Ugro Capital Limited · NSE:UGROCAP
Ugro Capital — Q2 FY22 Earnings Presentation
65 slides from Ugro Capital's earnings presentation, Nov 2, 2021
Slide 1: U GRO Capital | Q2FY22 & H1FY22 Investor Presentation
U GRO Capital | Q2FY22 & H1FY22 Investor Presentation Catalysing the future of credit access for MSMEs NSE: UGROCAP | BSE: 511742 November 2nd , 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 06 How we are funding our customers need 02 Operating & Financial Metrics 07 Our Governance & Team 03 Changing landscape in MSME 08 Portfolio Overview underwriting 04 Method to madness 09 Update on Financials 05 How we are reaching to customers 10 Mission 2025
Slide 4: Executive Summary
GRO Executive Summary
Slide 5: UGRO Capital – Journey since inception
UGRO Capital – Journey since inception 1,932 Cr 1,375 Cr 574 Cr 53 Cr Mar’19 Mar’20 Jun’21 Sep’21 Jul’18 Jan’19 Raised Started Capital Disbursing Growth Stage Covid – 19 Cautious Resumption of Covid – 19 Resuming Growth Stage Operational Shut down Operations Wave 2 (Apr – Jun) Operational Slow Down
Slide 6: Disbursement Trend (Segment wise M-o-M)
Disbursement Trend (Segment wise M-o-M) Disbursement M-o-M Trend till Sep-21 (in ₹Cr) 115 112 109 142 115 138 196 70 68 193 260 243 288 68 63 66 82 70 86 130 21 14 124 211 206 229 Total Disbursement (including SCF) 51 Disbursement (considering only incremental Disbursement in SCF) 16 90 54 26 64 21
Slide 7: AUM Trend (Segment-wise MoM)
AUM Trend (Segment-wise MoM) AUM M-o-M Trend till Sep-21 (in ₹Cr) 978 1,023 1,071 1,128 1,171 1,232 1,317 1,307 1,299 1,375 1,564 1,729 1,933 375 Total AUM 98% 340 120 302 105 215 170 219 174 178 87 197 153 72 83 138 138 71 74 188 43 52 427 130 34 210 181 135 19 194 199 189 141 13 188 378 8 196 189
Slide 8: We continue to build as per plan
We continue to build as per plan Q2 gained momentum on the back of overall economic recovery post Covid 2nd wave Metric ₹1,933 Cr 37 78% AUM Active Lenders Secured** on Book ₹958 Cr 10,000+ 700+* 1.9%/1.8% GNPA / Net Worth Customers Employees NNPA ₹3,636Cr ₹1,096 Cr 55 (3,275+)* Cumulative Branches
Slide 9: Executive Summary – Scale is showing up
Executive Summary – Scale is showing up All Fig in ₹ Cr Q2FY22 Q2FY21 H1FY22 H1FY21 AUM and Disbursement Credit Costs AUM 1,933 978 1,933 978 ▪ AUM stood at ₹1,933 Cr as on Sep’21 (₹978 Cr as on ▪ GNPA stood at 1.9% and NNPA stood at 1.8% Sep’20). ~98% increase on Y-o-Y basis ▪ Collection efficienci
Slide 10: Operating & Financial Metrics
Operating & Financial Metrics
Slide 11: Operating & Financial Metrics (1/2)
Operating & Financial Metrics (1/2) Consistent expansion of AUM with strong Equity & Debt support AUM (₹ Cr)* Disbursals (₹ Cr)* Gross to Net Disbursement Bridge (₹ Cr) 3,636 1,933 68 2,845 1,375 2,514 145 1,317 2,065 179 1,127 156 978 1,696 791 611 557 298 368 449 331 Q2FY21 Q3FY21 Q4FY21 Q1FY22 Q2
Slide 12: Operating & Financial Metrics (2/2)
Operating & Financial Metrics (2/2) Operating & financials ratios continue to improve with scale Interest Inc. (₹ Cr) & Portfolio Yield Finance Cost (₹ Cr) & Cost of debt* NII (₹Cr) and NIM% 15.5% 15.8% 15.7% 10.3% 14.8% 9.1% 8.1% 14.4% 7.3% 7.7% 58.6 10.6% 10.5% 10.4% 10.6% 10.2% 46.9 27.1 38.9 41.
