Ugro Capital Limited · NSE:UGROCAP
Ugro Capital — Q3 FY2022 Earnings Presentation
74 slides from Ugro Capital's earnings presentation, Feb 9, 2022
Slide 1: U GRO Capital Q3 & 9M FY22 Investor Presentation
U GRO Capital | Q3 & 9M FY22 Investor Presentation Catalyzing the future of credit access for MSMEs NSE: UGROCAP | BSE: 511742 February 9th , 2022 Slide 1
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 07 Our Governance & Team 02 Operating & Financial Metrics 08 Portfolio Overview 03 Changing landscape in MSME 09 Update on Financials Underwriting 04 Method to madness 10 Mission 2025 – 1 Mn Customers; 1% MSME Market Share 05 How we are reaching to customers 11
Slide 4: Executive Summary
GRO Executive Summary Slide 4
Slide 5: UGRO Capital – Who we are
UGRO Capital – Who we are Experienced Management Team A highly specialized, technology focused listed 250+ Years of Experience small business lending platform Strong Corporate Governance Board Controlled, Management Run Knowledge Technology Large Institutional Capital Deep domain expertise of target
Slide 6: UGRO Capital – Our Mission and Vision
UGRO Capital – Our Mission and Vision Mission: ‘To Solve the Unsolved’ India’s $600B+ SME Credit Availability Problem We aspire to capture 1% market share of the total MSME lending market by 2025 Slide 6
Slide 7: UGRO Capital – Journey since inception
UGRO Capital – Journey since inception 2,589 Cr 1,375 Cr 861 Cr 79 Cr Mar’19 Mar’20 Jun’21 Dec’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 8: Disbursement Trend (Segment-wise M-o-M)
Disbursement Trend (Segment-wise M-o-M) Disbursement M-o-M Trend till Dec-21 (in ₹Cr) 142 115 138 196 70 68 193 260 243 288 320 319 414 87 Total Disbursement (including SCF) 34 62 65 51 15 20 16 120 90 54 74 70 26 21 77 23 20 64 5 13 57 46 23 10 15 9 82 10 7 8 61 169 173 54 58 144 163 44 1 122 5 107
Slide 9: AUM Trend (Segment-wise M-o-M)
AUM Trend (Segment-wise M-o-M) AUM M-o-M Trend till Dec-21 (in ₹Cr) 1,128 1,171 1,232 1,317 1,307 1,299 1,375 1,564 1,729 1,933 2,140 2,335 2,589 Total AUM 524 454 416 183 130% 375 150 259 132 233 340 120 302 235 105 215 170 174 178 219 87 153 197 138 138 52 72 71 74 83 188 34 43 210 199 189 181 188
Slide 10: We continue to build as per plan
We continue to build as per plan Metric ₹2,589 Cr 50 77% AUM Active Lenders Secured** on Book ₹959 Cr 16,594 1,059 2.4%/2.0% Employees* GNPA1 / Net Worth Customers NNPA ₹4,689 Cr ₹1,764 Cr 85 Cumulative Gross Branches^ Disbursals Debt Data as of 31st Dec 2021 *Data as of Jan 2022 **Includes quasi-se
Slide 11: Executive Summary – We have scaled up across all parameters
Executive Summary – We have scaled up across all parameters All Fig in ₹ Cr Q1FY22 Q2FY22 Q3FY22 9MFY21 9MFY22 AUM 1,375 40.6% 1,933 33.9% 2,589 1,127 129.7% 2,589 Gross Disbursements 331 139.0% 791 33.1% 1,053 697 212.1% 2,175 Net worth 955 0.3% 958 0.1% 959 950 0.9% 959 Branches 34 61.8% 55 49.1%
Slide 12: Operating & Financial Metrics
Operating & Financial Metrics Slide 12
Slide 13: Operating & Financial Metrics (1/2)
Operating & Financial Metrics (1/2) Consistent expansion of AUM with strong Equity & Debt support AUM (INR Cr) Disbursals (INR Cr) Gross to Net Disbursement Bridge (INR Cr)* 2,589 4,689 11 1,933 3,636 264 220 2,845 176 1,317 1,375 2,514 1,127 2,065 778 657 791 1,053 368 449 331 Disbursement Portfoli
Slide 14: Operating & Financial Metrics (2/2)
Operating & Financial Metrics (2/2) Operating & financials ratios continue to improve with scale Interest Income (INR Cr) & Portfolio Yield$ Finance Cost (INR Cr) & Cost of Debt* NII (INR Cr) and NIM%^ 8.8% 8.1% 7.9% 14.8% 15.5% 15.8% 15.7% 16.0% 7.3% 7.6% 10.5% 10.4% 10.6% 10.2% 10.1% 77.9 31.6 58.
