ValuePickr Forum

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

Hey Rushil,

From their recent credit rating report May 05, 2021 (Page 6)

"As per the asset liability management (ALM) statement dated March 31, 2021 (Provisional), Ugro has positive cumulative mismatch in all of its maturity buckets. The company has unencumbered cash and cash equivalents of ~Rs. 338.89 Cr. as on March 31, 2021. The company is adequately capitalised with networth of Rs. 950.46 Cr. coupled with a gearing of 0.58 times as on December 31, 2020. The company’s high capitalisation levels provides high flexibility to raise additional borrowings. It also has the flexibility to raise funds through securitisation transactions. The company has plans to maintain adequate liquidity in the form of unencumbered bank deposits/balances, liquid funds or unutilised bank lines to cover three months of requirements "

Source -


At today’s market cap of INR 729 Cr, you are effectively getting INR 339 Cr of cash + INR ~1,100 Loan AUM + Technology + Team;

Adjusted Price to Book (excluding the unused cash on book of INR 339 Cr) would be (729-339)/(950-339) = ~0.60x


Hi Admantium - Great work on this company, thanks a lot!

Wanted to get your views on the CEO resignation a couple of months back - do you think that’s a red flag?

Hi @Arpit_L ,

I personally don’t think it is a red flag. Have two reasons for my belief -

a. The recent notification on exchange stated that the CEO Abhijit Ghosh is leaving for “better career prospects”

b. Prior to 3 years in Ugro, Abhijit worked in Religare for 11+ years (under Shachindra). The top management of Religare (SME team) followed Sachindra when he set up Ugro. I would not personally follow my boss, especially if I felt there was an ethical issue

The second point is purely my conjecture. I can be wrong. However, CEO leaving a company for better prospects is quite common.

Great explaination since starting this thread. I am also watching this company for two months. In addition to pouring money by investors, I was attracted by the statement of Shachindra that he has built a team of finest people from industry, most of these are from Religare. They are taking salary just to survive.Everybody is invested here, and given stocks. So all management team’s interests are aligned with the succes of company. Time deadline is 2025. Everybody is working hard to make it succeed and this will be their salary, incentive. This was the reason I also invested.

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I have gone through all the posts till bottom, I must thank you for the effort you have taken for introducing an interesting company, in normal course I wouldn’t have found it.
My question is more abstract, there is a general fear that banks and NBFCs have increased risk due to 2nd wave of pandemic. Your views please?

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Il take a stab at answering that @jyothi. The problem with nbfcs is their legacy book. Most of the listed nbfcs got absolutely destroyed from 2017 onwards and they’ve been cleaning up their books since then. Covid came in and slowed that process even more. Many of them were leveraged to their max too and now they have to de evolve to evolve basically. So apart from a few like bajaj finance and Muthoot most of them are in firefighting mode. They are trying to digitalise in order to improve their position in the future but this will take a lot of time. Then you have a company like ugro. They started off when most of the fires were done with already so they have no books to clean. They started off with 920 crores of capital and without debt so they aren’t in an existential crisis. In fact their gearing is at just 0.59 times now vs most nbfcs at nearly 3 to 4 times. This gives them a comfortable crar of 78 percent too! They also began with tech and are building from that rather than what the other nbfcs are doing which is moving towards tech and digitization from their older methods. This is the reason why ugro managed to continue showing profits even through covid. So they are comfortably placed right now and are arguable the safest listed lending company in the stock markets due to this unique position. Now imagine what they can do from here… They can slowly increase their debt while everyone else is surviving from 0.59 to 3.8 which is their target. They don’t need to apply for qips and dilute their book to survive. They have a comfortable amount of cash and can expand safely too. And all this with a core tech approach. Once you look past the liquidity risk this is really the safest lending company I’ve seen and I believe they could actually reach the size they say they could in 5 years just due to how they are currently placed. Unlike other small nbfcs which are cheap due to the existential threat that they carry, ugro is cheap due to execution risk ie can they actually do what they say and scale since they are basically a startup that began disbursing 2 years ago…
I do want to bet on this space since I see nbfcs having a good run ahead of them though I’d rather either pay a premium and go with the likes of bajaj Or
pay cheap for execution risks with ugro
but wouldn’t want to pay cheap for turnaround stories with a real danger of disappearing altogether. Considering this sector is so risky I’d rather pay the least amount for a chance of the biggest upside here than pay higher amounts and take on high risk with lower upsides… And the upside here is huge if one’s horizon is about 5 years.