Slide 13: Changing landscape in MSME underwriting
Changing landscape in MSME underwriting Underwriting in MSME space is moving from collateral based to cashflow based
Slide 14: India Stack 2.0 - The UPI Moment: Data to drive the underwriting
India Stack 2.0 - The UPI Moment: Data to drive the underwriting OCEN Framework disrupts lending models… …and helps overcome Lenders old way Lenders new way Based on balance sheet Based on cash flow ▪ Credit Dissemination Risk Assessment ▪ High Distribution Cost ▪ Assessing Credit worthiness Manual
Slide 15: Digitization is taking place across the value chain in MSME Lending
Digitization is taking place across the value chain in MSME Lending Inner Layer - Represents the physical loan activities for a borrower Account Aggregator Model To manage electronic data Middle Layer - Represents the consent and facilitate data digitized solutions built by Fintech exchange between
Slide 16: OCEN Framework would enable seamless flow of credit to MSMEs
OCEN Framework would enable seamless flow of credit to MSMEs 1 User activity causes OCEN’s Value Proposition platform prompt to avail of credit and borrower 3 Platform Requests for accepts the same access to information for Borrowers a) Risk assessment Loan Service b) Loan Monitoring Account Provide
Slide 17: Account Aggregation (AA) Model would facilitate credit underwriting of MSMEs
Account Aggregation (AA) Model would facilitate credit underwriting of MSMEs Borrower Account Aggregator Model Benefits 2 Electronic Consent to share Data 5 Transaction Completion Notification ▪ Account Aggregator model would allow the borrower to consent and share data in real time ▪ Account Aggreg
Slide 18: OCEN and AA Models are Shifting Colors of MSME Lending
OCEN and AA Models are Shifting Colors of MSME Lending Embedded Credit Buy Now Pay Later Flow Based Credit ▪ Payment option available at checkout for B2B ▪ Tailored credit products in-context at the point ▪ Leverage real-time cashflow data to reimagine platforms of demand creation (Platforms / Softw
Slide 19: Ecosystems and Touchpoints for new age MSME lending
Ecosystems and Touchpoints for new age MSME lending Tax and Legal Filing Apps B2B e-Commerce Neo Banks Social Networks Accounting and Khata Apps MSMEs Agri Tech Kirana Tech Payment Gateways Supply Chain Financing Loan Selection Platforms 19
Slide 20: Method to madness
Method to madness Bringing homogeneity to a non-homogeneous Sector
Slide 21: Our beginning: How we started - 2019
Our beginning: How we started - 2019
Slide 22: Deep analysis of Macro and Micro Economic Factors…
Deep analysis of Macro and Micro Economic Factors… A continuing process involving extensive study of macro and micro economic parameters carried out in conjunction with market experts like CRISIL • Demand supply gap & cyclicality • Input risk in demand • Sector specific government 180+ Sectors • Wor
Slide 23: …to arrive at a set of Specialized Sectors
…to arrive at a set of Specialized Sectors 8 sectors & 200+ Ecosystem representing ~50% of the total MSME Lending market and Micro Enterprises with sector agnostic approach Chemicals Electrical Equipment and Components Education Hospitality Micro Enterprises Light Engineering Auto Components Food Pr
Slide 24: …and further narrowed down based on their ecosystems
…and further narrowed down based on their ecosystems Sub-sectors selected basis the contribution to the overall sector credit demand and risk profiles Key sub-sectors: Key sub-sectors: Key sub-sectors: General nursing homes, eye clinics, K-12 schools, play schools Dyes and pigments, bulk and dental
Slide 25: “Risk Management” through ‘Expert Scorecards’ for all Sub-sectors
“Risk Management” through ‘Expert Scorecards’ for all Sub-sectors • Entity is observed through various parameters and their associated weightages Education K-12 Schools • The parameters and their associated weightages vary widely across sectors and Parameter Factor Weightage subsectors, and can vary
