Ugro Capital Limited · NSE:UGROCAP
Ugro Capital — DAM Capital Conference (May 2021)
70 slides from Ugro Capital's conference presentation, May 12, 2021
Slide 1: U GRO Capital Presentation
U GRO Capital | Presentation Tech focused Small Business Lending Platform UGROCAP | 511742 May 12th,2021 ‘To Solve the Unsolved’ India’s $600B+ SME Credit Availability Problem
Slide 2: Safe Harbor
Safe Harbor This presentation has been prepared by UGRO Capital Limited (the “Company”) solely for your information. By accessing this presentation, you are agreeing to be bound by the trailing restrictions. This presentation is for information purposes only and should not be deemed to constitute or
Slide 3: Table of Contents
Table of Contents 01 Executive Summary U GRO Capital - Overview 02 03 Strong Corporate Governance Experienced Management 04 05 Large Institutional Capital Knowledge 06 07 Technology Multi-pronged Distribution 08 09 Financial & Operating Performance Strategy & Long-Term Goals 10
Slide 4: Executive Summary
GRO Executive Summary
Slide 5: Where we stand now
Where we stand now Metric ₹1,127 Cr 22 70% AUM Active Lenders Secured on Book ₹950 Cr 8,429 300+ 600+ GRO Net Worth Customers Employees Partners ₹2,065 Cr ₹562 Cr 34 Cumulative Total Debt Disbursals Branches Focus in the current quarter has been on operationalising 25 Micro Branches and Disbursement
Slide 6: Executive Summary
Executive Summary 1) AUM & Disbursements 5) Credit Costs ▪ Cumulative Disbursements crossed ₹2,000 Cr milestone in Q3FY21 ▪ Proforma 90+ DPD stood at 2.3% and NNPA stood at 1.4% (Proforma ▪ AUM stood at ₹1,127 Cr as on Dec’20 (₹978 Cr as on Sep’20), ~15% without taking the benefit of Supreme Court s
Slide 7: U GRO Capital - Overview
GRO U GRO Capital - Overview
Slide 8: U GRO Capital | Who we are
U GRO Capital | Who we are A highly specialized, technology enabled small business lending platform Strong Corporate Governance Experienced Management Team Large Institutional Capital Board Controlled, Management Run 250+ Years of Experience ~$130M Of Equity Raised Knowledge Technology Deep domain e
Slide 9: Our Mission: To Solve the Unsolved
Our Mission ‘To Solve the Unsolved’ India’s $600B+ SME Credit Availability Problem 9
Slide 10: Our Business Model
Our Business Model Distribution Channels Liability Sources Branch Channel | GRO-Plus Traditional Balance Sheet Intermediated and Direct Distribution branches across Tier I to Tier VI locations, serving a broad Lending using funds from banks; PSL nature of books demographic of MSMEs to aid in obtaini
Slide 11: Strong Corporate Governance
Strong Corporate Governance Board led Management run Institution
Slide 12: Strong Corporate Governance framework enshrined in the Articles
Strong Corporate Governance framework enshrined in the Articles… ▪ High degree of regulatory oversight and ▪ As per our AoA & MoA, we shall appoint a Statutory transparency Auditor with good reputation, and preferably ▪ An institution created with a long-term view, having international affiliates. d
Slide 13: Independent Board of Industry luminaries (1/2)
…supervised by an Independent Board comprising of Industry luminaries (1/2) Shachindra Nath – Executive Chairman and MD Satyananda Mishra - Chairman, CSR Committee ▪ 26 years of experience in creating institutions across the financial ▪ Ex-Chairman, MCX, Ex-CIC, GoI, Ex-Director - SIDBI services dom
Slide 14: Independent Board of Industry luminaries (2/2)
…supervised by an Independent Board comprising of Industry luminaries (2/2) Navin Puri Rajeev K. Agarwal - Chairman, Stakeholder Committee ▪ Ex-Head of Branch Banking, HDFC Bank ▪ Ex-Whole Time Member, SEBI ▪ Over 30 years of experience at HDFC Bank and ANZ Grindlays Bank ▪ Over 30 years with experi
Slide 15: Experienced Management
Experienced Management Over 250+ years of combined experience
Slide 16: Founder with experience creating Institutions across Financial Services
