Ugro Capital Limited · NSE:UGROCAP
Ugro Capital — Q4 FY21 Earnings Presentation
68 slides from Ugro Capital's earnings presentation, Jun 30, 2021
Slide 1: U GRO Capital Q4 FY21 & Full Year FY21 Earnings Presentation
U GRO Capital | Q4 FY21 & Full year FY21 Earnings Presentation Tech focused Small Business Lending Platform UGROCAP | 511742 June 30th,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 Knowledge 02 U GRO Capital - Overview 07 Technology 03 Strong Corporate Governance 08 Multi-pronged Distribution 04 Experienced Management 09 Financial & Operating Metrics and Portfolio Overview 05 Large Institutional Capital 10 Strategy & Long-Term Goals
Slide 4: Executive Summary
GRO Executive Summary
Slide 5: Where we stand now
Where we stand now Metric ₹1,317 Cr 29 73% AUM Active Lenders Secured* on Book ₹952 Cr 6,605 361 700+ GRO Net Worth Customers Employees Partners ₹2,514 Cr ₹782 Cr 34 (2,000+) Cumulative Branches Total Debt (Pin-codes) Disbursals Focus in the Q4 was on operationalising 25 Micro Branches and scaling d
Slide 6: Executive Summary
Executive Summary All Fig in ₹ Cr FY20 FY21 AUM and Disbursement Credit Costs AUM 861 1,317 • AUM stood at ₹1,317 Cr as on Mar’21 (₹861 Cr as • GNPA stood at 2.72% and NNPA stood at 1.75% on Mar’20). ~53% increase on Y-o-Y basis • Collection efficiencies was at 93% in Branch-led Net worth 921.5 952.
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 a b c Strong Corporate Governance Experienced Management Team Large Institutional Capital Board Controlled, Management Run 250+ Years of Experience ~$130M Of Equity Raised d e Knowledge Technology Dee
Slide 9: Our Mission: To Solve the Unsolved
Our Mission ‘To Solve the Unsolved’ India’s $600B+ MSME Credit Availability Problem 9
Slide 10: Our Business Model
Our Business Model Distribution Channels Liability Sources Branch Channel | GRO-Plus Traditional Balance Sheet Prime and Micro branches across Tier I to Tier VI Lending using funds from banks; PSL nature of books locations, serving a broad demographic of MSMEs to aid in obtaining bank financing Know
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 comprising 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 comprising 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 & Leadership Team have execution expertise
Founder & Leadership Team have execution expertise of setting-up large institution Shachindra Nath Executive Chairman & Managing Director Experience – ~26 years Anuj Pandey J Sathiayan Pia Shome Sandeep Zanvar Chief Risk Officer Chief Financial & Operations Officer Chief Business Officer Chief Peopl
Slide 17: Large Institutional Capital
Large Institutional Capital Backed by Marquee Institutions & reputed lenders
Slide 18: U GRO has demonstrated a robust growth trajectory
Inspite of several headwinds, U GRO has demonstrated a robust growth trajectory Dec’2017 – Aug’2018 Private Equity Funds U GRO Fund Birth Raised ~Rs 920 crore of Capital from multiple Raise PE investors of global repute Business Jan’2019 Dec’2017 Launch Disbursement started in Jan’2019 Public Market
Slide 19: Backed by strong Equity and Debt Partners
Backed by strong Equity and Debt Partners Shareholding Pattern on a Fully Diluted basis (March-21) Liability Backed by Top Banks & Financial Institutions Promoter Public Sector Banks 2.7% Management ESOPs Others 4.8% 20.8% 20.4% Private Sector Banks Majority of U GRO’s shareholding is institutionall
Slide 20: Knowledge
Knowledge Sector based approach to specialization
Slide 21: Specialized MSME Lenders are better positioned to bridge the Credit Gap
Specialized MSME Lenders are better positioned to bridge the MSME Credit Gap Specialized MSME 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 fi
Slide 22: U GRO Lies 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 23: 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 24: …to arrive at a set of Specialized Sectors
…to arrive at a set of Specialized Sectors Micro-Enterprise is • 8 sectors & Micro Enterprises and their allied 200+ ecosystems a sector in itself • Focus on Micro & Small Businesses clusters in India • ~50% - Contribution of the 8 sectors to the Micro overall MSME lending market in India Enterprise
Slide 25: Sectors further 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 26: GRO Score 2.0 underwriting framework
GRO Score 2.0, a superior underwriting framework, launched to make our selection sharper We are on track to achieve 100% digital underwriting in SME lending Evaluation of Business System Forecasting of repayment assessment using generated future cashflow history transaction data digital PD Gro Score
Slide 27: 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 28: 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 29: 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 30: Technology
Technology Credit Process Enabled by Integrated Technology
Slide 31: 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 32: Technology Platforms
Technology platform to power the multi-pronged distribution channels Platform New Technology Initiatives • Web-portal for DSAs (Onboarding, An uberized distribution model Servicing & Training) GRO-Plus capable of onboarding DSAs, • APIs & Portal for Affiliates (Lead a CAs and other intermediaries Co
Slide 33: Platforms further integrated with rich 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 34: Distribution Network
Distribution Network Creating multi-channel distribution
Slide 35: 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 36: 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 37: 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 Secured >>> 25-250 lacs 75-300 lacs 10-25 lacs 1-25 lacs UnSecured >>> NA 10-25 lacs NA 1-5 lacs 37
