Ugro Capital Limited · NSE:UGROCAP
Ugro Capital — Investor Presentation (December 2018)
43 slides from Ugro Capital's investor presentation, December 2018
Slide 1: U Gro Capital | An Overview
U Gro Capital | An Overview December 2018
Slide 2: The SME Lending Market
The SME Lending Market A large yet untapped market opportunity 2
Slide 3: India represents a large, significantly underpenetrated market
India represents a large, significantly underpenetrated market One of the largest and fastest growing However, the credit to GDP ratio is still Significant government impetus and for economies in the world much lower than other markets the growth of credit GDP PPP – US$ Tn, Real GDP Growth Total cre
Slide 4: The lending market can be broadly divided into three segments
The lending market can be broadly divided into three segments… -• Constrained credit growth Corporate, -• Structural issues Infra, -• Higher NPA Real Estate -• Low Rating and Leverage -• Long term sustainable ROE is challenged -• No Equity Value Creation. +• Healthy credit growth -• Current players
Slide 5: Of which the SME segment is the most under-served
.. of which the SME segment is the most under-served India lags behind other emerging markets when With most SMEs depending on either self it comes to credit access for MSMEs financing or informal channels 120% % of MSMEs that have access to credit Source of SME financing 30% 31% 100% 14% 14% 16% 16
Slide 6: Specialization is key to success in the SME lending space
Specialization is key to success in the SME lending space… Challenges in lending to the SME segment ? Difficult to understand Fragmented set of High cost of customer High dependence on Lack of businesses/cash flows customers acquisition the ecosystem data How specialization helps Products Distributi
Slide 7: Emergence of niche, focused SME lenders in India
… leading to the emergence of niche, focused SME lenders in India Sector Focused Geography/Segment Focused Focus: Tamil Nadu/sub-prime Focus: Rajasthan/sub-prime Focus: K12 Segment Focus: Travel, Hospitality AUM: INR 1,000+ crores AUM: NA AUM: INR 1,000+ crores AUM: NA … Capital Raised: INR 1,000+ c
Slide 8: The U GRO Incarnation
The U GRO Incarnation The Assimilation of Aspirations 8
Slide 9: Reputed founder backed by marquee private equity funds
Reputed founder backed by marquee private equity funds Mr. Shachindra Nath Executive Chairman and Managing Director ▪ After 26 years of working with large corporates, Mr. Nath decided to embark on his entrepreneurship journey by acquiring control of a listed NBFC - Chokhani Securities Limited ▪ As t
Slide 10: Management team with a strong track record of execution
Management team with a strong track record of execution… Abhijit Ghosh - Chief Executive Officer Kalpesh Ojha - Chief Financial Officer ▪ Over 25 years of experience across BFSI, Consumer, Telecom, ▪ Over 20 years of experience in treasury, corporate finance, fund healthcare raising ▪ Was the Presid
Slide 11: Guided by an independent board comprising industry stalwarts
… and guided by an independent board comprising of industry stalwarts Name Designation Description Shachindra Nath ▪ Over 26 years of experience across lending, insurance and asset management Executive Chairman & MD ▪ Qualified lawyer and a University Rank holder from the Banaras Hindu University (I
Slide 12: Supported by a strong, fully formed second layer team
…supported by a strong, “fully formed” second layer team… ED & CEO Abhijit Ghosh CRO COO CFO CHRO CBO CGO Head Legal/ Manish Agarwal Anuj Pandey Kalpesh Ojha Rajni Khurana J Sathiayan ETJ Compliance Rajiv Kumar Head – Policy Head - Marketing Head Treasury Regional HR (2) Corporate Channel Sector Hea
Slide 13: The U Gro ethos | High levels of corporate governance
The U Gro ethos | High levels of corporate governance ❶ Choice of a listed vehicle: High degree of regulatory oversight, transparency and the ability to create an institution for perpetuity ❷ Corporate Governance Code: The U Gro Corporate governance code that captures best practices is enshrined int
Slide 14: Our journey so far | Capital raise through multiple modes
