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HomeSuccess StoryU GRO Capital Success Story: A Financial Immunity Booster For MSMEs To...

U GRO Capital Success Story: A Financial Immunity Booster For MSMEs To Bounce Back!

U GRO Capital Success Story

U GRO Capital Success story Micro, Small and Medium Enterprise (MSME) Sector has emerged as a very important sector of the Indian Economy, contributing significantly to employment generation, innovation, exports, and inclusive growth of the economy. Micro, Small and Medium Enterprises (MSME) are the backbone of the socio-economic development of our country.

U GRO- Company Highlights

  • Company Name-U GRO Capital Limited
  • Headquarter-Mumbai
  • Founder-Shachindra Nath
  • Sector-Financial Services (NBFC/ Fintech)
  • Founded-2017
  • Website-ugrocapital.com
  • Registered Entity Name-U GRO Capital Limited

U GRO Capital- About and How It Works

U GRO Capital has developed a sophisticated and self-sufficient underwriting process, which is capable of approving principal loan to customer in less than 60 minutes. Their constant efforts towards bettering their existing processes have enabled them to launch an end to end digital platform – Sanjeevani, which is built upon a deep digital architecture, towards easing the borrowing experience and quickening the disbursals as the entire process, from filling the application form, sharing documents and getting disbursal of the loan can be completed from customer’s workplace within 3 – 5 business days.

They have solved for this using their proprietary solution “GRO Score”, which was implemented from day one of business operations. GRO Score utilizes a wide range of sector-specific parameters to estimate default rates. It has a Gini co-efficient of over 60%, indicating a high degree of stratification, and thus allowed them to remove 70% of ‘bads’ by removing the bottom 20% by GRO score.

U GRO Capital- Founders

U GRO Capital is founded by Shachindra Nath. Shachindra Nath Mr. Shachindra Nath has over two decades of experience in the Indian Financial Services industry, with a proven track record of building and scaling large financial institutions. He was formerly the Group Chief Executive Officer of Religare, where he successfully led the IPO process and established multiple successful new business lines. He began his entrepreneurial journey with U GRO Capital, where he seeks to build an institution that will provide real value to society and stand the test of time. He is a qualified lawyer and a University Rank holder from the Banaras Hindu University (India).

How Was U GRO Capital Founded

The trigger behind instituting U GRO Capital could be traced back to the reflection on the state of MSMEs. It is really hard to acknowledge the fact that despite the MSME segment contributing to 30+% of India’s GDP, a vast majority of it lacks access to formal credit. U GRO was hence, instituted to ‘bridge’ this credit gap by utilizing our deep knowledge of the sectors, to build products optimized to the MSME needs, technology driven underwriting process for comprehensive assessment of MSMEs, critical to cater to thin file customers and also to achieve scale and enabling watertight corporate governance to eliminate possibility of egregious breaches in other market players. 

U GRO Capital- Name, Logo and Tagline

The company’s name was derived from the mission statement. U GRO was founded with the vision of ‘Solving the unsolved: India’s $300B MSME Credit Gap’, and their name speaks to their commitment to their MSME customers – they want to see “U GRO”, or they grow.

Shachindra grew up in a small town and in his early experiences in the carpet industry, he noted just how difficult it was to scale businesses as a result of insufficient financing availability. U GRO Capital is the manifestation of his dream of providing adequate financing to all fundamentally strong MSMEs, such that those entrepreneurs can achieve their own dreams.

U GRO Capital- Vision and Mission

U GRO caters to specific SME sectors by using their advanced knowledge of 8 sectors to create insightful loan products for each sub-sector. They use a unique combination of intelligence & technology using statistical predictive modelling to understand a prospective customer’s potential for growth. Their sub-sector level knowledge is derived from over 25 financial & non-financial sources to understand the ecosystem which the customer operates in.

U GRO Capital’s mission is to ‘Solve the Unsolved’ – the US$ 600Bn Small Business Credit Need. U GRO Capital believes that the problem of small businesses can be solved by building deep expertise around core sectors of MSMEs in India coupled with a data centric, technology-enabled approach.

