Well-Capitalized Fintech Lending Platform for Small Businesses.
Multibagger Stock Idea of Sep'21 : "Ugro Capital Ltd" ~ Tech focused Small Business Lending Platform.
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🌟🌟🌟 Ugro Capital Ltd (BSE:511742 | NSE:UGROCAP) 🌟🌟🌟
🏆🏆🏆 Market Cap ~ 900 Cr | Well-Capitalized Fintech Lending Platform for Small Businesses | AUM = 1729 Cr (Aug'21) -> 3500 Cr (Expected) by Mar'22 | Sales/Profit Growth (3Y): 252% & 113% | PEG ~ 0.55 & P/B < 1 | Trusted, Efficient, Committed & Visionary Management.
✅ The Story of "Professional Turned Entrepreneur" - Shachindra Nath, Executive Chairman and MD, Ugro Capital ✅
👉 U GRO Capital was instituted by Mr. Shachindra Nath (erstwhile Group-CEO of Religare Enterprise), with the buyout of Chokhani Securities Limited.
👉 This NBFC startup was founded by Shachindra Nath on July 5th, 2018 with a vision to reinvigorate it as an SME & MSME focused financing platform catering to select sub-sectors within the market.
👉 The Company has raised INR 950 Crores of Equity Capital from a diversified set of investors including 4 large private equity funds – PAG, ADV Partners, Samena Capital and NewQuest, public market funds such as Abakkus, IndGrowth, Chattisgarh Investments and multiple family offices/HNIs.
👉 Company name and philosophy (“Know More, Grow More”) says it all – We exist to enable U (the small business owner) to grow and believe that growth is a by-product of the right kind of knowledge.
👉 U GRO Capital is a highly specialized, technology-enabled lending platform – specifically designed to solve the credit availability issue.
👉 U GRO Capital aims to bridge the gap for growth in SME’s across 8 high potential sectors like Auto Components, Chemicals, Education, Electrical equipment and components, Food processing & FMCG, Hospitality, Healthcare and Light engineering.
✅ Mission of “Solving the unsolved” – the SME credit availability problem in the country. ✅
👉 The MSME/SME lending market in India is large (As per FICCI 87% of MSME in India do not have access to credit), it has a market opportunity of USD 600 Bn.
👉 MSME sector is the backbone of the Indian Economy as it contributes to 30% of the country’s GDP. Out of the estimated market of $600 Bn, only $250 Bn is currently served by the formal lending market.
👉 FY25E AUM target of Rs 20,000 Crores; ~70% contribution from Branch led channels led by Pratham, Sanjeevani, Saathi & Micro-Enterprise product.
👉 Partnerships and Alliances to remain a key distribution channel with ~15% contribution to total disbursals by FY25E; Digital channel disbursals to grow substantially over the next 5 years
👉 U GRO Lies at the intersection of Specialized NBFCs and FinTechs. GRO platform generates a go/no decision on the basis of statistical algorithms, data pulled out from API integrations and complex bank/GST/bureau analyzers running in the background. The entire process is automated and there is no manual intervention. The GRO platform takes only 10-45 min to take the decision.
✅ Backed by Marquee Private Equity Funds, supervised by an Independent Board composed of Industry luminaries. ✅
👉 This model of acquiring a small, listed company and raising significant capital to build a FinTech platform was an industry first conceptualization. In most cases, the benefit of value creation through early-stage formation is only available to private investors. This distinctive model was adopted by U GRO Capital to provide the similar benefit to millions of retail investors in public markets.
👉 Developed a special underwriting and distribution model. Strong lending capabilities (Cash Flow based lending Vs. Traditional Lending).
👉 Ugro's well-capitalised business model and inherent balance sheet strength at a time when most NBFCs are struggling with liquidity stress.
👉 Newquest Capital Partners (20.4%), ADV Partners (20.4%), PAG (18.3%), Samena Capital (12.5%), Promoter (2.7%) are the key stakeholders.
✅ Exponential Growth visible in it's financials too. It's RIGHT TIME to get Onboard this little GEM. ✅
👉 Disbursement M-o-M till June-21 was approx. 100-200 Cr, but from July'21 the run-rate is 250-260 Cr per month.
👉 Strong revival in AUM figures on account of good disbursement momentum observed from Jul-21. AUM = 1729 Cr (Aug'21)-> Expected to be 3500 Cr by Mar'22.
👉 FY19-21: Revenues growth 252%; Net Profit growth 113%; OPM & NPM grew at 18% and 10% respectively.
👉 Strong cash balance of INR 338 Cr as on March 21 which is sufficient to absorb losses from Covid.
👉 NII ~27.4 Cr, Total Provisions as of Jun-21 stood at ₹20.6 Cr (1.5% of the AUM). GNPA stood at 2.29% and NNPA stood at 1.88% as of Jun-21.
👉 Liability Management - Expanded the lender universe to 32; continued build-out of the liability book. Co-origination Partnerships with Three of the Largest Banks in India - SBI, BoB & ICICI.
🏆🏆🏆 Company aims to capture 1% market share of the total MSME lending market by 2025 and has strong corporate governance, experienced management team, large institutional capital, deep knowledge with domain expertise and data driven approach technology.
Company has low leverage of 0.84x and a CRAR of 62%. The low leverage levels implies that the company has sufficient runway to grow without the need for any further equity dilution.
U GRO Capital is not only available at reasonable valuation but also holds immense potential to become a large institution. It's a clear case of "Heads I win (Upside is 10x in 5 years), Tails I don’t lose much (Little downside)". 👍👍👍
One latest interview @ Founder Thesis Podcast -