Ugro Capital Limited · NSE:UGROCAP
Ugro Capital — Q1 FY22 Earnings Presentation
68 slides from Ugro Capital's earnings presentation, Aug 12, 2021
Slide 1: U GRO Capital Q1 FY22 Earnings Presentation
U GRO Capital | Q1 FY22 Earnings Presentation Tech focused Small Business Lending Platform NSE: UGROCAP | BSE: 511742 Aug 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 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 ₹1,561 Cr* 32* 74% AUM Active Lenders Secured** on Book ₹955 Cr 8,256 392 2.3%/1.9% GNPA / Net Worth Customers Employees NNPA ₹3,105Cr* ₹816 Cr 34 (2,000+)* Cumulative Branches Gross Debt (Pin-codes) Disbursals Demonstrated growth on all fronts despite the disruption caused
Slide 6: Executive Summary
Executive Summary All Fig in ₹ Cr Q1FY22 Q4FY21 Q1FY21 FY21 AUM and Disbursement Credit Costs AUM 1,375 1,317 847 1,317 ▪ AUM stood at ₹1,375 Cr as on Jun’21 (₹847 Cr as ▪ GNPA stood at 2.3% and NNPA stood at 1.9% on Jun’20). ~62% increase on Y-o-Y basis ▪ Collection efficiencies was at 96% in Branc
Slide 7: Disbursement Trend (M-o-M)
Disbursement Trend (M-o-M) Momentum in disbursement picked up in Jun & Jul-21 Disbursement M-o-M Trend till Jul-21 (in ₹Cr) 90 91 115 112 109 142 115 138 196 70 68 193 260 Total Disbursement 90 26 64 23 62 23 1 102 2 2 13 - - 71 56 69 67 42 70 67 54 48 7 8 107 39 58 68 49 59 43 50 39 42 51 48 48 24
Slide 8: AUM Trend (Segment-wise MoM)
AUM Trend (Segment-wise MoM) Strong revival in AUM figures on account of good disbursement momentum observed in Jul-21 AUM M-o-M Trend till Jul-21 (in ₹Cr) 879 931 978 1,023 1,071 1,128 1,171 1,232 1,317 1,307 1,299 1,375 1,561 Total AUM 303 170.47 219 173.77 177.77 153 272 138 138 264 130 282 270 2
Slide 9: U GRO Capital - Overview
GRO U GRO Capital - Overview
Slide 10: 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 11: Our Mission: To Solve the Unsolved
Our Mission ‘To Solve the Unsolved’ India’s $600B+ MSME Credit Availability Problem 11
Slide 12: 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 13: Strong Corporate Governance
Strong Corporate Governance Board led Management run Institution
Slide 14: 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 15: 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 16: 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 17: Experienced Management
Experienced Management Over 250+ years of combined experience
Slide 18: Founder & Leadership Team
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 19: Large Institutional Capital
Large Institutional Capital Backed by Marquee Institutions & reputed lenders
Slide 20: Backed by Marquee Private Equity Funds
Backed by Marquee Private Equity Funds, U GRO has demonstrated a robust growth since its inception Dec’2017 – Aug’2018 Shareholding Pattern on a Fully Diluted basis (March-21) U GRO Raised ~Rs 920 crore of Capital from Promoter Fund Birth multiple PE investors of global repute Raise 2.7% Management
Slide 21: Knowledge
Knowledge Sector based approach to specialization
Slide 22: Specialized MSME Lenders Better Positioned to Bridge 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 23: 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 24: 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 25: 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 26: Sectors narrowed down based on 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 27: 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 28: 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 29: 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 30: 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 31: Technology
Technology Credit Process Enabled by Integrated Technology
Slide 32: Technology essential to 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 33: 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 34: 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 35: Distribution Network
Distribution Network Creating multi-channel distribution
Slide 36: Multi pronged approach led by Offline presence and Tech
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 37: 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 38: Branch Led | Loan Products
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 >>> 50-250 lacs 50-300 lacs 15-75 lacs 1-25 lacs UnSecured >>> NA 10-25 lacs NA 0.5-5 lacs 38
