To bridge the credit gap for MSMEs, FinTech companies are playing an important role. They are solving the inefficiencies in the credit process and aiding credit decisions by accessing, scrutinizing and validating various alternate data sources as a mitigant to the lack of rich banking or financial data.
#UGROCapital #MSME #Loan #businessloan #loanschemes
#UGRO #MSMEs #Fintech #Data #Tech #Sustainablefinance
~PR.147~ED.148~GR.122~HT.96~
#UGROCapital #MSME #Loan #businessloan #loanschemes
#UGRO #MSMEs #Fintech #Data #Tech #Sustainablefinance
~PR.147~ED.148~GR.122~HT.96~
Category
🗞
NewsTranscript
00:00If you go to the Chroma store, you can buy anything for free.
00:03Now, it has become easier for MSMEs to pay rent through this data ecosystem.
00:08The resilience of a small trader is very strong.
00:12Today, MSME has a 30% GDP of our economy.
00:16It will reach up to 50%.
00:18YouGrow is India's first listed startup.
00:20In FY22, we were at Rs 3,000 crores.
00:23In FY23, we were at Rs 6,000 crores.
00:25In FY24, we were at Rs 9,000 crores.
00:27In FY22, we were at Rs 7,000 crores, which has reached around Rs 120 crores.
00:32Hi, this is Bhavna and you are watching GoodReturns.
00:35In India, the MSME sector is a sector that cannot be ignored
00:39because the 30% GDP contribution comes from this sector.
00:43But in this sector, in the past few decades,
00:46there has been a huge lack of credit.
00:48And the credit gap has been around Rs 90 lakh crores.
00:52The reason behind this was that, as a part of the cash economy,
00:56it used to operate largely.
00:57In this way, on the basis of cash income,
00:59the lenders had difficulty in providing them credit.
01:03But if you see, in the past 10 years,
01:05there has been a lot of transformation.
01:08Not only growth-wise, but there has been digitization in this sector.
01:12It has become very formalized.
01:14And you will see that there are many such lenders in MSME financing,
01:17especially new generation lenders,
01:19who are focusing a lot on this sector.
01:22There are many listed and unlisted companies as well.
01:24But in this area, the company that stands out among all of them
01:29is the Ugro Capital Company.
01:30We will learn about Ugro Capital and also talk to the management.
01:34We are in the office of Ugro Capital.
01:36And...
01:37Hello, sir.
01:38Sir is with us.
01:39We will learn a lot from him.
01:42We will learn about the company's financial growth,
01:44what is the strategy ahead,
01:46and we will also learn
01:47what else is needed to focus on the MSME sector.
01:51Thank you very much.
01:52Thank you so much for coming over.
01:54I would be happy to chat with you.
01:56Sir, first of all, we will talk about Ugro Capital.
01:58But before that, I would like to understand
02:01why did you choose this sector, MSME?
02:04Look, the progress of our country
02:06and the development of our country in the coming decades
02:09is MSME-dependent.
02:10The small industrialists in our country
02:13contribute around 30% of the GDP.
02:15More than 15 crores of people are employed in this sector.
02:18But in order to move these industrialists forward,
02:22there is a need for money.
02:24There is a credit gap of more than 90 lakh crores.
02:27So, this is an opportunity.
02:29And we feel that
02:30we have to do some very good work
02:33to develop this sector.
02:35That's why we chose MSME.
02:37We see that in the last 10 years,
02:39in this industry,
02:40if we talk about the credit gap,
02:42we have seen a lot of transformations.
02:45What changes have you seen
02:47since you started in 2018?
02:51Because we see that Ugro Capital has contributed a lot
02:54for its growth.
02:56What do you think?
02:57Our contribution is very small.
02:58As I said, if there is a credit gap of 90 lakh crores,
03:02we have only done 9,000 crores in the last 5 years,
03:05in which we have incurred losses in COVID for 2.5 years.
03:07We have just landed.
03:09But the transformation that is coming in the MSME industry,
03:13it started in 2017.
03:15Before 2017,
03:16every small business and business in India
03:19used to run in a cash economy.
03:21When you do business in cash,
03:24it is very difficult to lend.
03:25But when demonetization happened first,
03:27then GST was implemented,
03:29then our banking was formalized,
03:31the Bureau was strengthened a lot.