Slide 26: …leading to data analytics driven sector specific scorecards
…leading to data analytics driven sector specific scorecards Sector Specific Score Cards Parameters used to filter Model Development Datasets Bureau Footprint • Commercial bureau presence used for scorecard Developed basis strong fundamentals Sector Specific Score Cards development Look alike Custom
Slide 27: Our acceleration: How have we evolved - 2021
Our acceleration: How have we evolved - 2021
Slide 28: First lender to completely move to Data Tripod
First lender to completely move to Data Tripod GST Statement Analysis ▪ 400+ data parameters ▪ Validate monthly sales, expenses, gross margins ▪ Insight into borrower's business network and concentration ▪ Digitized sector identification ▪ State-wise break up providing information on operating marke
Slide 29: GRO Score 2.0 - A superior underwriting framework
GRO Score 2.0 - A superior underwriting framework Forecasting of future cashflow Bank Entity Individual One Single Model capturing all data GRO 2.0 Evaluation of repayment history Credit Bureau Data + Banking Data + 28% Approval Rate System generated digital PD Trained on own data – eliminates “Look
Slide 30: How we are reaching to customers
How we are reaching to customers Vast geography, varying needs, multiple sources of origination
Slide 31: 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 ▪ Prime Loan Branches – 14 Branches with loans ▪ Supply Chain Financing – Anchor and its largely sourced by DSAs ecosystem financing of Supply Chain ▪ Micro Loan Branc
Slide 32: Branch Led | Network of 55 Branches spread across the country
a Branch Led | Network of 55 Branches spread across the country Total 55 Branches as on Sep-21 Rajasthan Ajmer Prime Loan Branches Kotputli Sikar Head Office Jhotwara Jagat Pura Prime Loan Branches Bikaner • 14 Branches across 8 states in top metro cities Ganganagar Micro Loan Branches Jodhpur • Loc
Slide 33: Branch Led | Loan products curated to cater to 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/ Intermediated : Prime Branches Self Sourced : Micro Branches Emerging <10% 10-14% 14-18% >18% Pratham Sanjeevani Saathi GRO Micro Ticket Size - Secured 50-250 lacs 50-300 lacs
Slide 34: Ecosystem Channel – SCF | Products
b Ecosystem Channel – SCF | Products Ecosystem channel for Supply Chain Financing Products Anchor Led Non-Anchor Led Sales Invoice ▪ No corporate acceptance required Vendor Financing ▪ Downloadable app for invoice level Discounting management ▪ Seamless virtual escrow account repayments Purchase Inv
Slide 35: Ecosystem Led Channel – Supply Chain Finance (SCF)
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 & FinTech Partners Anchors Anchor Addition Addition of f
Slide 36: Ability to build and manage e-market platforms like GeM Sahay
Ability to build and manage e-market platforms like GeM Sahay U GRO was one of the first lenders on GeM Sahay platform Government e-Marketplace (GeM) is the National Public Procurement Portal for an online, end-to-end Marketplace for open, efficient & transparent procurement of goods and services by
Slide 37: Machinery Finance | Positioned to tap the opportunity across the value chain
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 Pre-Approved List of Machinery ❖ Plastic/injection molding ❖ Light Engineering OEMs as U GRO’s Leads Dealership Driven
Slide 38: Partnership Channel | Actively partner with FinTech's/NBFCs
Partnership Channel | Actively partner with FinTech's/NBFCs to improve c distribution reach… Highly customized, API driven tech platform for large and emerging lending institutions to collaborate on upstream and downstream activities Online E-commerce Aggregators Market Places Market Places B2B Offl
Slide 39: Direct Digital – GRO Direct | Our Innovation-Driven Digital Lending Platform
