Ugro Capital Limited · NSE:UGROCAP
Ugro Capital — Q2 FY25 Earnings Presentation
49 slides from Ugro Capital's earnings presentation, Oct 22, 2024
Slide 1: Exchange filing cover letter
22nd October 2024 To BSE Limited National Stock Exchange of India Limited Phiroze Jeejeebhoy Towers Exchange Plaza, 5th Floor, Plot No. C/1, G Dalal Street Block Bandra, Kurla Complex, Bandra Mumbai 400001 (East) Mumbai 400051 Scrip Code – 511742 Symbol – UGROCAP Subject: Investor Presentation for t
Slide 2: UGRO Capital Q2'FY25 Earnings Presentation
UGRO Capital Limited Building an Institution for MSME Lending Data Tech Empowering Small Businesses (MSME) Lending Q2’FY25 Earnings Presentation 22 October 2024 NSE: UGROCAP | BSE: 511742 Slide 1
Slide 3: 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 4: Milestone quarter: Growing in size, getting recognized
Milestone quarter: Growing in size, getting recognized Total AUM crossed INR 10,000 Cr milestone as of Sep’24 Over the last 3 years, UGRO’s investment in DataTech infrastructure, coupled with branch network and market Awarded ‘Best Fintech Lender of the Year’ at leading position is coming together i
Slide 5: Milestone quarter: Distribution & Liability franchise firing together
Milestone quarter: Distribution & Liability franchise firing together Highest ever net loans originated: 46 Micro branches added in Highest ever disbursement by Distribution Q2’FY25 taking total branch Micro Channel: count to 210: INR 1,971 Cr compared to INR Expanding to new markets with INR 456 Cr
Slide 6: Q2'FY25 Snapshot: All-round Profitable Growth
Q2’FY25 Snapshot: All-round Profitable Growth Asset side reaping in benefits of continued investments in DataTech and distribution network • AUM increased to INR 10,157 Cr as on Sep’24 compared to INR 9,218 Cr as of Jun’24 and INR 7,592 Cr as of Sep’23 (+34%) • Recorded lifetime highest net loans or
Slide 7: Performance snapshot for Q2'FY25
Performance snapshot for Q2’FY25 Q2’FY25 Q2’FY24 H1’FY25 H1’FY24 AUM (INR Cr) 10,157 7,592 34% 10,157 7,592 34% Net Disbursement (INR Cr)* 1,971 1,476 34% 3,118 2,760 13% Annualized EPS of H1’FY25** Off-book AUM 44% 45% 60 bps 44% 45% 60 bps INR 14.4 per share Net Total Income %$ 13.1% 13.6% 47 bps
Slide 8: Key metrics for Q2'FY25/ H1'FY25
Key metrics for Q2’FY25/ H1’FY25 01 Asset 02 03 Asset 04 Liability & Profitability Growth Quality Co - lending AUM Net Total Income GNPA Borrowings As of Sep’24 : 10,157 Cr Q2’FY25 | H1’FY25: As of Sep’24 : 2.1% As of Sep’24 : 5,344 Cr (+34% Y-o-Y) 200 Cr | 365 Cr (Sep’23: 1.9%) (+21% | + 33% Y-o-Y)
Slide 9: Highest-ever Net Loan Origination (Channel wise Q-o-Q)
Highest-ever Net Loan Origination (Channel wise Q-o-Q) Amount in INR Cr Disbursement is up 34% YoY; Disbursement excluding Supply Chain Financing* is up 49% YoY 1,971 277 1,554 1,552 291 1,459 1,477 322 1,146 -98 1,284 209 261 193 1,166 156 456 1,100 173 172 167 225 227 148 -89 196 109 153 85 52 193
Slide 10: Strong AUM Growth Trend (Product wise Q-o-Q)
Strong AUM Growth Trend (Product wise Q-o-Q) Amount in INR Cr AUM increased to INR 10,157 Cr as of Sep’24 from INR 9,218 Cr as of Jun’24 and INR 7,592 Cr as of Sep’23 (+34%) 34% 10,157 9,047 9,218 1,184 12% 8,364 1,108 1,112 7,592 1,391 14% 967 1,168 1,253 355 3% 6,777 849 11% 1,037 6,081 439 1,105
Slide 11: Our collection efficiencies and portfolio performance remains stable
Our collection efficiencies and portfolio performance remains stable Collection Efficiency remains robust ECL Data (Sep’24) (In Cr) Loan Exposure Loan Exposure (%) Total Collections* (including overdue) / Current Month Demand Stage 1 9,561 93.6% Stage 2 436 4.3% 98% Stage 3 214 2.1% 97% 96% 96% 96%
Slide 12: Our collection efficiencies and portfolio performance remains stable
Our collection efficiencies and portfolio performance remains stable Stable Stage 1 assets Stable Stage 3 assets 95% 95% 94% 94% 93% 94% 2.0% 2.0% 2.0% 2.1% 1.9% 1.8% Jun'23 Sep'23 Dec'23 Mar'24 Jun'24 Sep'24 Jun'23 Sep'23 Dec'23 Mar'24 Jun'24 Sep'24 Adequate Provision Coverage Ratio 48% 49% 49% 48%
