Whalesbook
IPO Fuels Retail Lending Growth
InCred Holdings is preparing to go public with a Rs 1,250 crore Initial Public Offering (IPO). This move is set to significantly boost the capital of its main subsidiary, InCred Financial Services (IFSL), which is crucial as IFSL generates nearly all of the InCred group's revenue through personal, student, and business loans. The IPO will feature a fresh issuance of shares to raise capital and an offer for sale by current shareholders. This dual approach aims to inject capital for growth and offer liquidity to early investors. The funds are intended to improve IFSL's Tier-1 capital and its Capital to Risk-Weighted Assets Ratio (CRAR), directly enabling it to lend more.
Market Standing and Growth Metrics
InCred Holdings operates as a fast-growing diversified Non-Banking Financial Company (NBFC) in India. Between FY23 and FY25, it showed strong performance, leading in Profit After Tax (PAT) Compound Annual Growth Rate (CAGR) and ranking second in Assets Under Management (AUM) growth among NBFCs. For the first nine months of the fiscal year ending December 31, 2025, InCred reported a PAT of Rs 290 crore on total income of Rs 1,870 crore. Its AUM reached about Rs 14,448 crore, marking a nearly 26% increase. Personal loans make up the largest portion of its loan book at 55.56%. InCred's expansion relies on technology, with a focus on risk management and efficiency. Its subsidiary, IFSL, saw its AUM increase by 49% in fiscal 2024 to Rs 9,039 crore and by 36% (annualized) to Rs 11,476 crore in the first nine months of fiscal 2025.
Risks in Unsecured Loans and Cash Flow
Despite its growth, InCred Holdings faces risks outlined in its Draft Red Herring Prospectus (DRHP). A major concern is the high proportion of unsecured loans, making up 76.43% of its loan book as of December 31, 2025. Unsecured lending carries greater credit risk and is more vulnerable to economic downturns and borrower cash flow issues. This was highlighted when its 90+ days past due (dpd) loans increased to 4.5% during the COVID-19 pandemic. Additionally, the company has reported negative operating cash flows, totaling Rs 1,421 crore for the nine months ended December 31, 2025. This is largely due to working capital changes, such as increased loans issued and trade payables. The group's reliance on IFSL for revenue also poses a risk; any negative performance from IFSL could significantly impact the overall financial health of InCred Holdings.
Sector Outlook and IPO Timing
The Indian NBFC sector is projected for continued strong growth, estimated at 15-17% in FY26, outpacing bank credit growth. NBFCs play an increasingly vital role in providing credit, with their market share expected to remain stable around 18-19%. InCred's IPO received approval from SEBI on February 5, 2026, and is valid for 18 months, offering a window to launch depending on market conditions. Competitors in this space include Bajaj Finance and HDB Financial Services, as well as digital lenders like Navi. The success of InCred's IPO will hinge on its ability to demonstrate strong asset quality, competitive pricing, and a clear plan for the raised capital, supported by its distribution network.