Founder with experience creating Institutions across Financial Services… Mr. Shachindra Nath Executive Chairman and Managing Director 26 years of experience in providing strategic direction to institutions across the financial services domain Lending Capital Markets Asset Management Insurance SME Le
Slide 17: Leadership Team with execution expertise
…backed by Leadership Team with execution expertise in setting-up large institutions… Anuj Pandey Sandeep Zanvar Pia Shome J Sathiayan Chief Risk Officer Chief Financial & Operations Chief People Officer Chief Business Officer Experience – ~22 years Officer Exp – ~15 years Experience – ~29 years Exp
Slide 18: Deep second layer Management Team
…and a deep second layer Management Team with extensive experience across BFSI space Collections, Marketing & Business Credit & Risk Tech, Analytics & Product Operations Vijay Bhatt Sanjeet Kwatra Irem Sayeed Subrata Das Prabhakaran S Head, Pratham Head, Supply-Chain Chief Credit Officer Chief Innov
Slide 19: Large Institutional Capital
Large Institutional Capital Backed by Marquee Institutions & reputed lenders
Slide 20: U GRO has had an illustrious journey
In spite of several sectoral headwinds, U GRO has had an illustrious journey Dec’2017 – Aug’2018 Private Equity Funds U GRO Fund Birth Raised ~Rs 950 crore of Capital from multiple Raise PE investors of global repute Business Jan’2019 Dec’2017 Launch Disbursement started in Jan’2019 Public Market Fu
Slide 21: Backed by strong Equity and Debt Partners
Backed by strong Equity and Debt Partners Shareholding Pattern on a Fully Diluted basis (Dec-20) Liability Backed by Top Banks & Financial Institutions Promoter Public Sector Banks Management ESOPs 2.7% 4.8% Others 20.8% 20.4% Private Sector Banks Majority of U GRO’s shareholding is institutionally
Slide 22: Knowledge
Knowledge Sector based approach to specialization
Slide 23: Specialized SME Lenders better positioned to bridge MSME Credit Gap
Specialized SME Lenders are better positioned to bridge the MSME Credit Gap Specialized SME Lenders Traditional NBFCs Banks Customized products based on the nature of business, non-financial Loans against property, supply Loans against property, supply Product parameters, end use, payment chain fina
Slide 24: U GRO at the intersection of Specialized NBFCs and FinTechs
U GRO Lies at the intersection of Specialized NBFCs and FinTechs Sector Specialization Supply Chain Platforms Product Specialization Digital Lenders Specialized Fintech NBFCs Platforms Geographical Specialization Off-Balance Sheet Lenders U GRO intends to create a specialized, scalable platform opti
Slide 25: 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 & Environmental Capital change in Input risk government cyclicality in issues Cycle technology policy demand Criteria Asset Upgrade & Interest Revenue EBITDA Median rating Gearing Turn
Slide 26: A set of Specialized Sectors
…to arrive at a set of Specialized Sectors • 8 sectors & Micro Enterprises and their allied 200+ ecosystems • Focus on Micro & Small Businesses clusters in India • ~50% - Contribution of the 8 sectors to the overall MSME lending market in India • Partnership with CRISIL to deep dive into sub-sectora
Slide 27: Sectors narrowed down based on their ecosystems
These sectors were further narrowed down based on their ecosystems 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, agrochemicals diagnostic labs, radiology/pathology Key clusters:
Slide 28: GRO Score underwriting framework
GRO Score, a superior underwriting framework, launched to make our selection sharper We are on track to achieve 100% digital underwriting in SME lending Business Evaluation of System assessment using Forecasting of repayment generated transaction future cashflow history digital PD data Gro Score 2.0
Slide 29: Risk Management through Expert Scorecards (1/2)
