RBI rejects Cred's application to increase stake in NBFC Newtap: Report

Cred is looking to restructure the shareholding of its NBFC firm Newtap, in which it holds a 23.6% stake while the rest is with Kunal Shah, as it looks to tap new clients and expand its scope of lending beyond Cred users.

RBI rejects Cred's application to increase stake in NBFC Newtap: Report

Friday August 18, 2023,

2 min Read

The Reserve Bank of India (RBI) has rejected Kunal Shah-owned Cred’s application to increase its stake in its non-banking finance (NBFC) firm—Newtap Finance.

RBI holds a 23.6% stake while the rest is held by Shah. 

The development was reported by Livemint

Founded in 2021 by Shah, Newtap Finance, had acquired Parfait Finance & Investment, which is a Reserve Bank of India (RBI)-registered NBFC, to offer lending products to Cred users. While the offering remained restricted to Cred's user base, the NBFC is now looking to expand its lending scope to other businesses, and raise independent funding, both debt and equity.  

This would require restructuring of Newtap shareholding, in which Shah holds a majority stake as of now. 

Queries sent to CRED by YourStory remain unanswered. This story will be updated to reflect its response.

“Cred applied to take control of the NBFC. But last month, the application got rejected on the grounds of ‘corporate governance and management issues’,” the source quoted in the Livemint report said. 

Of the two sources quoted in the story, one denied that RBI had referred to any corporate governance or management issues in the letter returning the application. Cred is engaged in discussions with the banking regulator to determine the reason, it added. 

Cred has been looking to raise about $50-60 million, as reported by The Arc, for the NBFC firm from both new and existing investors including Sequoia Capital and Singapore’s sovereign fund GIC, to maintain equity-to-debt ratio and serve diverse customers.

At present, Newtap powers Cred’s buy now-pay later product (Cred Flash), and personal loans (Cred Cash), which includes some other lending partners as well. 

According to RoC filings, Newtap posted a profit of Rs 5.6 crore in FY23, and Rs 15.5 crore revenue from operations compared to Rs 6 lakh the year before. Its ‘loans and advances’ stood at Rs 273 crore. 

Shah and Cred have collectively invested about Rs 79 crore in equity capital in Newtap.

Edited by Akanksha Sarma