UGRO Capital: Targeting to hit milestone of Rs 20,000 cr loan book in 8-10 quarters: Shachindra Nath

“UGRO is now expanding from its current base of 105 locations to 250 locations this year and 400 next year and all of these physical infrastructure which we are building is in tier II to tier V town,” says Shachindra Nath, Founder & MD, UGRO Capital.

We have heard a lot in terms of how the new government is likely to focus on the rural India, the middle class in the tier II, tier III cities, what is your plan at UGRO Capital? What is the current exposure? What do you plan to do to tap into that opportunity?
It is not just the narrative which is now coming. Our belief has been that when it comes to the micro enterprises segment, the potential and the resilience of small businesses in these cities and towns would become much stronger.
Roughly around 60% to 70% of our loan book is targeted towards these segment of the market. As we say, we are at the bottom or middle of the micro enterprises. Of the 90-lakh crore cap, we target customer segments which are in the trading turnover of 15 lakh to 15 crore and they are predominantly in very small cities and towns.

UGRO is now expanding from its current base of 105 locations to 250 locations this year and 400 next year and all of these physical infrastructure which we are building is in tier II to tier V town. We have added states like UP, MP, Andhra and Maharashtra beside our existing states in south, three states and three states of north.

You have also become the new head of Assocham NBFC and Infra Committee, congrats for that, what are the issues faced by smaller NBFCs in terms of reach, in terms of tying up with larger banks for co-lending partnerships in terms of availability of capital and in general cost of capital because I am not bucketing MFI alone, your kind of organisations which are tech backed, some other NBFCs, some SBF kind of organisations, say small finance bank or even affordable housing, their challenges remain the same versus the really large pedigree, legacy kind of NBFCs. So, what are you going to really take up as an issue or agenda at the top level of regulators as well?
If you look at this, the regulatory intent or the policy intent that the entire banking credit, 40% of average net banking credit should be in the priority sector. As we all know the banking sector, while in recent past the priority sector lending from bank side has improved, but for a variety of reasons the real priority sector credit dissemination has always been done by middle sized NBFCs.

So, the large NBFC continue to focus on large ticket loan or segment of the market which may or may not be priority sector, but NBFCs which are in the range of Rs 1000 crore assets to Rs 10,000, Rs 15,000 crore assets really do the credit dissemination for priority sector. It can be agri, it can be MSME, it can be housing finance company, microfinance company, so on and so forth.
But in India today, we do not have a systematic liquidity flow to such NBFC, either the bank lending to NBFC goes to the large NBFCs or it does not come to middle sized NBFC.

It was presumed that the co-lending would solve that problem, but what we have seen of the total one lakh crore of co-lending, which has been done in India as per Crisil report, again, the 60% of that went for non-priority sector.
So, there is a renewed effort to figure out both at the regulatory level as well as the government level, that what could be the sustainable model of providing liability to NBFC, because otherwise they are heavily dependent on term borrowing from the bank or from the capital market.

Companies like UGRO have very well diversified. We have global DFIs. We have banking. We have a market leader in co-lending but that may not be the case for every lender, which are smaller to our size and that is why there is an effort that how do we make sure that the friction between banks and smaller NBFC on co-lending is resolved, how do we make sure that the banking system liquidity flow through NBFC goes to the last mile and also some long-term solution of creating financing institutions whether it is Assocham, whether it is FIDC, all of the industry body, there is a renewed effort and also at the government level to make sure that the good work which is done by NBFC towards credit dissemination actually is helped more on the liability side and I think so there is a need or a reason to differentiate between NBFC which are in large consumer credit, personal credit which are not actually helpful in the real economic output growth from them to people who are doing this real job of providing last mile credit.

Going back on this tier II, tier III, tier IV locations, you are also expanding footprint there. The government appears to be focusing there. The street, the market wants to find names which have good plays out there. How will it boost your business? We just saw your quarterly numbers and full year numbers as well, if you are able to capitalise on these new locations well and indeed government capital and focus is also going there, how much can it boost your overall business in the next two-three years?
We continue to believe there are three big trends and I think so post current election result when market actually might have not read it properly, actually government would continue to focus in expanding our digital economy, expanding our tier II to tier V town economy.

And businesses like ours, which have just recently capitalised ourselves significantly, we have raised almost 1300 plus crore of capital, large portion of that money has already flown in, that we are using the GST infrastructure, the digitised banking infrastructure and build our proprietary data analytics tool and also supplementing that with physical geography.

The lower band of the economy would continue to grow, the possibility of creating a large institution around MSME financing at least for us is very clear. We are very buoyant. We have grown almost 3000 crore every year. We continue to hold our first milestone of making large institution of 20,000 crore in 8 to 10 quarters from now.