“Risk Management” through ‘Expert Scorecards’ for all Sub-sectors (1/2) ▪ Post filtering out the various sub-sectors, its very important to scale the risk associated with an entity present in the sub-sector ▪ The entity is observed through various parameters and their associated weightages ▪ The par
Slide 30: Risk Management through Expert Scorecards (2/2)
“Risk Management” through ‘Expert Scorecards’ for all Sub-sectors (2/2) Parameter Factor Weightage Vintage of the school 30% School Principal’s Experience 25% Entity related Association with any reputed brand/group 25% Exam Board with which the school is affiliated 10% Typical income profile of stud
Slide 31: Bank Statement Analysis
Advanced Bank, GST and Bureau Analyzers to Size Up the Customer’s Cash Flows, Ability to Repay, Risk-Return Metrics and Estimate Loan Exposure ▪ 400+ data parameters Category State ▪ Validate monthly sales, expenses, gross margins ▪ Insight into borrower's business network and concentration ▪ Digiti
Slide 32: Fraud Checks and Litigation
Fraud Checks and Litigation Internal De-dupe BIFR AML Courts and Tribunals LOS ▪ Array of BIFR Cases ▪ OFAC ▪ Access to court records of Indian ▪ Case logged in through another ▪ Status of the BIFR Case ▪ Interpol (Red and Yellow Notices) District, High and Supreme Courts channel for same product ▪
Slide 33: Technology
Technology Credit Process Enabled by Integrated Technology
Slide 34: Technology is essential to achieve a Specialized Model at Scale
Technology is essential to achieve a Specialized Model at Scale DISTRIBUTION CREDIT UNDERWRITING ▪ Quick and easy integration with distribution partners ▪ Access and process the large trove of private and public data ▪ Paperless login enabled by API integrations and OCR ▪ Centralize underwriting kno
Slide 35: Technology Platforms
Technology platform to power the multi-pronged distribution channels An uberized distribution GRO-Plus model capable of a Branch Led onboarding DSAs, CAs and other intermediaries GRO-Chain Supply chain financing Technology Platforms b platform for vendor and Supply Chain dealer/distributor financing
Slide 36: Platforms integrated with data enrichment layer
Platforms further integrated with rich data enrichment layer GRO Partners & Direct Partnership & Alliances Eco System Digital Direct Distribution A Plug and Play Multiple Distribution customer Module touchpoints GRO App Partner LOS Customer ERP Customer Devices GRO LOS All process are Data Enrichmen
Slide 37: Distribution Network
Distribution Network Creating multi-channel distribution
Slide 38: Multi pronged approach led by Offline presence and Tech capabilities
Multi pronged approach led by Offline presence and Tech capabilities a Branch Led Channel | GRO-Plus b Ecosystem Channel | GRO-Chain ▪ Tier 1-2 Branches – 9 Branches with loans largely ▪ Supply Chain Financing – Anchor and its sourced by DSAs ecosystem financing of Supply Chain Turnover: ₹0.2-200 Cr
Slide 39: Branch Led | Network of 34 Branches
a Branch Led | Network of 34 Branches spread across the country Total 34 Branches Tier 1-2 Branches Head Office Rajasthan Tier 1-2 Branches Ajmer ▪ 9 Branches across 8 states in top metro cities Tier 3-6 Branches Kotputli ▪ Locations identified through SME cluster analysis Sikar and portfolio benchm
Slide 40: Branch Led | Loan Products for the entire pyramid of borrowers
a Branch Led | Loan Products curated to cater to the entire pyramid of borrowers Prime/ Near-Prime Medium Prime Low-Prime/ Emerging <10% 10-14% 14-18% >18% Pratham Sanjeevani Saathi GRO Micro 40
Slide 41: Ecosystem Channel – SCF | Products
b Ecosystem Channel – SCF | Products 1 Anchor Led Vendor Distributor / Retailer Financing Dealer Financing Financing Vendor Anchor Dealer ▪ Receives faster payment ▪ Minimises WC investment ▪ Provides much needed WC for purchase of ▪ Reduces cost of capital by leveraging anchor’s ▪ Off-balance sheet
Slide 42: Ecosystem Led Channel – Supply Chain Finance