Slide 13: Unique capital light liability strategy
Unique capital light liability strategy Demonstrated ability to manage a prudent mix of on-balance sheet and off-balance sheet approach On-Balance sheet Diversified Lender base across Lending Co-Lending with Banks/NBFCs Institutions – Banks, Large NBFCs and Partnership with PSBs, Pvt. Banks and Larg
Slide 14: Robust momentum of our co-lending platform continues
Robust momentum of our co-lending platform continues High proportion of off - Book AUM mix Product wise Mix of off - Book AUM (Sep’24) On Book Portfolio Off Book Portfolio 2,792 3,331 1,105 355 1,391 1,184 0% 3% 47% 42% 45% 40% 43% 45% 44% 62% 45% 45% 45% 100% 97% 53% 58% 55% 38% 60% Secured Business
Slide 15: Diversified Lender base and continued build-out of liability book
Diversified Lender base and continued build-out of liability book Total Debt (INR Cr) and Cost of borrowings Liability mix by lender profile Liability mix by product 10.6% 10.7% 10.7% 10.7% 10.75% 6% 4% Cost of Borrowings 5,344 4% 4,653 4,529 18% 4,173 3,798 45% 26% Total Debt Total Debt INR 5,344 C
Slide 16: Finance | Income Statement
Finance | Income Statement Income Statement (₹ Cr) Q2’FY25 Q2’FY24 Y-o-Y Q1’FY25 Q-o-Q Annualised ROA Tree Q2’FY25 H1’FY25 Interest Income 208.0 171.7 21% 231.9 -10% As a % of Gross On Book AUM Income on Co-Lending / Direct 109.5 64.8 69% 50.4 117% Total Income 22.5% 21.5% Assignment Other Income 25
Slide 17: Finance | Balance Sheet
Finance | Balance Sheet Balance Sheet (₹ Cr) Sep-24 Mar-24 Balance Sheet (₹ Cr) Sep-24 Mar-24 Liabilities Assets Trade payables 3 14 Cash and Bank Balance 588 455 Debt securities 1,664 1,395 Loans 6,360 5,432 Borrowings (other than debt securities) 3,680 3,258 Investments 68 59 Other financial liabi
Slide 18: Operating & Financial Metrics
Operating & Financial Metrics Total Income (INR Cr) & Portfolio Yield$ Finance Cost (INR Cr) & Cost of Borrowing Operating Exp. (INR Cr) and Cost to Income 17.4% 17.5% 17.7% 17.7% 17.8% 10.61% 10.65% 10.70% 10.73% 10.75% 55.9% 53.1% 52.0% 54.1% 52.7% 16.6% 16.7% 16.7% 16.2% 16.3% 128 134 143 105 105
Slide 19: We have a clear path to achieve 4% ROA
We have a clear path to achieve 4% ROA Change of ~160 bps 2.3% 150 75 50 50 ~4% RoA bps bps bps bps RoA FY24 YIELD COST OF BORROWING OPERATING LEVERAGE CREDIT COST In ~8 EXPANSION DECREASE INCREASE Quarters Aided by scale, Micro loan mix On the back of capital raise, Portfolio increase led by strong
Slide 20: Long-term Sustainable Strategy to maintain healthy growth, return ratios
…and Long-term Sustainable Strategy to maintain healthy growth, return ratios ~30% Large TAM, growth across products, Loan Growth on a Sustained Basis particularly Micro Assuming on-book debt/equity of 3.5x >~18% ~50% Increase from 45% in FY24, tapping ROE Off-Book AUM strong co-lending demand Incre
Slide 21: MSME lending: The largest opportunity today
MSME lending : The largest opportunity today Slide 20
Slide 22: For India's GDP to reach USD 5 trillion, MSME sector has to reach USD ~2 trillion
For India’s GDP to reach USD 5 trillion, MSME sector has to reach USD ~2 trillion Today India’s GDP in FY2028 FY2028 MSME ~6.3 Crore MSMEs 35 – 40% ~8 – 10 Crore MSMEs MSME MSME 35-40% 35-40% ~15 Crore employment ~20-22 Crore employment ~30% of GDP ~30-40% of GDP MSME sector expected to grow to USD
Slide 23: MSME sector is the key to India's Employment Generation
MSME sector is the key to India’s “Employment Generation”, making it one of the Central themes of Government in the last decade MSME count to grow to ~10 crores employing 20-22 crores Slide 22
Slide 24: Well supported by continuity in Government initiatives
…well supported by continuity in Government initiatives Government Initiatives throughout the years Financial Support for MSME Growth - 2024 • 2014 - Pradhan Mantri MUDRA Yojana (PMMY) Budget Allocation • For Ministry of MSME: INR 22k Crores • 2015 - Udyog Aadhaar Memorandum (UAM) • Funds for centra
