U Gro Capital | An Overview December 2018
Executive Summary U Gro Capital – An Overview Sector Focused Approach To Lending A systemically important, non-deposit taking NBFC Auto components Chemicals focused on providing loans to small businesses in Education U Gro’s philosophy the prime/near prime segments Electrical equipment on product design, and components credit appraisal and Management team with a collective experience of Food processing/ distribution are 150+ years FMCG Healthcare aligned to these Hospitality sectors Capital base of more than INR 950 Cr Light engineering 8 38 5 Year Projected Loan book of more than INR 14,000 Sectors Sub sectors Cr Secured Loans Traditional Channels New Channels Interest Rate - 10.5%-12% Direct Sales Agents Digital Channels (Ticket size - INR 50 lakhs to 5 Cr) (leverage 3 rd party and (operating in target Unsecured Loans segments / own platforms for lead Interest Rate - 16% -19% geographies) sourcing) (Ticket size - INR 10 lakhs to 50 lakhs) Supply chain financing Branch Sales Team Industry Partnerships Interest Rate - 13%-15% (Customer acquisition (prioritized segments) (Ticket size - INR 3 lakhs to 30 lakhs) through outreach / walk-ins) Offerings are customized based on selected sectors Co-lending with NBFCs Product offerings Distribution Strategy 2
Key Highlights SME lending represents a large but underpenetrated market opportunity Lending to SME expected to reach USD 600 Bn by FY23 Highly underpenetrated market – Although, MSMEs account for 45% of the Indian Industrial output, only 14% of these companies have access to credit Experienced management team with a strong track record of execution Started by Shachindra Nath, professional turned entrepreneur Management team with a collective experience of 150+ years at large organizations like Barclays, ICICI, Yes Bank Clearly defined and differentiated execution road-map Sector focused lending -> Distribution, product, credit appraisal and portfolio strategy to be aligned to eight selected sectors Asset build up to be driven by the liability strategy Leveraging fin-touch and fin-tech to create a truly differentiated lending platform Well-capitalized NBFC with a proven track-record of raising capital from diverse sources Initial capital infusion of more than INR 950 Cr Ability to raise capital from diverse sources - Initial fund raise from large PE funds like PAG, ADV, NewQuest, Samena, public market funds like IndGrowth, Abakkus, insurance firms, family offices and HNIs Strong governance mechanisms in place to ensure ‘sustainable’ growth A management-driven, board-run company with high levels of corporate governance with a majority independent, experienced board who have held senior leadership positions at SIDBI, SEBI, ICRA and RBI A strong corporate governance code which has been incorporated into the articles of association 3
About U Gro Capital 4
Our Mission To Solve the Unsolved India’s USD 600 Bn SME Credit Availability Problem 5
Our Customer Small business with a revenue of INR 2 to 200 Cr Education Chemicals Healthcare Operating in one of U Gro’s eight selected sectors Minimum business vintage of 3 years Electrical equipment Hospitality and components Prime/ Near Prime segment with a prior borrowing history Capital needed for either business expansion, purchase of machinery or to fulfil working capital requirements Auto components Food processing/FMCG Light engineering 6
Our Execution Strategy Asset Strategy Liability Strategy Strong presence in targeted customer segments Liability led asset strategy Acquire through a carefully thought over mix of Build a granular, diversified, largely secured channels aligned to sectors portfolio before moving to unsecured lending Enhance RoE progressively by increasing leverage Product portfolio based on customer needs Tailor products to match characteristics (collateral, Knowledge Active engagement with stakeholders cash flows) of underlying sectors Enhance ratings through close partnerships with Mix of own and third party products rating agencies and by creating a diverse and secure lending book Credit underwriting driven by deep segment Early conversations with banks to secure debt and understanding co-lending partnerships Leverage ‘data’ through an API led strategy Access new sources of finance, based on tailored Technology asset book. e.g. Multilateral agencies like IFC, SIDBI, Proprietary statiscal and expert scorecards etc. Differentiated customer service enabled through a digital platform Digitize and digitalize to improve service delivery 7
Our Journey First Round of Preferential Qualified Institutional Placement Formation of Chokhani Securities 1994 - 2017 Dec, 2017 Allotment Aug, 2018 1994 : Formation of Chokhani Raised INR 435 Cr of capital from Raised INR 112 Cr of capital from Securities global private equity firms - ADV public market funds, insurance 1995 : Listing of Chokhani Securities Partners, NewQuest and IndGrowth companies and private equity funds 2004-Present: 14 year track-record of profitability Disbursements Acquisition of Chokhani Securities May, 2018 to begin in (later renamed as UGro Capital) by Dec, 2017 Shachindra Nath followed by a January revamp of the management team Approval for the demerger of the Raised INR 192 Cr of capital from lending business of Asia Pragati – large family offices / HNIs through a INR 175 Cr preferential allotment of shares Reinvigoration of Chokhani Second Round of Preferential Securities Allotment | One of the only companies in the lending space to start with INR 950+ Cr of capital | The listed company structure provides access to permanent source of capital | 8
SME lending represents a large but underpenetrated market opportunity 9
SME Lending | A large underserved opportunity With most SMEs depending on either self India lags behind other emerging markets when financing or informal channels it comes to credit access for MSMEs 120% Source of SME financing % of MSMEs that have access to credit 31% 100% 30% 18% 16% 16% Family 14% 14% 80% Savings 70% of the market is still funded Family 60% India Mexico Malaysia Russia Argentina Brazil Poland Business through the equity of the 40% Own Savings Although MSMEs account for 45% of the Indian The SME financing opportunity is large owner/family Self - Equity Industrial output – the segment has been starved for 20% Debt - Formal capital from formal sources Expected to become a USD 600+ Bn market Sources 0% Category 1 616 CAGR 17% NBFCs have been stepping in to fill the need 237 Fragmented market with very few specialised gap in the market players FY16 FY18 SME lending market share FY17 FY23P US$ Bn IndiaBulls LIC HF DHFL Shriram City Union Private HDFC Cholamandalam Bajaj Finance Capital First PSU banks PNB HF Others banks NBFC NBFC Category 1 PSU Private banks banks Market dominated by large LAP providers and diversified Diversified geographical presence and more NBFCs – Absence of players with specialized focus on the specialized assessment ability provide NBFCs the SME segment competitive advantage 10
Experienced management team with a strong track record of execution 11
Reputed founder backed by marquee private equity funds Shachindra Nath Executive Chairman and Managing Director After 26 years of working with large corporates, Mr. Nath decided to embark on his entrepreneurship journey by acquiring control of a listed NBFC - Chokhani Securities Limited As the Group CEO of Religare from 2010, he had led the entire integrated financial services business of the group - SME focused lending, Retail Broking, Life Insurance, Health Insurance, Mutual Funds, Capital Markets, Investment Banking and Asset Management Some of his marquee achievements include successfully leading the IPO process for Religare in 2007, establishing new businesses as well as stitching successful joint ventures and partnerships together with global financial services firms Mr. Nath is a qualified lawyer and a University Rank holder from the Banaras Hindu University (India) Key Investors 12
Recommend
More recommend
