. However, as overall credit costs were Rs 106 crore (4.4% on average managed assets [ 6.0% for fiscal 2023]) and Rs 117 crore (7.8%) for H1 2025, the company’s net loss was Rs 18 crore and Rs 75 crore for FY24 and H1 FY2025, respectively

In the first half of fiscal 2024, on a standalone basis, credit costs surged to 7.1% (annualised) from 4.0% (FY 2024) largely on account of base effect due to reduction in total managed assets from Rs 3,298 crore as on March 31, 2024 to Rs 3,183 crore on September 31, 2024. In terms of standalone asset quality, on book gross non-performing assets (NPAs) was rangebound at 3.3% (2.8% including write offs of Rs ~45 crore undertaken over trailing 12 months) as on March 31, 2024 when compared with 2.9% as on March 31, 2023. As on September 30, 2024, GNPA stood at 3.4%, which also factors in the effect of Rs ~38 crore of write off during the first half fiscal 2025. On September 30, 2024, 90+ days past due (dpd) of the consumer finance book was 3.0% as on September 30, 2024. Within consumer finance, 90+ days past due of online checkout finance stood at 3.3% as on September 30, 2024, and that of the personal loan portfolio was 2.5%. The moderation in reported asset quality metrics over H1 2025 stemmed from the ground level stress being observed across the unsecured sub-sector, particularly in the more vulnerable customer segments. . With a nominal proportion of the SME book outstanding, asset quality performance of the consumer finance book will determine the company’s overall asset quality. As the business scales, the ability of the company to control credit costs and bring in operating efficiency while scaling up the portfolio will be key to improving profitability over the medium term.