Slide 25: Building a large institution for MSME financing is a real possibility
Building a large institution for MSME financing is a real possibility Explosion of Credit in MSME Segment: Large market opportunity, conducive macro, favorable policy framework Total MSME Credit gap is INR 92 trn Credit Gap of our customer segment constitutes 95% FY17 FY24 Medium Enterprise No. of e
Slide 26: UGRO Capital: Well-placed to capitalize on the opportunity
UGRO Capital: Well-placed to capitalize on the opportunity MSME Focused Lender targeting Analytics Powered Pan-India Presence large credit gap Targeting MSME sector which has India’s trailblazing data-driven Extensive network pan India, with substantial credit gap of ~INR 92 cashflow based underwrit
Slide 27: UGRO's Data & Tech driven approach
UGRO’s Data & Tech driven approach Slide 26
Slide 28: UGRO's journey of Data-Tech driven lending to MSMEs over 5+ yrs
UGRO’s journey of Data-Tech driven lending to MSMEs over 5+ yrs Build phase Early Validations Maturing phase Growth Phase Data Repository- Sep’24 Infrastructure build at inception during Covid, pivoted At Dec 2022, 87% of long term portfolio Become an industry to cash flow based underwriting models
Slide 29: Data driven by AI/ML powers our core underwriting
Data driven by AI/ML powers our core underwriting : Ability to capture alternate data from banking and bureau… …to draw meaningful insights out of unorganized data... Artificial Intelligence GRO 2.0 GRO 3.0 Engineering of making Intelligent Credit Bureau Machines and Programs Credit Across Multiple
Slide 30: GRO Score – Risk Bands Stacking up on Historical Portfolio
GRO Score – Risk Bands Stacking up on Historical Portfolio Default rates across score bands – All customers assessed Since Inception Score Band wise break up of recent disbursals (Apr 24 – Sep 24) 3.0% 3% 9% 1.7% 1.7% A+&A 1.5% 14% B 1.1% GRO Score A+ to C 48% 1.0% ~88% C 0.6% 0.7% D 26% E A+&A B C
Slide 31: Our System Architecture supports full SME lending
Our System Architecture supports full SME lending Secured Factoring P&M Loans OD product EV / Solar Digital Finance Co-lending Embedded Business Loan Finance GSTN Bureau + Banking Bureau + Banking + GSTN GROSCORE GROSCORE 2.0 3.0 UGRO’S PROPRIETARY TECH CAPABILITY Co-lending Supply Chain D2C Offerin
Slide 32: Multi-product, multi-channel Asset Engine
Multi-product, multi-channel Asset Engine Slide 31
Slide 33: Serving a diverse set of customers with multi-product, multi-channel strategy
Serving a diverse set of customers with multi-product, multi-channel strategy GRO line Prime Intermediated: Micro: Tier 2 & beyond Ecosystem Channel & Direct & Digital Metro & Tier 1/2 branches Green Asset Financing Alliances Branches Collateral: Prime Property Collateral: Collateral:Standard Standa
Slide 34: Sector Focused Approach, Multiple Products and Large Distribution Strength
Sector Focused Approach, Multiple Products and Large Distribution Strength Micro Enterprises Retailer 23 Finance Prime Branches Light Engineering Business Loans Secured by Property 187 Auto Components Micro Branches Business Chemicals Loans 650+ GRO Partners Our Product Food Processing Offering 40+
Slide 35: Well diversified, granular and stable portfolio quality
Well diversified, granular and stable portfolio quality Product Mix (AUM) Portfolio Concentration in key geographical areas Sector Mix State wise AUM 12% coverage 7% 27% 1% 17% 4% 1% 14% 18% 1% 5% 8% 3% 10% 2% 4% 7% 11% 21% 19% 12% 11% 24% 5% Rest of India – 1% 9% Guaranteed by CGTMSE 2% 3% Secured
Slide 36: Shareholding, Board, and Management
Shareholding, Board, and Management Slide 35
Slide 37: Institutionally Owned: Majority held by Institutional Investors
Institutionally Owned: Majority held by Institutional Investors Shareholding Pattern as of Sep’24 Fully diluted shareholding pattern* (Investment arm Other Public shareholders, 29.1% of Denmark govt.) Other Public 10.5% (Investment arm of 40k+ shareholders 16.4% shareholders, 26.0% Denmark govt.) 10