03:33After that,
03:34if you go to the Chroma store in the consumer financing business
03:37and you can buy anything for interest,
03:40now it has become easier for MSMEs to pay interest
03:42through this data ecosystem.
03:45And we are moving this forward
03:47and trying to create a big institution
03:50to support MSMEs.
03:52What do you think?
03:53You were talking about COVID.
03:55After COVID, in this industry,
03:58because at that time,
03:59small businessmen went into a lot of loss.
04:04Has everything recovered after COVID?
04:06Look, there are two very important things.
04:09The resilience of a small businessman is very strong.
04:14The area in India that has come back the most
04:18to the normalization curve is MSMEs.
04:21Three big things have happened due to COVID.
04:24In the MSME industry,
04:26there has been a transformational change.
04:28All small businesses have understood
04:31that they need to do something good for a bad time.
04:34How to prepare.
04:36They have understood this now.
04:37A new generation is coming in MSME financing,
04:40where the old ways of working are changing.
04:43People are focusing a lot on digitization.
04:46And after combining these two,
04:48you will see that in the coming decades,
04:52MSMEs will be very big.
04:54Today, MSMEs are 30% of our GDP.
04:57It will reach up to 50%.
04:59And when it reaches 50%,
05:01around 20 to 22 crore people in India
05:05will be dependent on MSMEs for their employment.
05:07And this will become the biggest area
05:10to take our country forward in development.
05:12Right, right.
05:13We will come to what the government is doing
05:16and what steps it will take for MSMEs later.
05:18First, let's talk about UGRO Capital.
05:20What do you think are the key factors
05:22that have contributed a lot to the growth of UGRO?
05:26Our mindset was to build a big institution.
05:32UGRO is India's first listed startup.
05:35We believed that in the listed world,
05:38when companies mature,
05:41they come to the public market in a very expensive way.
05:44We acquired a very small listed company
05:47and raised a lot of capital through private equity.
05:50We started with a capital of Rs 1,000 crore.
05:53In the last two years,
05:55we raised another capital of Rs 1,500 crore.
05:58We have raised institutional capital
06:00of Rs 2,700 crore so far.
06:02We built a very big digital infrastructure
06:06and a very large distribution architecture
06:10so that we can serve all the credit needs
06:13of our target customers of Rs 15 lakhs to Rs 15 crores.
06:16The most important thing
06:18that is helping us to show this kind of growth
06:21is our partnership with banks.
06:23In India, banks have very solid cash
06:27because you and I deposit money there.
06:29By partnering with them, we are able to give credit to MSMEs.
06:33Today, we have a co-lending of Rs 9,000 crores
06:36with a 50% share of the bank.
06:38This gives us confidence that we have a large capital,
06:41a quality management team and the support of banks
06:45because of which we can build a large MSME financing company.
06:49Right.
06:50I was looking at the financial performance of the company.
06:54If we talk about FY24 Q4,
06:57the income of Rs 330.4 crore has been there.
07:0152% has increased year on year.
07:04If we compare FY23 with FY24,
07:08you have seen a 58% growth.
07:11Sir, tell me what is your plan for the upcoming quarters
07:14and upcoming years
07:16so that the financial performance can boost up further?
07:20We run a marathon.
07:23We always think about what we are going to do in the long run.
07:29This quarterly performance is just an outcome of it.
07:32This quarterly performance is just an indicator
07:36that this company started with a large capital,
07:38built the OPEX infrastructure upfront
07:41and with the AUM growth, the quarterly performance is increasing.
07:45If you see, in FY22, we were at Rs 3,000 crore,
07:49in FY23, we were at Rs 6,000 crore,
07:51in FY24, we were at Rs 9,000 crore.
07:53Our PAT was Rs 7 crore in FY22 which has reached around Rs 120 crore.
07:58We will maintain such a minimum growth and profitability growth rate.
08:04I have no objection to this.
08:06As the maturity increases and our cost of borrowing decreases,
08:10and our yield on portfolio increases,
08:13we will do better than what we have shown so far.
08:16Right.
08:17If we talk about the competitors,
08:20there are many competitors in this industry.
08:23How do you stand out?
08:25How do you differentiate UGRO capital from competitors?
08:29There is no competition in MSME financing.
08:32Okay.
08:32The competition is only in our own thoughts.
08:36Because it is such an under-penetrated segment.
