Ugro Capital – Opportunity To Invest in a Fintech-like Company Below Book Value

Ugro Capital Business Update Q4FY23:

Business Highlights:

• UGRO Capital’s AUM reached INR 6,081 Cr, a 105% increase from the previous year.
• Collaborated with ten co-lending partners, over 65 lenders, 35 fin-techs, and 1,200 GRO partners.
• Provided data-backed customised finance solutions to over 46,000 MSMEs in India.

Future Growth and Opportunities:

• Intends to gain a 1% market share with 1 million small businesses as customers in the next three years.
• Recently launched the GRO X App, a digital solution for small businesses, offering collateral-free instant credit and financial management capabilities.
• The equity capital raise will strengthen UGRO’s capital position and balance sheet.

Financial Highlights

1. UGRO Capital has shown impressive growth in its assets under management (AUM) with a significant increase of 105% YoY and 19% QoQ. This indicates a strong expansion of the company’s lending activities. The substantial growth in gross loans originated both annually and in Q4’FY23 further emphasises the company’s expansion efforts.
2. UGRO Capital has maintained a relatively low level of gross non-performing assets (GNPA) and net non-performing assets (NNPA) with a ratio of 1.6% and 0.9%, respectively. This suggests effective risk management and a healthy loan portfolio.
3. The company has witnessed a substantial increase in total income, with Q4’FY23 and FY23 showing impressive growth of 92% YoY, 15% QoQ, 119% YoY, and 123% YoY, respectively. This growth demonstrates the company’s ability to generate higher revenue from its lending activities.
4. UGRO Capital has reported improved profitability, as indicated by the significant increase in net total income, reaching INR 126.8 Cr for Q4’FY23 (up 101% YoY and 17% QoQ) and INR 390.5 Cr for FY23 (up 123% YoY). The growth in pre-tax profit (PBT) further highlights the company’s enhanced profitability.
5. UGRO Capital has maintained a diverse pool of lenders, with the lender count reaching 66 as of Mar’23. This indicates a robust liability position and access to funding sources. Additionally, the healthy capital position with a capital adequacy ratio (CRAR) of 20.23% provides a strong cushion for future lending activities.
6. The company’s debt to equity ratio of 3.2x suggests a moderate level of leverage. It is important to monitor this ratio to ensure a sustainable capital structure and manage any associated risks.

Overall, UGRO Capital has demonstrated strong growth, improved profitability, and maintained a healthy portfolio quality. The company’s focus on expanding its lending activities and managing risks will be crucial for sustained success. Additionally, the diversified lender base and healthy capital position provide a favorable outlook for future growth and liquidity.