d Direct Digital – GRO Direct| Our Innovation-Driven Digital Lending Platform Customer Service Product and Marketing Chatbot based, integrated with popular Innovation driven by Micro-Level message apps (proposed) Focus within Sub-sectors ▪ 100% Digital Customer Servicing Product Development ▪ Sector
Slide 40: Development of System Architecture for full-Suite SME Lending
Development of System Architecture for full-Suite SME Lending GRO-Plus GRO-Direct Intermediaries Direct Interface An uberized distribution Direct to customer model for FOS origination NBFCs/ Suppliers (Online) channel – went and onboarding DSAs, FinTechs live in beta phase in CAs and other December
Slide 41: Platforms further integrated with rich data enrichment layer
Platforms further integrated with rich data enrichment layer A paperless, and seamless customer onboarding & underwriting process supplemented by physical underwriting GRO Partners & Direct Partnership & Alliances Eco System Digital Direct Distribution A Plug and Play Multiple Distribution customer
Slide 42: “Zero Data Loss” – Captures end to end data to enable deeper adoption of analytics
“Zero Data Loss” – Captures end to end data to enable deeper adoption of analytics ..ingested through ..enabling data driven 360-degree data from all stages of borrower life cycle… source systems into Data Lake end use Bureau, Fin, Policy / On boarding Credit Assessment Demographics Enterprise repor
Slide 43: How we are funding our customers need
How we are funding our customers need Backed by large institution equity and debt
Slide 44: Backed by marquee Private Equity Funds
Backed by marquee Private Equity Funds Shareholding Pattern on a Fully Diluted basis (Sep-21) Promoter Management ESOPs 2.7% 4.8% Others 20.8% 20.4% 12.5% 20.4% 18.3% Chhattisgarh Investments Majority of U GRO’s shareholding is institutionally owned 44
Slide 45: Tri-Pronged on the liability side: Lending as a Service
Tri-Pronged on the liability side: Lending as a Service • Relationship with 36 partners including • Partnerships already signed with Bank of Banks, NBFCs & DFIs Baroda, IDBI Bank. In discussion with SBI, ICICI Bank • Policy of actively securitizing the loan book • Diverse liability mix to include –
Slide 46: Expanded lender universe to 37; Continued build-out of liability book
Expanded lender universe to 37; Continued build-out of liability book (Sep-21) Total Liabilities Cost of Borrowing Liability Mix Total Liabilities (INR Cr) IRR based Borrowing Cost Liability Type by Sanction (Sep'21) 9 14 22 29 32 37 Interest Rate 5% All-in Cost 7% 1,096 12.00% Count of Lenders 11.4
Slide 47: Building India’s largest Co – Lending platform: Lending as Service
Building India’s largest Co – Lending platform: Lending as Service Business Commenced Co-Lending is a value accretive strategy Bank of Baroda Example of Co-Lending Model Secured Business Loans Numbers provided are for illustrative purposes Original Agreement Signed – Oct’19 only Agreement under new
Slide 48: Our Governance & Team
Our Governance & Team Financial Services succeed only because of quality of Governance and tenacity of management teams
Slide 49: Strong Corporate Governance framework enshrined in the AoA
Strong Corporate Governance framework enshrined in the AoA Listed Vehicle Reputed Auditors ▪ High degree of regulatory oversight and ▪ As per our AoA & MoA, we shall appoint a Statutory transparency Auditor with good reputation, and in line with RBI ▪ An institution created with a long-term view, di
Slide 50: Board Members comprises of diverse industry experience
Board Members comprises of diverse industry experience Shachindra Nath – Executive Chairman and MD Abhijit Sen - Chairman, Audit Committee ▪ 26 years of experience in creating institutions across the financial ▪ Ex-CFO, Citi-India services domain ▪ Over 40 years of experience with Citi, CEAT, Tata ▪
Slide 51: Board Members comprises of diverse industry experience
