U GRO Capital | An Overview August 2020
The Indian SME Lending Market A large yet untapped market opportunity 2
Small Businesses in India Face a Severe Credit Availability Problem US$300 B | SME Credit Gap 29% 50% (2019) (Proj. 2024) Potential Addressable Credit Gap: MSME Contribution to India’s GDP ₹ 21.3 T growing at 7%+ per annum 111M 150M ₹ T 0.7 2.9 (2019) (Proj. 2024) 45.0 Number of People Employed by MSMEs in India 23.7 20.1 The Government of India has proposed the above aggressive growth targets for the MSME space and has installed significant incentives for Indian MSMEs. These include a favorable tax regime, interest Banks NBFCs Other Total Formal Total subvention, and the MUDRA and CGSTME schemes . institutions Supply Addressable Demand 60M $560B 10% MSMEs in India Gross Value Add MSMEs with Access to Credit The Indian Government is looking to bolster the MSME sector to greatly increase financial inclusion | The MSME Credit Gap is a barrier to growth and inclusion in the MSME space | U GRO is targeting the Credit Gap using an innovative mix of Knowledge + Technology 3
Traditional Lenders remain unfocused on SMEs due to Business Model Diversity Challenges in lending to the SME segment… ? Difficult to understand Fragmented set of High cost of customer High dependence on Lack of businesses/cash flows customers acquisition the ecosystem data Traditional Lenders continue to find mid market and large corporate more rewarding – not necessarily true!! …leading to a Frustrating Borrowing Experience for Small Businesses Time consuming Non-tailored credit Rigid collateral Product mismatch offline process assessment requirements 4
Specialized SME Lenders are Better Positioned to Bridge the SME Credit Gap Specialized SME 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 financing, unsecured loans chain financing capacity/ frequency of underlying customer Omnichannel Distribution Branch/DSA led Branch/DSA led Ecosystem based lending Sector specific approach, One size fits all One size fits all Credit Appraisal Cash Flow Based Collateral/Bureau score Collateral/Bureau score Automated Review Turn-Around Time 4-5 days 15-20 days 30-45 days Combining traditional and non- traditional sources. Use of Financial Statements, P&L Project Reports. Projected Documentation information available in public and Account, Balance Sheets, Bank financials, Bank Statements. private domains. Digital document Statements submission 5
Technology is Essential to Achieve a Specialized Model at Scale CREDIT UNDERWRITING DISTRIBUTION ▪ Access and process the large trove of private and public data ▪ Quick and easy integration with distribution partners ▪ Centralize underwriting knowledge ▪ Paperless login enabled by API integrations and OCR ▪ Customized scorecards ▪ Lower turn-around time ▪ Automate processes to reduce errors and increase throughput ▪ Faster product launches and process iterations ▪ Access and analyze surrogate data ▪ Direct to customer interface and pre-approved programs | Better Assessment | Shorter TAT | Personalized Customer Journeys | COLLECTIONS OPERATIONS ▪ Automated, analytics led early warning systems ▪ Comprehensive notification/trigger mechanism for best-in-class ▪ Cash less EMI collections client servicing ▪ Geo-tagging of customers ▪ Banking integration for automated disbursement, deductions ▪ Digital self service and support ▪ Digital process enablers such as eSign, eKYC, eStamping ▪ Processing at scale Technology has created a new breed of fin-tech lenders in India | Digital lending to increase 10-15 times by 2023, scaling up to ~$100B in annual disbursements 6
U GRO Lies at the Intersection of Technology Focused and Specialized NBFCs… Specialized NBFCs Fintech Platforms Sector Specialization Supply Chain Platforms ▪ ▪ Scale a challenge High credit costs Product Specialization Digital Lenders ▪ ▪ Liability challenged Restricted to niches ▪ ▪ Opex heavy models Mostly loss making Geographical Specialization Off-Balance Sheet Lenders U GRO intends to create a specialized, scalable platform optimized for end-to-end lending 7