U GRO Capital- Target Market Size

U GRO Capital is a pureplay MSME lender. The total addressable demand for financing from Indian MSMEs is ~INR 45 trillion, as estimated by IFC. Of this demand, only INR 23.7 trillion is met through formal sources – largely banks, NBFCs and other FIs. This leaves a gap of INR 21.3 trillion, which is estimated to be growing at over 7% per annum. U GRO’s vision is to cater to this gap.

U GRO Capital- Products/ Services

MSMEs can avail capital through U GRO’s operational four-pronged distribution model-

Traditional branch-led channel: Sourcing through GRO-Partners (DSAs) – secured and unsecured business loans

The coming months will also see the company launch their direct distribution branches. Until now, U GRO has 9 branches in Tier I metro cities, and these largely cater to the aforementioned prime/near-prime segment through an intermediated mode of distribution. In order to cater to MSMEs in Tier II/III metros and sub-urban locations, they will open branches in such locations and reach out directly to MSMEs. This will also see them foray into a higher yield segment.

U GRO Capital- Business Model and Revenue Model

The core revenue model is raising liability at low rates and disbursing loans at higher rates, thus earning spreads – riskier segments will have larger spreads, but this is counteracted by higher rates of bad loans Additional fee-based income sources come from upstream co-lending and other assignments. Incremental revenue sources include cross-selling, particularly insurance.

MSME loan requirements range from INR 1 lakh to INR 5 crores depending on sector in which they operate and their respective turnovers and business needs, and they step in to cater to the varying requirement, via their corresponding tailored services. In terms of pricing, their average yield on book for secured loans was 11.7% in June 2020, 18.5% for unsecured loans and 13.3% for supply chain financing.

U GRO Capital- Startup Launch

U GRO’s first customers were achieved through a mix of their branch network and the BFSI partners, although largely the former. Their initial investment in branches and human capital infrastructure really increased the ease in building up their customer base, and U GRO reached 100 customers very shortly after commencing lending operations.

U GRO Capital- Marketing Strategy

Analytics and technology have been significant parts of U GRO’s organization structure from day one – it is a core strategic focus area for them, and they have invested in requisite manpower and infrastructure to enable advanced applications. This has resulted in their early success stories – their loan origination platform which connects to 24 external APIs and can produce an in-principle decision within 60 minutes, and their customized business rules engine which hosts all the credit policies and credit scores. 

For India’s largest public and private sector banks to be willing to co-lend with them at such an early stage is a huge indication of their trust in our abilities, especially as it pertains to being able to source and underwrite high quality MSME loans. Co-lending represents a highly value accretive channel as it comes with a combination of income on interest spread and also fee income.

U GRO Capital- Challenges

It goes beyond saying that the COVID-19 was the most devastating thing happening to not only our economy but the entire world. It also posed as the biggest challenge to U GRO, too.

This included the integration of video KYC and digitalization of the personal discussion process and customer loyalty framework, and the development of an in-house rule engine. With a highly self-sufficient underwriting process and their strong liquidity base, they were able to resume our potential operations pretty strongly as their July disbursals bounced back to a staggering 80% of pre-Covid levels.  

U GRO Capital- Advisors

One of the key advisors to U GRO is:

Global Value Creation Partners – led by Sanjeev Goel, ex-Head of Equity Investments FIG for EMENA and Asia at IFC.

U GRO Capital- Acquisitions and Mergers

U GRO Capital was formed through the acquisition of Chokhani Securities Ltd, there have been no further acquisitions till date.

U GRO Capital- Recognitions and Achievements

World BFSI Congress Awards by ET NOW in the categories – Financial Services, FinTech & Loan

‘Finnoviti Award 2020’ by Banking Frontiers, partnered by Deloitte in the category ‘Business Model – Innovation’

4th Edition of IBGL Awards 2018-19: ‘India’s Greatest Leader 2018-19, India’s Greatest Brand 2018-19’

India NBFC Summit 2019 Awards by Perfios: ‘Rising Star of the Year’

Companies & Education Awards 2019: ‘The Most Trusted Company Emerging NBFC’