08:39If I tell you that there is a credit gap of Rs 90 lakh crore,
08:43to fill this credit gap,
08:44even if 100 more companies like UGRO come,
08:47we will not be able to fill this credit gap.
08:49Okay.
08:49Still, there is someone in every segment of the market who is doing this work.
08:52Absolutely.
08:53But our main differentiator is that we use data,
08:58we have very deep product lines,
09:00we can secure big loans,
09:02we can secure small unsecured loans,
09:03we can finance machinery,
09:05we can finance supply chain,
09:06we provide rooftop solar,
09:08we do embedded financing.
09:10I don't think that any of our peer set,
09:13I don't call them competitors,
09:14our peer set can lend with so much variety and agility for our customer segment.
09:21That is why I believe that this is a company
09:24which will grow very well every year,
09:28and we will be able to service all the needs of MSME customers.
09:31Absolutely.
09:32Do you have any recent partnerships or collaborations
09:35that contribute to growth
09:37or are you planning any further partnerships or acquisitions?
09:42No, we want to build our business organically,
09:47but whenever we feel that there is a sector in which we are not present,
09:52like recently we acquired a company, MyShubLife,
09:55this company is a very established and well-established company in Embedded Financing.
09:59Whenever a small merchant who pays on a phone or Fino or Airtel,
10:07if we have to pay a very small rate on the basis of the track record of that payment,
10:10then this is a sector in which we were not present.
10:14So, to augment this, we did a small acquisition.
10:17There are many such sectors in which we are slowly progressing.
10:22Whenever we feel that something good will come, we will definitely consider it.
10:26But our organic growth is very strong
10:28and I believe that it will continue to run like this.
10:31Okay, if we look at the current market dynamics or industry trends,
10:35then how do you see the growth trajectory of UGRO Capital?
10:41See, as I said, our base has been formed.
10:45So, we add 3000 crores of assets to our base every year.
10:49Now, one of our very deep focus areas is micro enterprises.
10:55Where we used to operate on more than 75 branches in 5 states,
11:00we are increasing it very extensively.
11:04Now we have started UP, now we have started MP, now we have started Maharashtra.
11:08In the coming year, we will be present at about 250 locations.
11:11Next year, in 2026, we will be present at 400 locations.
11:15This tells us that our footprint in India will be the largest for MSME financing.
11:21And because of this, we will be able to serve the needs of a very small trader,
11:24whether he is a retail trader or a manufacturer,
11:27in these 400 locations and about 11 states.
11:32This will lead to two things.
11:33First, there will be EM growth, but the yield of our portfolio will also increase by about 150 basis points.
11:40If you look at all the NBFCs today,
11:44one metric that the public market always measures is Return on Asset and Return on Equity.
11:50We are about 2.5% Return on Asset and 10% Return on Equity.
11:53We believe that we will reach 4-1% in 8-10 quarters.
11:57And our Return on Equity will also reach 17-18%.
12:01When we achieve this metric,
12:03we will be able to match the best NBFC of India, which has been in India for 40-50 years.
12:11So, this will be a unique company that will be able to match the performance of more than 40 years old companies in the next 6-7 years.
12:19And we will build a big business for MSME in a very focused manner.
12:23You talked about geographical expansion, that you are planning on 400 locations.
12:28Are there any products that you are planning to offer in diversification?
12:35That's a very good question.
12:36Till now, every channel of ours used to focus on a particular product.
12:41Our intermediated channel, where we originate through more than 900 DSAs,
12:47we used to give secured and unsecured business loans.
12:50Now, we have started offering machinery finance, rooftop solar, and supply chain finance in that channel.
12:57Our micro-enterprise branches used to offer very small secured loans.
13:01Now, we have opened it up so that they can finance small machinery as well as rooftop solar.
13:06The expansion of UGRO,
13:09bringing different types of products and servicing MSME financing,
13:14we are now putting it in every line.
13:17So, if a customer comes to our branch in Churu, Rajasthan,
13:22it is not necessary that he can take a loan only against the property.
13:26If he wants to buy a machine, he can take a loan against that.
13:28If he wants to buy a rooftop, he can take a loan for that.
13:32So, we are growing our business in a double way.
13:36We are doing geographical expansion and putting all the product lines in our geographies.
13:41So, the benefit of this will definitely come to the company.