Board Members comprises of diverse industry experience S. Karuppasamy - Chairman, Compliance Committee Satyananda Mishra - Chairman, CSR Committee ▪ Ex-Executive Director, RBI ▪ Ex-Chairman, MCX, Ex-CIC, GoI, Ex-Director - SIDBI ▪ Over 40 years of experience with RBI ▪ Over 40 years with the IAS (Ba
Slide 52: Management Team have execution expertise of setting-up large institution
Management Team have execution expertise of setting-up large institution Sachindra Nath Amit Mande Anuj Pandey Exec Chairman &MD Chief Revenue Officer Chief Risk Officer Experience – ~25+ years Experience – ~20 years Experience – ~20 years Sunil Lotke Pia Shome Amit Gupta J Sathiayan Chief – Legal &
Slide 53: Executive Committee supported by strong second layer of management
Executive Committee supported by strong second layer of management Executive Chairman and MD Chief Chief Legal & Chief Revenue Chief Risk Chief Financial Chief Strategy Chief People Technology Compliance Officer Officer Officer Officer Officer Officer Officer Prime Business Ecosystem Operations Risk
Slide 54: Portfolio Overview
GRO Portfolio Overview
Slide 55: AUM Growth Channel Wise
AUM Growth Channel Wise AUM growth picked up in Q2 with overall pick up in the economy and disbursements Partnership and Alliances Channel 2,500 Channel Mix Ecosystem Channel (Machinery + Supply Chain Fin) Partnership & Alliances 19% Branch-Led Channel (Prime + Micro) 1,933 2,000 Machinery Loans 375
Slide 56: Portfolio Sector Snapshot | AUM (as of Sep-21)
Portfolio Sector Snapshot | AUM (as of Sep-21) Branch-led Sectoral Mix Machinery Finance Sectoral Mix AUM - 1224 Cr 3% 3% AUM - 120 Cr 2% Light Engineering 4% 5% 3% 10% Food Processing Light Engineering 22% Education Electrical Equipment 7% Healthcare Chemicals Auto Components Hospitality Healthcare
Slide 57: Portfolio Region Snapshot | AUM (as of Sep-21)
Portfolio Region Snapshot | AUM (as of Sep-21) Geographical Mix* Sectoral Mix* 3% Light Engineering Pin-codes serviced - 3275 11% 3% Food Processing 25% <1% Electrical Equipment 6% Education <1% <1% Healthcare 1% 19% 8% <1% Chemicals 2% 15% 8% Hospitality <1% <1% Auto Components <1% 10% 11% 7% 1% <1
Slide 58: Portfolio Provisioning, Collection Efficiency & Restructuring Highlights
Portfolio Provisioning, Collection Efficiency & Restructuring Highlights Collection Efficiency and Bounce rates Restructuring Highlights Sep-21 Figures Collection Efficiency Bounce Rate ▪ Restructured 7.2% (137.1 Cr) of our portfolio as on Sep-21. 86% of the restructured pool was current as of Sep-2
Slide 59: Update on Financials
Update on Financials (Q2 FY22 & H1 FY22 )
Slide 60: Financials | Income Statement & Balance Sheet
Financials | Income Statement & Balance Sheet Income Statement (₹ Cr) Q3 FY21 Q4FY21 Q1 FY22 Q2 FY22 FY21 Balance Sheet (₹ Cr) Q2 FY22 FY21 Income Financial Assets 2,026.34 1,656.89 Interest Income & income from investment 38.8 44.4 50.7 60.6 148.5 Loans 1,782.30 1,278.81 Sale of Services 0.02 3.51
Slide 61: Mission 2025 – 1 Mn Customers; 1% MSME Market Share
Mission 2025 – 1 Mn Customers; 1% MSME Market Share AUM : INR 20,000 Crores
Slide 62: We have 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 63: Distribution channel wide approach
Distribution channel wide approach 270 Branches by FY25 Branch Led • 45 intermediated branches from 14 currently Channel • 225 Micro branches from 41 currently • Enter into multiple BC partnerships for low capex/ opex model Ramp up the Ecosystem Network Ecosystem • Penetrating existing network of An
Slide 64: Where we want to be in next 5 years
Where we want to be in next 5 years ROA Tree (Projected) Interest Income 16-17% Cross-sell 0.2-0.5% ~₹119 bn ~₹200 bn Co-lending/Assignment Income 0.4-0.6% 5th Year AUM at the end of 5th Year Other income 0.5-1% Disbursals Interest on cash 0.5-1% Total Income 17.5-19.5% 16.3% Interest Yield Borrowin
Slide 65: Thank You
THANKYou ©U GRO | CAPITAL | www.ugrocapital.com