b Ecosystem Led Channel – Supply Chain Finance (SCF) Supply financing across the ecosystem value chain of the Anchor i.e. right from supplier of raw materials to the retailer Approach to supply chain financing We have a diverse pool of anchors Addition of financially sound anchors with proven Anchor
Slide 43: Machinery Finance
b Machinery Finance | Positioned to tap the opportunity across the value chain Holistic approach to Machinery Finance to tap all the aspects of the Machinery Finance value chain Approved List of Machinery that we Finance ▪ Plastic/injection molding ▪ Allied sector – Printing, ▪ Light Engineering Pac
Slide 44: Partnership Channel
Partnership Channel | Actively partner with FinTechs/NBFCs to improve c distribution reach Online Aggregators Feature Particulars Asset Side downstream co-lending with FinTech/ B2B Market Place E-Commerce Type of co-lending NBFCs Marketplace Customer Profile MSMEs pan India Opportunities Sourcing of
Slide 45: Direct Digital – GRO Direct
d Direct Digital – GRO Direct| Our Innovation-Driven Digital Lending Platform Product Development Customer Service ▪ Sectoral Need Gap Chatbot based, integrated with Identification based on popular message apps (proposed) Perception Maps ▪ Completely Digital Customer Servicing ▪ E.g. Solutions avail
Slide 46: Liability Management
Liability Management Backed by a diverse base of Lenders
Slide 47: Liability is an Art
Liability is an ‘Art’ – U GRO is designed to perfect this Art.. U GRO’s asset strategy would lead to a low cost of capital Key tenets of our liability strategy Liability led Asset strategy Active engagement with stakeholders Diversified Liability Base ▪ Build a diversified, granular book catering to
Slide 48: Our Liability Strategy | A Tri-Pronged Approach
Our Liability Strategy | A Tri-Pronged Approach Partnerships already signed with Relationship with 22 partners SBI, ICICI Bank and Bank of including Banks, NBFCs & DFIs Baroda DFI funds can be channeled Policy of actively securitizing the loan specifically to specific focus sectors & Co-origination
Slide 49: Co-origination Partnerships with Three of the Largest Banks
Co-origination Partnerships with Three of the Largest Banks in India Co-origination is a value accretive strategy Bank of Baroda Example of Co-origination Model (Loan Book: $67B) Numbers provided are for illustrative purposes only Secured Business Loans Signed October 5, 2019 Customer pays a single
Slide 50: Expanded lender universe from 14 to 22
Expanded lender universe from 14 to 22; Borrowing costs also trending downwards 756 1% EOP Sanctioned Liability on Book (Rs Cr) Weighted Borrowing Cost (%, papm) 6% 4% 194 Undrawn Sanctions Liability 38% Drawn Sanctions 387 397 22% Type by 12.02% Sanctions 11.43% 11.46% (Q3FY21 257 562 Rs Cr) 178 38
Slide 51: Financial & Operating Metrics
Financial & Operating Metrics As of Q3-FY21
Slide 52: Recent Updates
Recent Updates Uptick in Disbursals Launch of Micro Branches ▪ Disbursals back to pre-COVID levels as we saw strong ▪ All 25 GRO Micro branches across Tamil Nadu, momentum in branch led channel Karnataka, Gujarat, Telangana and Rajasthan have ▪ Growth in Partnerships & Alliances channel through been
Slide 53: Consistent expansion of AUM with strong Equity & Debt support
Consistent expansion of AUM with strong Equity & Debt support AUM (in ₹ Cr) Disbursals (in ₹ Cr) Debt (in ₹ Cr) & Leverage Ratio 1,127 0.59 978 2,065 861 847 0.42 0.42 753 1,696 0.28 562 1,367 1,398 0.20 1,074 387 397 257 372 368 178 293 298 31 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 Q3FY20 Q4FY20 Q1FY21
Slide 54: Operating & financial ratios continue to improve with scale
Operating & financials ratios continue to improve as with scale Interest Income (in ₹ Cr) & Yield NII (in ₹Cr) and NIM% Finance Cost (in ₹ Cr) & Cost of debt 11.8% 14.8% 12.0% 11.0% 11.1% 10.7% 14.3% 14.3% 14.4% 11.5% 10.3% 14.1% 38.9 10.5% 10.6% 34.1 10.1% 22.5 23.8 24.4 28.9 30.6 19.6 27.1 24.8 9.