13:43It will also come to the customer a lot.
13:45Amazing.
13:46Because the election atmosphere is going on,
13:49and when we are recording this interview,
13:51it is the election day, the voting day.
13:54So, sir, tell me that to make this particular industry, MSME financing,
13:59more organized, there are two questions from the government.
14:04Do you think some steps have been taken correctly?
14:07And what can be done further if the BJP government continues this?
14:12See, if you look at the track record of the last 5 or 7 years,
14:18a little before that, in fact,
14:21MSME, for any type of government,
14:25whether it is a national government or a state government,
14:29every government knows that MSME is important for our country.
14:33It is important because a lot of people are employed in it.
14:37So, these people who are employed are the voters.
14:40So, whether the government is of a party or an opposition,
14:44whether it is a left-wing, whether it is a right-wing,
14:47whether it is a middle-wing,
14:48no government can ignore MSME.
14:53That is why in the last 10 years or 8 years,
14:56all kinds of policies have been taken to support MSME.
15:00And in the last 5 years and in COVID, the Indian government has provided a lot of support.
15:04Whether it is the country's credit guarantee scheme,
15:06whether it is the liquidity scheme,
15:08or there are many schemes of the MSME ministry that support MSME.
15:12So, the whole universe is ready to support MSME today.
15:18I believe that no matter who comes to power,
15:20MSME will make a lot of progress in our country.
15:23The budget is also focused on this sector.
15:26But what are some specific suggestions that you have?
15:30Because you have a good name in the industry.
15:32Do you have any suggestions that you think can be done to uplift this industry further?
15:38Look, a lot of things can be done.
15:40No matter how much you do for such a big sector, it always looks less.
15:44But one thing for which we always hope that the Indian government will pay attention,
15:50we do a lot of representation through the industry body,
15:53that the entities that lend to MSME should be viewed from a different perspective.
16:02Those NBFCs or those fintechs that focus on MSME,
16:06whether it is a banking system, a regulator or a government,
16:09they need to provide additional support.
16:12If you look at the progress of the microfinance industry in India,
16:16microfinance has become so big because RBI has given a different category to MFI and NBFCs.
16:22As soon as I think that the NBFCs that lend to the priority sector and MSME will be viewed from a different perspective,
16:31then we can make more progress in supporting these traders.
16:36Absolutely.
16:36Once again, the budget will be presented in July.
16:38What are your expectations from that for this industry?
16:42See, a new government will come and if this government comes back,
16:46which is what everyone expects,
16:48I believe that when this government comes back,
16:51it wants to work with a lot of new elements in its first 100-200 days.
16:58It sets the agenda for the next 5 years.
17:01A lot of industry consultations are going on.
17:03And the government pays a lot of attention to what can be done for MSME.
17:08If you look at the BJP's announcement,
17:11there is a reference to MSME where it is said that the MSME loan limit will be increased.
17:19The credit guarantee scheme will be increased.
17:21I feel that if this government comes back,
17:23then a big focus will definitely be on increasing MSME credit.
17:27Thank you so much, sir.
17:29It was very nice talking to you.
17:31I also felt very nice. Thank you.
17:32So, he was Mr. Sachin Trinath, founder of Eugro Capital.
17:36You just heard from him about the MSME sector.
17:39You heard about the credit gap of 90 lakh crores because the industry was not formalized.
17:44You heard how that gap has been reduced.
17:47Whenever we talk about a particular company,
17:502-3 things are very important in it.
17:53The first is how much experience does the company's management have?
17:57You have just heard that the company's management and founder are very experienced.
18:03The second thing is the company's growth.
18:05The company's vision is very strong.
18:11If we talk about the stock price, then this stock has also given a return of 30%.
18:17It comes in the start-up that was listed at that time.
18:21The company started in 2018.
18:23So, there are 2-4 things that you have to keep in mind.
18:26Apart from this, if you are associated with the MSME sector,
18:29or if you are planning to start a small business and you have some queries,
18:34then you can write to us in the comment section.
18:37We will definitely try to connect the experts with us.
18:40In this way, we can bring experienced experts with us who can solve your problems.
18:45How did you like this video?
18:47Do let us know.
18:48If you are associated with us through Facebook, then like the Facebook page of Goodreturns.
18:52If you watch us on YouTube, then don't forget to subscribe to the channel.