Slide 15: Changing landscape in MSME underwriting
Changing landscape in MSME underwriting Underwriting in MSME space is moving from collateral based to cashflow based Slide 15
Slide 16: 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 17: 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 Middle Layer - Represents the To manage electronic data consent and digitized solutions built by Fintech facilitate data exchange between
Slide 18: 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 a) Risk assessment Borrowers Loan Service Provider b) Loan Monitoring Accoun
Slide 19: 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 20: 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 21: 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 Slide 21
Slide 22: Method to madness
Method to madness Bringing homogeneity to a non-homogeneous Sector Slide 22
Slide 23: Our beginning: How we started - 2019
Our beginning: How we started - 2019 Slide 23
Slide 24: 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 25: …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 26: … and further narrowed down based on their ecosystems
… and further narrowed down based on their ecosystems Key sub-sectors: General nursing Key sub-sectors: K-12 schools, play Key sub-sectors: Dyes and homes, eye clinics, dental clinics, schools pigments, bulk and polymers, diagnostic labs, Key clusters: NCR, Mumbai, agrochemicals radiology/pathology
Slide 27: “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 subsectors, and Parameter Factor Weightage can vary
Slide 28: …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 Developed basis strong fundamentals Sector Specific Score Cards • Commercial bureau presence used for scorecard development Look alike Custom
Slide 29: Our acceleration: How have we evolved - 2021
Our acceleration: How have we evolved - 2021 Slide 29
Slide 30: 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 31: 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 32: How we are reaching to customers
How we are reaching to customers Vast geography, varying needs, multiple sources of origination Slide 32
Slide 33: 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 through Intermediate channel ecosystem financing of Supply Cha
Slide 34: Branch Led | Network of 82 Branches spread across the country
a Branch Led | Network of 82 Branches spread across the country Total 82 Branches as on Dec-21 Prime Loan Branches Head Office Prime Loan Branches • 14 Branches across 8 states in top metro cities Micro Loan Branches Major Clusters # • Locations identified through SME cluster analysis Jaipur 5 and p
Slide 35: Branch Led | Loan products curated to service entire pyramid of borrowers
a Branch Led | Loan products curated to service 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 15-75
Slide 36: Supply Chain Finance | Product Overview
b Supply Chain Finance | Product Overview Ecosystem channel for Supply Chain Financing Products Anchor Led Non-Anchor Led Vendor Financing Sales Invoice ▪ No corporate acceptance required Discounting ▪ Downloadable app for invoice level management ▪ Seamless virtual escrow account Distributor / Deal
Slide 37: Supply Chain Finance | Anchor Led Approach Overview
b Supply Chain Finance I Anchor Led Approach Overview 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
Slide 38: Ability to build and manage e-market platforms like GeM Sahay
b 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
Slide 39: Machinery Finance | Positioned to tap opportunity across value chain
b Machinery Finance I Positioned to tap opportunity across 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 OEMs as U GRO’s Leads Dealership Driven Sales Repeat Purchase ❖ Light E
Slide 40: Partnership Channel | Actively partner with FinTech's/NBFCs
c Partnership Channel | Actively partner with FinTech's/NBFCs to improve distribution reach Highly customized, API driven tech platform for large and emerging lending institutions to collaborate on upstream and downstream activities while leveraging GRO score Online E-commerce Aggregators Market Pla
Slide 41: Direct Digital – GRO Direct | Innovation-Driven Digital Lending Platform
d Direct Digital – GRO Direct| 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 ▪ Completely Digital Customer Servicing Product Development ▪ No r
Slide 42: 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, CAs FinTechs live in beta phase in and other intermedi
Slide 43: 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 customer Distribution
Slide 44: “Zero Data Loss” – Captures end to end data