Disc: after months of back and forth I’ve begun investing as of today thanks to this thread which pushed me over the edge and made me re look it. Will be allocating a max of 2 percent of my PF and not more due the nature of the instrument. Not a sebi advisor.


Let me just elaborate a bit on execution risk in the post above since I just threw the term in passing above and did not highlight what the risks are:

  1. We have no idea how they’ll handle scaling up:
    As of now they are in this comfort zone of lending with just 0.59 leverage. As they gear up to higher levels the risk will rise and their balance sheet may see some stress.

  2. Dependance on tech:
    Pre covid their npa levels were better than most in the industry and even during covid they were fantastic. However, whenever tech is used in such a big manner for underwriting there is always a risk that npas could blow up as more and more customers are on boarded. However, they seem to be very confident regarding their system and only lend to select sectors and even filed a patent for its underwriting model
    U GRO Capital seeks patent for its scorecard based underwriting model
    So there could be a moat brewing here if their tech holds with scale.

  3. Is the company really cheap?
    They currently hit profits of 3 to 4 crores pre tax per quarter. They are getting huge tax refunds which take their profits higher which won’t last forever. So this needs to be kept in mind. Its fantastic that they have managed to get profitable so quickly but since they’ve taken a lot of opex upfront they need to balance growth with maintaining quality of book while still just scraping through with profits. So on a profits basis their run rate is currently around 12 crores per year under normal tax rates. That shows how small they are currently and how far they need to go to become even a mid size lender and how risky this investment is. Also though its not wise to look at a financial company on a PE basis they would suddenly look very expensive earnings per share wise when their tax returns to normal so that needs to be kept in mind. All of their metrics ie roe/roa etc will continue looking horrible for a few years until a certain scale is reached since they are starting off with so much capital and have front loaded so many costs. They are currently value at 4.5 times interest income. However, on book value basis they look cheap since their assets far out weigh liabilities but on actual performance wise only a year or two would show us how quickly this book value can increase since it will take a lot to move the ticker book wise given the huge starting point its begun from.

  4. Covid 2 and 3: While they have ambitious targets for 5 years from now I wouldn’t mind if they delayed this by a year or two due to covid. Their gnpas went up during covid and there is a danger that if they try to grow too fast during this period they may continue going higher. That being said they are better placed than most with low leverage so this may not be a big issue and may in fact act as a good test for their underwriting tech.

  5. The illiquidity and ownership structure:
    It takes a lot of faith in the management and market participants to assume there was no mal intent meant with the promoter structure. Companies with such low free float do have problems with manipulations. However the intent behind this structure has been explaining above and by management and one needs to take a call for themselves regards whether they are comfortable or not. Regards Liquidity, it would be an issue for large institutions but not for retailers by the looks of it. While the spread is High overall the prices are stable during the day and apart from an errant share or two being sold at huge extremes most are bought and sold within range. For eg The 52 week low of Rs. 70 was just a few shares that traded at that price(just yesterday 1 share traded at 85 Rs!) … The bottom looks closer to the 85 to 90 range so at cmp we are very close to it.

  6. Opportunity cost:
    An investment here is money forgotten for 5 years at least. At the end of the day this a profit making listed startup but a startup nonetheless. The business is barely a year old and may take a couple years for the market to even value it properly. So entering with short time frames here will not work. That being said if the management continues to walk the talk at 68 percent cagr and controls npas there could be a frenzy which could give returns in a shorter time frame here so timing the market isn’t something I’d recommend especially with a stock with such low free float.

  7. The sectoral risk:
    While nbfcs have the potential to create life changing wealth they can also be huge wealth destroyers in the best of times. Their cost of borrowing is something to keep an eye on. For a company so new it’s decreased surprisingly quickly to 10 odd percent which is fantastic. We need to keep an eye on If they can keep this constant/continue decreasing it.
    They currently have a lot of cash that acts as a huge safety buffer but if they expand too fast they could burn through it. So we also need to Keep an eye on their costs which are pretty high at present.