Slide 38: We are Independently supervised by eminent Board of Directors
We are Independently supervised by eminent Board of Directors Non-Executive Chairman Satyananda Mishra Chairman, Corporate Social Responsibility Committee Ex-Chairman- MCX, Ex-CIC, GOI, Ex-Director - SIDBI Independent Directors Karnam Sekar Hemant Bhargava Rajeev K. Agarwal S. Karuppasamy Tabassum I
Slide 39: With strong corporate governance framework enshrined in the Articles
With strong corporate governance framework enshrined in the Articles ▪ Reputed Audit Firm to be appointed as the statutory auditors ▪ High degree of regulatory oversight and transparency ▪ Sharp and Tannan appointed as the statutory auditor ▪ An institution created with a long-term view, designed an
Slide 40: Professionally Managed: Leadership team has 165+ years of cumulative experience
Professionally Managed: Leadership team has 165+ years of cumulative experience Shachindra Nath - Founder & Managing Director 26+ Years of diversified financial services experience across asset management, lending, capital markets & insurance Amit Mande Anuj Pandey Kishore Lodha Chief Revenue Office
Slide 41: Leadership is supported by strong second layer of management
Leadership is supported by strong second layer of management Monika Kapoor J Sathiayan Ajit Kumar Tanya Chadha CBO - Intermediated Business CBO - Micro Enterprises CBO - Equipment Finance CBO - Digital Business 21+ Years of Experience 25+ Years of Experience & Green Asset Financing & Alliances 25+ Y
Slide 42: Understanding Co-lending
Understanding Co-lending Note: This section is only for learning & illustration purpose Slide 41
Slide 43: RBI Guidelines on Co-lending
RBI Guidelines on Co-lending RBI circular dated November 05, 2020 1➢ Loan sanction - Joint contribution of credit by banks and NBFCs 2➢ Interest rate - Blended rate to be offered to customers 3➢ Common Escrow Account: The Bank and the NBFC shall open common escrow account for disbursal as well as re
Slide 44: Co-origination Process Framework - CLM 1
Co-origination Process Framework - CLM 1 Documentation: ➢ Co-Branded Sanction letter issued to the customer post approval by both the lenders. NBFC funding Bank funding ➢ Customer signs agreement with both the lenders. ➢ Security (if any) to be created in favor of both the lenders on pari passu basi
Slide 45: Co-Lending Process Framework - CLM 2 (akin to Direct Assignment)
Co-Lending Process Framework - CLM 2 (akin to Direct Assignment) 1 Customer Documentation: CaseCase underwritten andand underwritten disbursed by UGRO disbursed andand by NBFC shared shared with with partner as per the common lending policy bank as per the common lending policy 2 ➢ Sanction letter,
Slide 46: Co-lending: Current Status and Market Opportunity
Co-lending: Current Status and Market Opportunity Composition of Co-lending AUM (as of Dec-23) Co-lending AUM is expected to grow 35-40% CAGR in medium term Co-lending AUM (Rs lakh crores) Others, 12.0% 500,000+ LAP, 8.0% Personal Loans, 34% (Mix of PSL (Non-PSL) and Non-PSL) Gold Loans, 13% (Non-PS
Slide 47: Co-Lending model is a win-win combination for Banks, NBFCs & Customers
Co-Lending model is a win-win combination for Banks, NBFCs & Customers Benefits for various stakeholders ▪ Expand distribution in ▪ Access to higher liquidity at ▪ Access to credit particularly under-served areas at competitive cost for under-served segments minimal opex. and geographies with ▪ Enab
Slide 48: Direct Assignment (DA) vs Co-Lending akin to DA
Direct Assignment (DA) vs Co-Lending akin to DA Particular Direct Assignment (DA) Co-lending akin to DA Forms part of Gross Loans (Balance Sheet) for Only 10% share Only the 20% (self-funded) portion of the loan Originator Originating NBFC and funding Bank agree on a common lending policy Underwriti
Slide 49: Thank you
Thank you www.ugrocapital.com Slide 48