Slide 39: 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 40: 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 & FinTech Partners Addition of financially sound anchors
Slide 41: 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 42: Partnership Channel
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 43: 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 44: Liability Management
Liability Management Backed by a diverse base of Lenders
Slide 45: 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 46: Expanded the lender universe to 32
Expanded the lender universe to 32; 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) Interest Rate as on Jun 21 (INR Cr) All-in Cost 5% 12.72% 4% 12.00% 11.47% 11.3
Slide 47: Co-origination Partnerships with Three Largest Banks
Co-origination Partnerships with Three of the Largest Banks in India Business Commenced 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
Slide 48: Financial & Operating Metrics
Financial & Operating Metrics As of Q1 FY22
Slide 49: Operating & Financial Metrics (1/2)
Operating & Financial Metrics (1/2) Consistent expansion of AUM with strong Equity & Debt support AUM (₹ Cr) Disbursals (₹ Cr) Debt (₹ Cr) & Leverage Ratio 1,375 2,845 0.80 0.84 1,317 2,514 1,127 0.59 782 816 978 2,065 847 1,696 0.42 0.42 1,398 562 387 397 298 368 449 331 31 Q1FY21 Q2FY21 Q3FY21 Q4F
Slide 50: Operating & Financial Metrics (2/2)
Operating & Financial Metrics (2/2) Operating & financials ratios continue to improve as with scale Interest Inc. (₹ Cr) & Portfolio Yield NII (₹Cr) and NIM% 15.8% Finance Cost (₹ Cr) & Cost of debt* 11.1% 15.5% 10.7% 10.3% 9.1% 8.3% 14.8% 49.8 11.2% 14.1% 14.4% 10.6% 10.5% 10.6% 43.8 10.4% 27.1 27.
Slide 51: Portfolio Overview
GRO Portfolio Overview
Slide 52: AUM Growth Channel Wise
AUM Growth Channel Wise AUM growth subdued in Q1 on account of disruption in our operations due to COVID 2nd wave Partnership and Alliances Channel 1,600 Channel Mix Ecosystem Channel 1,375 Branch-Led Channel 1,317 1,400 16% 219 1,127 171 1,200 978 139 264 19% 281 1,000 861 847 140 65% 229 177 800 1
Slide 53: Portfolio Sector Snapshot | AUM
Portfolio Sector Snapshot | AUM Branch-led Sectoral Mix Machinery Finance Sectoral Mix 1% 1% AUM - 893 Cr 4% 2% AUM - 83 Cr Light Engineering 7% Light Engineering Food Processing 25% Electrical Equipment 11% Education Auto Components Chemicals 11% Healthcare Hospitality 17% 12% Electrical Equipment
Slide 54: Portfolio Region Snapshot | AUM
Portfolio Region Snapshot | AUM Geographical Mix* Sectoral Mix* 1% Pin-codes serviced - 2325 5% Light Engineering 8% Food Processing <1% 29% Electrical Equipment 9% <1% <1% Education <1% 9% Chemicals <1% 20% 3% Hospitality <1% <1% 12% 14% Healthcare <1% Auto Components 5% 1% <1% 13% <1% Micro Enterp
Slide 55: Provisioning, Collection Efficiency & Restructuring Highlights
Portfolio Provisioning, Collection Efficiency & Restructuring Highlights Collection Efficiency and Bounce rates Restructuring Highlights ▪ Restructured 7.5% (103.2 Cr) of our portfolio as on Jun-21. 67% of the restructured pool Jun-21 Figures Collection Efficiency Bounce Rate was current as of Jun-2
Slide 56: Financials | Income Statement & Balance Sheet
Financials | Income Statement & Balance Sheet Income Statement (₹ Cr) Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 FY21 Balance Sheet (₹ Cr) FY20 FY21 Income Financial Assets 1,144.33 1,656.89 Interest Income & Income from Investments 34.49 38.77 44.44 50.72 148.48 Loans 832.30 1,278.81 Sale of Services 0.00 0.0
Slide 57: Strategy and Long-Term Goals
Strategy and Long-Term Goals Growth & ROE focus
Slide 58: 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 Chief Strategy Officer & Head of Investor Relations rahul.agarwal@sgapl.net / vijay.goel@sgap
Slide 62: Appendix
GRO Appendix
Slide 63: Narrowed down Sub-sectors/ecosystem 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 64: 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 65: 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 66: 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 67: 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 68: Thank You
THANKYou ©U GRO | CAPITAL | www.ugrocapital.com