Our journey so far | Capital raise through multiple modes… First Round of Preferential Formation of Chokhani Securities Qualified Institutional Placement 1994 - 2017 Allotment Dec, 2017 Aug, 2018 1994: Formation of Chokhani Raised INR 435 Cr of capital from Raised INR 112 Cr of capital from Securiti
Slide 15: Leading to a highly diverse shareholding structure
…leading to a highly diverse shareholding structure Calculation of Shares Outstanding Shareholding Pattern (Fully Diluted Basis, Post the demerger) # Shares Issued & Outstanding (as on November 30, 2018) 1,98,43,110 IndGrowth Others 5% 15% Add: Dilutive Instruments Promoters 4% Samena Compulsorily C
Slide 16: Our Mission
GRO Our Mission 16
Slide 17: To Solve the Unsolved India's US$ 600Bn SME Credit Availability Problem
Our Mission To Solve the Unsolved India’s US$ 600Bn SME Credit Availability Problem 17
Slide 18: Our Approach
Our Approach Know More, Fin-touch + Liability Grow More Fin-tech First Deep sector specialization Leverage the best practices of Create an organization that to understand, reach, and traditional NBFCs and the pro-actively address the service the customer better modern fin-tech providers to ‘needs’ o
Slide 19: Know More, Grow More
Know More, Grow More Sector based approach to specialization 19
Slide 20: Deep analysis of macro and micro economic factors
Deep analysis of macro and micro economic factors… 180+ Sectors Demand Working Impact of Sector specific supply gap & Input Environmental Capital change in government cyclicality in risk issues Cycle technology policy demand Criteria Asset Upgrade & Revenue EBITDA Median Interest Turnover downgrade
Slide 21: To arrive at a set of eight sectors
… to arrive at a set of eight sectors… Healthcare ▪ Unlike most NBFCs that have a negative sector list, U Gro Light will have a positive list of sectors that we will lend to Education engineering ▪ Even within these sectors, U Gro has selected 38 sub- sectors on which to focus Auto Top 8 Chemicals ▪
Slide 22: Sub-sectors and key clusters to focus on
…and sub-sectors and key clusters to focus on Key Sub-sectors: General nursing Key Sub-sectors: K-12 Schools, Play Key Sub-sectors: Dyes and pigments, homes, eye clinics, dental clinics, Schools bulk and polymers, agro-chemicals, diagnostic labs, radiology/pathology Key clusters: NCR, Mumbai, other
Slide 23: Product Approach
GRO Product Approach 23
Slide 24: Product Offerings
Product Offerings Moving beyond conventional products… Secured Loans Unsecured Loans Supply chain financing Ticket Size: INR 50 lakhs to 5 Cr Ticket Size: INR 10 to 50 lakhs Ticket Size: INR 3 to 30 lakhs Interest rate: 10.5% to 12% Interest rate: 16% to 19% Interest rate: 13% to 15% LTV: Up to 80%
Slide 25: Deep sectoral understanding leading to finely tailored solutions
Deep sectoral understanding leading to finely tailored solutions Scenario: Hospitality/restaurants; franchise set up Loan structuring ▪ 1st disbursal – Rs 50 lac security transferred to master franchisee account – repayment to start post 6M Ability to offer structured disbursement ▪ 2nd disbursal –
Slide 26: Illustrative Examples
Illustrative Examples Based on our sectoral capabilities, we would deliver customized solutions, faster TAT, better yields through a combination of higher loan to value and exposure limits, vis-à-vis being a pure play LAP focused lender Sector Sub-sector Products (basis cash flow) Assessment Paramet
Slide 27: Distribution Approach
GRO Distribution Approach 27
Slide 28: Traditional Channels
Client Acquisition Strategy Channels Role Direct Sales Agents Traditional Channels ▪ Develop strong relationships with DSAs and DSA aggregators operating in target segments / geographies ▪ Driven by competitive commissions/ sales contests, faster processing, better experience, etc. Branch Sales Team
Slide 29: Distribution Network
Distribution Network Locations identified through extensive analysis of portfolio and Rigorous DSA Selection Criteria SME cluster performance ▪ An initial list of 130+ channel partners arrived at post rigorous vetting of 1,200+ DSAs ▪ Selection criteria Branch Office ‐ Minimum three year track-recor
Slide 30: Credit Appraisal and Portfolio Approach