Slide 38: 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 39: 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 40: Machinery Finance | Positioned to tap the opportunity
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 41: Partnership Channel | Partner with FinTechs/NBFCs
Partnership Channel | Actively partner with FinTechs/NBFCs to improve c distribution reach We continue to forge partnerships with different FinTechs & NBFCs Online Aggregators B2B Market Place E-Commerce Marketplace Opportunities Feature Particulars Asset Side downstream co-lending with FinTech/ Typ
Slide 42: 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 43: Liability Management
Liability Management Backed by a diverse base of Lenders
Slide 44: Our Liability Strategy | A Tri-Pronged Approach
Our Liability Strategy | A Tri-Pronged Approach Partnerships already signed with Relationship with 29 partners SBI, ICICI Bank and Bank of including Banks, NBFCs & DFIs Baroda • Diverse liability mix to include – all major • Co-origination with larger banks • Policy of actively securitizing the bank
Slide 45: Expanded the lender universe to 29
Expanded the lender universe to 29; continued build-out of liability book Total Sanctions Cost of Borrowing Liability Mix End of Period - Sanctioned Liability IRR based Borrowing Cost* Liability Type by Sanctions (INR Cr) 12.72% as on March 21 (INR Cr) Interest Rate 12.32% 3% 12.00% All-in Cost 5% 1
Slide 46: 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 Secured Business Loans Numbers provided are for illustrative purposes only Original Agreement Signed – Oct’19 Agreement under new co-lendin
Slide 47: Financial & Operating Metrics
Financial & Operating Metrics As of Q4-FY21 and Full Year FY21
Slide 48: Quick update - Q4 FY21 & Full Year FY21
Quick update - Q4 FY21 & Full Year FY21 Disbursements Technology ▪ Prime Branches – Good momentum seen in ▪ End-to-end digitalization of Supply Chain Financing disbursement in Mar-21 implemented ▪ Micro Branches – All branches operationalized by ▪ Closely working with co-lending partners to achieve
Slide 49: Portfolio Trend (1/2)
Portfolio Trend (1/2) Consistent expansion of AUM with strong Equity & Debt support AUM (₹ Cr) Disbursals (₹ Cr) Debt (₹ Cr) & Leverage Ratio 0.80 53% 1,317 80% 2,514 1,127 0.59 782 978 2,065 861 847 1,696 0.42 0.42 562 1,367 1,398 0.28 387 397 257 293 298 368 449 31 Q4FY20 Q1FY21 Q2FY21 Q3FY21 Q4FY
Slide 50: Portfolio Trend (2/2)
Portfolio Trend (2/2) Operating & financials ratios continue to improve as with scale Interest Inc. (₹ Cr) & Portfolio Yield NII (₹Cr) and NIM% Finance Cost (₹ Cr) & Cost of debt* 15.5% 11.6% 11.0% 11.1% 10.7% 14.8% 11.2% 10.3% 14.3% 14.1% 14.4% 10.6% 10.5% 9.1% 43.8 10.4% 38.9 27.1 34.1 22.5 23.8 2
Slide 51: Portfolio Overview
GRO Portfolio Overview
Slide 52: AUM Growth Channel Wise
AUM Growth Channel Wise During the year AUM increased by 52% contributed by all our distribution channel Partnership and Alliances Channel 1,600 Channel Mix Ecosystem Channel Branch-Led Channel 1,317 1,400 13% 1,127 171 1,200 978 139 21% 281 1,000 861 847 140 66% 229 753 800 177 168 182 203 187 170
Slide 53: Portfolio Split (1/2)
Portfolio Split (1/2) Diversified across sectors within each channel Branch-led Sectoral Mix Machinery Finance Sectoral Mix 1% 0% AUM - 864 Cr AUM - 72 Cr Light Engineering 4% 7% Food Processing Light Engineering 11% 23% Education Electrical Equipment Chemical 12% Health care 17% Hospitality 12% Ele
Slide 54: Portfolio Split (2/2)
Portfolio Split (2/2) Book diversified across geography, sectors & secured Geographical Mix* Sectoral Mix* 1% Pin-codes serviced – 2,175 5% Light Engineering 9% 24% Education Electrical Equipment 9% Food Processing <1% 1% 10% Hospitality <1% 20% 15% Chemicals 2% 13% Healthcare 5% 3% <1% 14% Auto Com
Slide 55: Portfolio Provisioning, Collection Efficiency & Restructuring Highlights
Portfolio Provisioning, Collection Efficiency & Restructuring Highlights Collection Efficiency and Bounce rates Restructuring Highlights Mar-21 Figures Collection Efficiency Bounce Rate ▪ Restructured 6.0% (79.5 Cr) of our portfolio as on Mar-21 ▪ Majority of the restructuring was done in the Hospit
Slide 56: Income Statement
Income Statement Income Statement (₹ Cr) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 FY20 FY21 Income Interest Income & Income from Investments 30.78 34.49 38.77 44.44 96.00 148.48 Sale of Services 0.00 0.00 0.02 3.51 8.45 3.53 Other operating revenue 0.00 0.33 0.30 0.71 0.69 1.34 Total Income (A) 30.79 34.82 3
Slide 57: Strategy and Long-Term Goals
Strategy and Long-Term Goals Growth & ROE focus
Slide 58: 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 59: 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 60: 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% ~₹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 Borrowing Co
Slide 61: 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 rahul.agarwal@sgapl.net / vijay.goel@sgapl.net nirav.shah1@ugrocapital.
Slide 62: Appendix
GRO Appendix
Slide 63: Narrowed down Sub-sectors/ecosystem across our 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 64: Growth Potential/Opportunity 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 65: Growth Potential/Opportunity 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 66: Growth Potential/Opportunity 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 67: Growth Potential/Opportunity 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 68: Thank You
THANKYou ©U GRO | CAPITAL | www.ugrocapital.com