“Zero Data Loss” – Captures end to end data to enable deeper adoption of analytics ..ingested through ..enabling data driven end 360-degree data from all stages of borrower life cycle… source systems into Data Lake use Bureau, Fin, Credit On boarding Policy / Demographics Banking & Enterprise report
Slide 45: How we are funding our customers’ need
How we are funding our customers’ need Backed by large institution equity and debt Slide 45
Slide 46: Backed by marquee Private Equity Funds
Backed by marquee Private Equity Funds Shareholding Pattern on a Fully Diluted basis (Dec-21) Promoter Management ESOPs Others 2.7% 4.8% 15.9% Individuals 11.3% 20.4% 12.5% 20.4% 12.0% Chhattisgarh Investments Majority of U GRO’s shareholding is institutionally owned Slide 46
Slide 47: Tri-Pronged on the liability side: Lending as a Service
Tri-Pronged on the liability side: Lending as a Service • Relationship with 50 partners including • Partnerships already signed with Bank of • Policy of actively securitizing the loan book Banks, NBFCs & DFIs Baroda, IDBI Bank, SBI and Central Bank of to ensure that the mismatch in the greater India
Slide 48: Expanded lender universe to 50; Continued build-out of liability book
Expanded lender universe to 50; Continued build-out of liability book Total Liabilities Cost of Borrowing Liability Mix Total Liabilities (INR Cr) IRR based Borrowing Cost Liability Outstanding (Dec'21) 14 22 29 32 37 50 Interest Rate 5% All-in Cost 9% Count of Lenders 1,929 11.47% 11.44% 11.35% 9%
Slide 49: Building India’s largest Co – Lending platform: Lending as Service
Building India’s largest Co – Lending platform: Lending as Service Co-Lending is a value accretive strategy ▪ Secured Business Loans ▪ Original Agreement Signed – Oct’19 ▪ Agreement under new co-lending regulation – Jun’21 Example of Co-Lending Model Numbers provided are for illustrative purposes on
Slide 50: Our Governance & Team
Our Governance & Team Financial Services succeed only because of quality of Governance and tenacity of management teams Slide 50
Slide 51: 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 52: Board Members comprises of diverse industry experience (1/2)
Board Members comprises of diverse industry experience (1/2) S. Karuppasamy - Chairman, Compliance Satyananda Mishra – Chairman, CSR Committee Committee ▪ Ex-Chairman, MCX, Ex-CIC, GoI, Ex-Director - SIDBI ▪ Ex-Executive Director, RBI ▪ Over 40 years with the IAS (Batch of 1973) ▪ Over 40 years of e
Slide 53: Board Members comprises of diverse industry experience (2/2)
Board Members comprises of diverse industry experience (2/2) Amit Gupta (New Quest Nominee) Chetan Gupta (Samena Nominee) ▪ Founding Partner of NewQuest ▪ Managing Director at Samena Capital ▪ Was the Non-Executive Director of Ujjivan Financial Services Limited ▪ Board Member of RAK Logistics, Softl
Slide 54: 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 55: 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 56: Portfolio Overview
Portfolio Overview Slide 56
Slide 57: AUM Growth Channel Wise
AUM Growth Channel Wise Partnership and Alliances Channel 3,000 Channel Mix Ecosystem Channel (Machinery + Supply Chain Fin) 2,589 Partnership & Alliances 20% Branch-Led Channel (Prime + Micro) 2,500 523 Machinery Loans 1,933 2,000 7% Prime 442 Loans 375 Supply Chain Fin 60% 1,317 1,375 1,500 10% 33
Slide 58: Portfolio Region Snapshot | AUM (as of Dec’21)
Portfolio Region Snapshot | AUM (as of Dec’21) Geographical Mix Sectoral Mix Light Engineering Food Processing 18% 19% Electrical Equipment Education <1% 12% Chemicals Hospitality 19% 1% 18% <1% 1% 7% Healthcare Auto Components <1% 6% 3% 6% 4% 6% Micro Enterprises Other MSME 8% 1% <1% <1% 1% <1% 10%
Slide 59: Portfolio Sector Snapshot | AUM (as of Dec-21)
Portfolio Sector Snapshot | AUM (as of Dec-21) Branch-Led Sectoral Mix (AUM : 1,624 Cr) Machinery Finance Sectoral Mix (AUM : 183 Cr) 4% 19% 20% Light Engineering Food Processing 20% 1% Light Engineering Electrical Equipment 5% Education Healthcare 7% 16% Chemicals Hospitality 7% Auto Components Hea
Slide 60: Portfolio Provisioning, Collection Efficiency & Restructuring Highlights
Portfolio Provisioning, Collection Efficiency & Restructuring Highlights Collection Efficiency and Bounce rates ▪ Restructured 5.3% (136.4 Cr) of our portfolio as on Dec-21. 85% of the restructured pool was current as of Dec-21 Dec-21 Figures Collection Efficiency Bounce Rate ▪ Majority of the restr
Slide 61: Update on Financials (Q3 & 9M FY22)
Update on Financials (Q3 & 9M FY22 ) Slide 61
Slide 62: Financials | Income Statement & Balance Sheet
Financials | Income Statement & Balance Sheet Income Statement (₹ Cr) FY21 Q1 FY22 Q2 FY22 Q3 FY22 9M FY22 Balance Sheet (₹ Cr) FY21 9M FY22 Income Financial Assets 1,656.9 2,659.9 Interest Income & income from investment 148.5 50.7 60.6 79.7 190.9 Loans 1,278.8 2,350.7 Sale of Services 3.5 - 1.0 3.