Credit Appraisal and Portfolio Approach 30
Slide 31: Credit Appraisal Process | A Three Pronged Approach
Credit Appraisal Process | A Three Pronged Approach File Flow For A Secured Loan In principal approval in 60 ~8 segment specific mins statistical scorecards Pre-defined Statistical Sub-sector ~Sub-sector specific Sourcing Channel Data Enrichment PD templates Criteria Met? Score-cards Policies ▪ Sour
Slide 32: Credit Scoring Model Currently Used by NBFCs / Banks
Credit Scoring Model – Currently being used by NBFCs / banks Parameters Factors Factor weightage Increase In ATNW in last 2 years 2% EBITDA margin for the last audited year 4% Current Ratio 10% Financial Risk TOL/ATNW 5% Business Risk 10% Inventory + Debtor Turnover Period 3% Total Debt to NCA 3% Fi
Slide 33: Data based decision making
Data based decision making Ability to front-load the entire credit assessment cycle ‘’Destination state” data infrastructure ▪ Universal data environment storing data from all source systems, such Credit evaluation as LOS, LMS, Accounting, HRMS ▪ Borrowing and repayment history ▪ 360 degree view of
Slide 34: Proprietary Statistical Scorecards For Assessment At The Application Stage
Proprietary Statistical Scorecards For Assessment At The Application Stage Illustration of scorecard benefit: Default rate across score ranges Visible reduction in residual default rates after removing bottom 20% Segment overall default rate ‘Bad rates’ across intervals Healthcare 0.56% 3.45% 0.18%
Slide 35: Expert Scorecards
Expert Scorecards Case A: Less than 20 bedded nursing home Case B: 20-50 bedded nursing home Case C: 50-100 bedded nursing home Financial Facility 20% Facility 20% Facility Financial 30% 40% 40% Financial Operational 60% 20% Operational 40% Operational 30% Parameters Factors Case A Case B Case C Vin
Slide 36: Strong Risk Management Framework
Strong Risk Management Framework PORTFOLIO LEVEL RISK ENTERPRISE LEVEL RISK Appraisal Asset Liability Management Policies and deviations are standardized Liquidity equivalent to 6 months of liability and 2 months of Completely automated CAM to prevent manual errors and advances to be maintained at a
Slide 37: Fin-touch + Fin-tech
Fin-touch + Fin-tech Building a Technology enabled organization 37
Slide 38: Hybrid Lending Model
Hybrid Lending Model Traditional – Fin-Touch Alternative – Fin-Tech Traditional credit assessment models like Alternate credit assessment models CIBIL scores leveraging analytics + publicly available data Leverage technology to automate processes Physical processes such as visits to customers thus r
Slide 39: Business model backed by best in class technology design
The U GRO business model is backed by a “best in class” technology design… Process Transaction Rapid automation experience scalability System driven workflows at every Customized user interfaces for Cloud based architecture and stage of the customer journey internal and external stakeholders customi
Slide 40: Complementing traditional touch and feel across the value chain
..to complement traditional “touch and feel” across the value chain Sourcing Verification and Disbursal Collection and Recovery ▪ Online process to augment traditional fraud ▪ Collection and litigation team already in place ▪ Partnerships with traditional/digital control process ▪ Analytics led pred
Slide 41: Highly customized and flexible technology stack
Highly customized and flexible technology stack to meet business needs Enterprise architecture design Service Oriented S/W Client interfaces for internal and Customer portal and Sales hierarchy Operations portal Reporting external front end mobile apps Notification Engine users Advanced analytics/ D
Slide 42: Liability First: The Missing Link
Liability First The Missing Link 42
Slide 43: Liability Strategy
Liability Strategy Focus on building the “right” book ▪ Partner with ratings agencies from start to create the right quality of asset book ‐ Build a diversified granular book ‐ Start with a primarily secured book and slowly build the unsecured part. Unsecured book to not exceed 20% of the overall bo
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