What Is InvoiceX? Grip's Rated Invoice Discounting Investment Product

Published on
Jul 11, 2023
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    What is InvoiceX?

    Are you on the lookout for an investment product that is (a) diversified for lower risk, (b) has a short tenure, (c) is credit-rated, and also (d) provides fixed returns? If yes, then InvoiceX by Grip is the solution you have been looking for! 

    But, before delving deeper into the nuances of this new asset class, let's understand what Grip is all about! 

    What Is Grip?

    Grip helps you #GoBeyond inflation, low returns and volatility through a discovery platform that offers non-market-linked & regulatory-compliant investment opportunities! 

    At Grip, we are driven by innovation and the unwavering trust of our users, enabling us to achieve many industry firsts in India: 

    • 1st asset-backed leasing discovery platform
    • 1st commercial real-estate discovery platform with opportunities starting at INR 1 lakh 
    • 1st to list an alternative investment instrument (LeaseX - SDI) on NSE

    Adding to this list of firsts, we are excited to introduce another product - InvoiceX - the first-ever credit-rated, diversified version of invoice discounting. This new product aligns with our commitment to providing a more transparent, compliant and greater variety of investment options for our users. 

    What Is Invoice Discounting?

    In order to understand InvoiceX, we must first understand invoice discounting with the help of a simple example:

    X Ltd. (Goods seller) is in the business of selling tyres and Y Ltd. (Goods purchaser) is its customer. When X Ltd. sells tyres to Y Ltd., it raises an invoice on Y Ltd. for payment within 90 days. This means that there is a 90 days gap between the delivery of tyres and payment of the invoice. This is not great for X who has already incurred all the expenses for manufacturing and selling the tyres. To address this, X borrows money from a financially savvy investor against Y’s invoice. This process of financing the gap between the delivery of goods/services and payment by the customer by raising capital against an invoice is called invoice discounting.

    In short, invoice discounting is a way for companies to use their unpaid invoices as collateral for a loan. This method forms a large part of the short-term financing industry in India, wherein around $14 bn is raised annually through banks and large financial institutions (source: based on current and expected volumes via TreDS; Financial Express).

    Over the last 5 years, invoice discounting has gained popularity among individual investors, because of its short investment tenure and fixed inflation-beating returns.

    Conventional Invoice Discounting Opportunities (Dependence On A Single Invoice)

    How Does Conventional Invoice Discounting Opportunities Work?

    Grip’s InvoiceX Opportunities (Backed By A Diversified Pool Of Invoices)

    Over the last year, our users gave us feedback on how Invoice Discounting could be made more secure as an investment opportunity. The majority of users loved the short tenure and the fixed returns but also wanted:

    1. Exposure to a diverse pool of invoices rather than a single invoice. This would result in lower risk for them 
    2. SEBI or RBI-approved structure so that there is protection for the investor
    3. No commingling risk arising due to the involvement of the platform
    4. Credit-rated instrument for higher transparency and easier understanding of risk 

    We are excited to share that we were able to meet all these requests from our users! And InvoiceX is a product aligned with this feedback. 

    InvoiceX by Grip is the first ever diversified, RBI-compliant, and credit-rated instrument available for individual investors which enables them to take exposure in loans backed by invoice discounting proceeds

    Each opportunity entails cash flows from a pool of loans backed by invoices raised on multiple well-reputed companies (known as Anchors), thus offering the benefit of diversification to the investors. It is a fixed-income instrument issued in accordance with an established RBI framework. Investors are provided with fixed and regular payouts in the form of interest, with the principal being returned closer to maturity. This instrument is also rated by reputed agencies like India Ratings.

    Additionally, only the interest component is expected to be taxed in the hands of the investor. It is monitored by the SEBI registered trustee to meet any delay or shortfall in payments and also has a security cover, to protect up to 20% of the investment value.

    Sounds interesting? Let’s now take a quick look at how capital would flow from start to finish for an InvoiceX opportunity with multiple loans backed by invoices.

    Capital flow in invoice X - backed by diversified pool of loans against invoices

    Want to learn more? Click here to watch a short 3 minute explainer video on InvoiceX.

    Comparing InvoiceX And Invoice Discounting

    InvoiceX not only has all the benefits of invoice discounting, but also has the X factor of being (a) rated by an external credit rating agency, (b) diversified across multiple Anchors in different industries, and (c) compliant with RBI guidelines.

    In conclusion, Grip's introduction of InvoiceX presents a more streamlined approach towards short-tenure, fixed-income, regulatory-compliant products, enabling investors to effectively diversify their portfolios and foster financial growth. 

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    Happy Investing!

    Disclaimer: This communication does not constitute advice relating to investing or otherwise dealing in securities and is not an offer or solicitation for the purchase or sale of any securities. Grip Invest Technologies Private Limited ("Grip", formerly known as Grip Invest Advisors Private Limited) is not registered with SEBI in any capacity and does not advise, encourage, or discourage its users to invest or not invest in any securities. Grip is solely an execution-only platform and does not guarantee or assure any return on investments made by you in any opportunities sourced by Grip and accepts no liability for consequences of any actions taken based on the information provided. Your investment is solely based on your judgement. Investments in debt securities are subject to risks. Read all the offer-related documents carefully.

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