Slide 55: Steady scale-up of portfolio across distribution channel
Steady scale-up of portfolio across distribution channel 1,400 Partnership and Alliances Channel Ecosystem Channel Branch Led Channel Self- Sourced 1,200 Channel Mix 1,127 978 1,058 1,000 15% 861 847 753 842 800 691 687 575 600 18% 555 400 67% 374 200 0 Q2 FY20 Q3 FY20 Q4 FY20 Q1 FY21 Q2 FY21 Q3 FY2
Slide 56: Portfolio diversified by Geography and Sector
Portfolio remains well diversified by Geography and Sector Geographical Mix* Sectoral Mix 6% 8% 24% 1% 18% 9% 3% 5% 3% 10% 13% 8% 16% ▪ Delhi/NCR 13% 15% ▪ Karnataka ▪ Gujarat 14% 10% ▪ Telangana & AP 16% ▪ Maharashtra ▪ Rajasthan Light Engineering Hospitality ▪ West Bengal ▪ Tamil Nadu Education Ch
Slide 57: Portfolio & restructuring highlights
Portfolio & restructuring highlights Portfolio split by Channel and ECL Data Product category POS (Cr) ROI (%) Ticket size (Cr) All figures in ₹ Cr Loan Exposure Loan Exposure (%) Branch Channel 759 14.8% 0.41 Stage 1 1,051 93.2% Ecosystem Channel 197 13.2% 1.05 Stage 2 47 4.2% Partnerships and Alli
Slide 58: Income Statement
Income Statement Income Statement (₹ Cr) Q3 FY21 Q2 FY21 Q3 FY20 9M FY21 9M FY20 Income Interest Income 35.07 30.32 23.89 92.87 43.84 Interest from investments 3.70 4.17 4.45 11.17 20.83 Sale of Services 0.02 0.00 0.40 0.02 2.90 Other operating revenue 0.30 0.33 0.16 0.63 0.42 Total Income (A) 39.08
Slide 59: Strategy and Long-Term Goals
Strategy and Long-Term Goals Growth & ROE focus
Slide 60: A clearly articulated vision to achieve our goals
We have a clearly articulated vision to achieve our goals Asset Side Strategy Liability Side Strategy ▪ Opening of new branches in line with our plans and ▪ Adequately raise debt to fuel the build out of asset training & specializing frontline sales to achieve growth targets ▪ Raise long term, low-c
Slide 61: Way forward
Way forward FY25E target to reach 270 total branches, of which 225 direct distribution branches Target to open 36 Intermediated branches in Tier 2 & 3 cities by FY25E while no plans to open any new such branches in Tier 1 cities FY25E total cumulative disbursements target of ~Rs 119 bn; ~68% CAGR ov
Slide 62: Where we want to be in next 5 years
Where we want to be in next 5 years ROA Tree (Projected) FY25E Interest Income 16-17% Cross-sell 0.2-0.5% ~₹119B ~₹200B Co-lending/Assignment Income 0.4-0.6% 5th Year Disbursals AUM at the end of 5th Year Other income 0.5-1% Interest on cash 0.5-1% Total Income 17.5-19.5% 16.3% Interest Yield Borrow
Slide 63: Contact Us
Contact Us Company : Investor Relations Advisors : Ugro Capital Ltd. Strategic Growth Advisors Private Limited CIN: L67120MH1993PLC070739 CIN: U74140MH2010PTC204285 Mr. Nirav Shah Rahul Agarwal / Vijay Goel Head of Strategy & IR [email protected] / [email protected] nirav.shah1@ugrocapital.
Slide 64: Appendix
GRO Appendix
Slide 65: Narrowed down Sub-sectors across focus sectors
Narrowed down Sub-sectors/ecosystem across our focus sectors Sector Sub-Sectors Key Clusters General nursing homes, eye clinics, dental clinics, diagnostic labs, NCR, Mumbai, Bengaluru, Hyderabad and 1 Healthcare radiology/pathology labs, pharma retailers Chennai NCR, Mumbai, Coimbatore, Chennai, 2
Slide 66: Growth Potential in Selected Sub-Sectors (1/4)
Growth Potential/Opportunity In Selected Sub-Sectors (1/4) Healthcare (Nursing Homes, Diagnostic Labs, Eye/Dental Clinics, Retail Pharmacy) ▪ Sector growing at 22% CAGR & expected to see sustainable growth of 14-15% over long term ▪ Significant healthcare shortfall in India (0.7 hospital beds/1000 v
Slide 67: Growth Potential in Selected Sub-Sectors (2/4)
Growth Potential/Opportunity In Selected Sub-Sectors (2/4) Chemicals (Bulk Chemicals, Polymers, Agrochemicals, Dyes & Pigments) ▪ India Chemical Industry grown at ~11% CAGR over the last decade. Per capita consumption in India is 1/10th of the worlds average; presents huge capex opportunity ▪ Bulk c
Slide 68: Growth Potential in Selected Sub-Sectors (3/4)
Growth Potential/Opportunity In Selected Sub-Sectors (3/4) Electrical Equipment and Components (B2B, B2C) ▪ Govt’s focus on infra expansion to create substantial demand for electrical equipment & components ▪ Favorable demographics (Urbanization, increase in disposable income level, aspiration for g
Slide 69: Growth Potential in Selected Sub-Sectors (4/4)
Growth Potential/Opportunity In Selected Sub-Sectors (4/4) Auto and Light Engineering (Casting and forging, medical equipment and devices, engine parts, drive transmissions etc.) ▪ Auto & Light engineering is a sector that enables other sectors. Industrial Consumables are an integral sub-segment of
Slide 70: Thank You
THANKYou ©U GRO | CAPITAL | www.ugrocapital.com