…Leveraging the Best of Both Worlds to Create a Truly Scalable Lending Model Alternative – Fin-Tech Traditional – Fin-Touch Traditional credit assessment models like Alternate credit assessment models CIBIL scores leveraging analytics + publicly available data Leverage technology to automate processes Physical processes such as visits to customers thus reducing manual errors Adopting a hybrid model Focus on collateral driven lending Unsecured credit solutions comprising best practices of traditional lenders and modern fin-tech companies Limited to term loans Variety of loan products 8
The U GRO Incarnation The Assimilation of Aspirations 9
Our Mission ‘To Solve the Unsolved’ India’s $600B+ SME Credit Availability Problem 10
U GRO Capital | Who We Are Experienced Management Team 250+ Years of Experience A highly specialized, technology enabled small business lending Strong Corporate Governance platform Board Controlled, Management Run Knowledge Technology Deep domain expertise of A scalable, data driven Large Institutional Capital target segments to better approach to ensure ~₹920 Cr Of Equity Raised understand the customer dissemination of knowledge 11
Founder With Experience Creating Institutions Across Financial Services… Mr. Shachindra Nath Executive Chairman and Managing Director 26 years of experience in creating institutions across the financial services domain Lending Capital Markets Asset Management Insurance SME Lending Asset Management Life Insurance Retail Broking Built India’s 4th largest Non - Largest alternative asset Created a platform with over Life insurance JV with AEGON ▪ Core pillar of Religare’s Banking Finance business, management out of India : 1,350 points of presence NV of the Netherlands successful growth journey focused on SMEs with a book Over $ 21 B of AUM with across India ▪ 6-year stint as the Group- size of over USD 2.3 billion presence across the US, Health Insurance CEO of Religare Enterprise Europe, Asia and Africa One of India’s first specialized Wealth Management Housing Finance JV with Macquarie providing health insurance companies ▪ Transitioned the company Started the housing finance Marquee funds included wealth management solutions from an operating loss of arm focused on funding the Northgate, IBOF, Landmark to ultra HNI clients ~USD 80 million in 2013 to affordable housing segment Partners and Quadria Capital USD 50 million of net profitability in 2016 Investment Banking Mid-market focused ▪ Presented the “CEO of the institutional equities and Year” award at the Asia investment banking platform Banking, Financial Services & Insurance Excellence with presence in 8 countries Awards in August 2015 ▪ Started his entrepreneurial Key Exits: Sale of the life insurance stake to Aegon, sale of the mutual fund business to Invesco, sale of Northgate to TCP, sale of journey in 2016. Landmark Partners to the management team 12
…Supported by a Leadership Team With a Strong Track Record of Execution… Abhijit Ghosh CEO and Whole Time Director AUM Managed: ₹ 180 B Kalpesh Ojha J Sathiayan Anuj Pandey Chief Financial Officer Chief Business Officer Chief Operating Officer Liability Raised: ₹ 700 B AUM Managed: ₹ 80 B AUM Managed: ₹ 120 B Manish Agarwal Sunil Lotke Rajni Khurana Chief Risk Officer Chief Officer – Legal & Compliance Chief Human Resources Officer AUM Managed: ₹ 1,200 B AUM Managed: NA AUM Managed: NA Fully 4/5 Deep and 172 formed Rated large ESOP employee count team employees pool 13
Strong Corporate Governance Framework Enshrined in the Articles… ▪ ▪ High degree of regulatory oversight and transparency Deloitte appointed as the statutory auditor and PWC appointed as the internal auditor ▪ An institution created with a long-term view , designed for continued operational efficiency ▪ Access to permanent capital ▪ ▪ Any proposed loan > 1% of net worth or to a related party to Independent directors to comprise majority for perpetuity require unanimous approval of ALCO and the Board ▪ Any shareholder holding >10% to qualify for a board seat ▪ Board approved multi-layer credit authority delegation ▪ Key committees to be headed by an independent member ▪ Removal of key management (including CRO, CFO) to with required credentials require 3/4th board approval ▪ The majority of the NRC, ALCO and Audit Committees to ▪ Any significant action by the Company to need 3/4 th comprise of independent directors approval of the Board Special Resolution of Shareholders required for effecting any changes to the AoA Promoters/Management do not have unfettered rights to divert business strategy 14
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