Slide 63: Mission 2025 – 1 Mn Customers; 1% MSME Market Share
Mission 2025 – 1 Mn Customers; 1% MSME Market Share AUM : INR 20,000 Crores Slide 63
Slide 64: 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 65: 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 68 currently • Enter into multiple BC partnerships for low capex/ opex model Ramp up the Ecosystem Network Ecosystem • Penetrating existing network of An
Slide 66: 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% ~₹119 bn ~₹200 bn Cross-sell 0.2-0.5% 5th Year AUM at the end of Co-lending/Assignment Income 0.4-0.6% Disbursals 5th Year Other income 0.5-1% Interest on cash 0.5-1% 16.3% Interest Yield Total Income 17.5-19.5% 9.5% Bor
Slide 67: UGRO Impact
GRO UGRO Impact Slide 67
Slide 68: UGRO Capital is addressing the US$ 300bn credit gap in the MSME sector
UGRO Capital is addressing the US$ 300bn credit gap in the MSME sector US$300B | MSME Credit Gap 30% 50% $B (2019) (Proj. 2024) Potential Addressable Credit Gap: MSME Contribution to India’s GDP $304.4B growing at 7%+ per annum 41.4 10.0 642.9 111M 150M 338.5 287.1 (2019) (Proj. 2024) Number of Peop
Slide 69: UGRO Capital is making concerted effort towards multiple SDGs
UGRO Capital is making concerted effort towards multiple SDGs MSME sector contributes significantly to the economic and social development of our country by fostering entrepreneurial spirit and self- employment aligning to the United Nations SDG’s – 8,9 and 10 MSME alignment SDGs • MSMEs are a key c
Slide 70: UGRO Capital – SDG contribution through sectorial lending approach
UGRO Capital – SDG contribution through sectorial lending approach 8 sectors & 200+ Ecosystem representing ~50% of the total MSME Lending market Healthcare Auto Components (8% of H1’22 AUM) Education Chemicals (10% of H1’22 AUM) Food Processing / Hospitality FMCG Electrical Equipment Light Engineeri
Slide 71: UGRO Capital – Organizational Impact Framework
UGRO Capital – Organizational Impact Framework Employment Generation Customer Type • Direct Employment generation at organizational level • Focusing on equitable distribution of credit by • Indirect job creation by lending to MSMEs (housing penetrating up to tier 6 cities for Micro funding 42% of to
Slide 72: UGRO Capital – Organizational Impact Numbers
UGRO Capital – Organizational Impact Numbers 3,200+ Pin codes 11,000+ ~1800 Spread of Current Loan Book MSME Customers as on date Loans extended to Micro Enterprise 10% 8% ~300,000 AUM in Education Sector AUM in Healthcare Sector Employment Supported Slide 72
Slide 73: UGRO Capital – Mission 2025
UGRO Capital – Mission 2025 1% 1 Mn+ 2 Mn+ Market share of MSME lending space MSMEs to be supported through various Jobs to be directly supported through that U GRO will capture by FY25 loan products our debt funding 600,000+ 0.4% ~1 Mn+ Women jobs to be directly supported GDP contribution of the MS
Slide 74: Thank You
Thank You Contact Information : Investorrelations@ugrocapital.com / krunal@cap-ir.com www.ugrocapital.com Slide 74