Overall, one really needs to bet on the jockey here ie Shachindra Nath and his management team(the same way the PE firms are currently) and the skin in the game they have with their company ownership and whether they can scale the company from nothing to a 20000 aum company in 2025. Its very rare a retailer gets to participate from the ground floor with a company… But this is that one instance. Usually we would be coming in during an ipo when the price would favor the exiting owners… Here we get to enter at under the valuations paid by the founders(the PE firms) so there isn’t a question of overpaying here which gives comfort in itself and if management do even half of what they’ve said they will do(and they’ve walked the talk for a year now) we could be the ones exiting at stupendously high valuations in 5+ years in a faux ipo as liquidity and coverage of the stock increases lol.

Thanks again to @Admantium for inititiating this thread on what really looks like a fantastic business opportunity. This is the closest most of us could get to actually starting our own financial institute from the ground up and will be a good lesson in the financial markets if nothing else. Cheers.

Disc: I am invested. I am not a sebi advisor. Not buy or sell recommendations. Please do your own due diligence before investing.


I think this is bit similar business like lenden club and what i found is that initial npas were about to 2 to 3 percent but when their book grew with lax lending standards the npas skyrocketed above 10percent

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That’s my main worry with ugro. With great scale comes great responsibility… with handling npas. However, What gives me comfort is the strategic sectors ugro targets ie consumption based. Its kept them on good footing through covid too. Also, their underwriting process is supposed to really be spectacular. The friend of mine who invested in them a while back works in bfsi and heard about their underwriting process through a strategic tie up with his company. He began a position soon after. Maybe starting with a fresh pair of eyes post the liquidity crisis at the tail end of the last decade has helped them crack the npa model. They were learning lessons and creating a tech based model to create a book while most were repairing theirs. Pre covid they had less than 0.1 gnpa which is unheard of(though on a low lending base). Even during covid and post them getting a reasonable amount of disbursals their gnpas and npas are better than most small nbfcs. I’m willing to bet a small percent of my portfolio since IF they do manage to scale without compromising their book too much ie maintaining at least under 2 percent gnpa post covid then I really can’t even comprehend where they’ll be 10 years from now. I keep telling myself that A whole host of religare staff wouldn’t leave for a pipe dream.
I’m not too sure about lenden club but don’t think it’s a direct comparison since they are an all weather p2p lender. Last I heard their npas had settled and come under 4 percent too

Disc: I am invested. I am not a sebi advisor. Not buy or sell recommendations. Please do your own due diligence before investing.


Yes thats right…lendenclub is more on P2P lending while these guys target SMEs.
I think they are more at part with lending kart. My cousin use to work in lending kart and got to know they burned alot of cash and high NPA.So i believe role of management and their lending criteria is key here as you suggested.Have a look at their website

Another key differentiating factor is that ugro also has physical points for disbursals and collections. So there is a follow up check done personally which adds another layer to decrease Risk. The underwriting tech helps them identify clients faster and approve within 24 hours but there is a human touch involved too. They also indulge in cross lending so they are pretty well diversified. In fact their pure play digital platform for lending isn’t even out yet and has been on hold and will release next year directly and hopefully they use what they learn to create a safe platform(I am a bit wary of this platform tbh since I don’t know what the human element will be… But its still a while away from Release) . I think being listed makes them even more careful with how they spend cash since they have to answer for it every quarter. Imo they are doing things the right way and are really trying to build something generational here. The likes of lendingkart etc are just building in order to sell at higher valuations and even with all their issues are still getting funded at higher and higher valuations. I personally have a lot of confidence regards ugro and feel they’ve set and are setting themselves up as well as anyone could in this minefield of a sector

Disc: I am invested. I am not a sebi advisor. Not buy or sell recommendations. Please do your own due diligence before investing.


Thanks for bringing this co. to the forum’s attention. This is probably a really good company if someone wants to invest in a Fintech run by experienced NBFC personnel and is more like a Private Equity style Investment.
I went through the company’s presentations and investor calls. Looks like the management pretty much knows what to do and clearly have a goal.
Since they’re focused on MSMEs, ofcourse it is going to be a high risk business with NPAs shooting up with time. Also, since their underwriting is purely digital based, it’ll take time to know how well it works to mitigate risk. It is pretty good to see that the Management isn’t way too much aggressive in growing which would give them time to make changes to their underwriting methods as they keep on getting better data. As @Malkd pointed out, one big advantage for Ugro would be that they wouldn’t be busy clearing out the mess other NBFCs have been facing since 2018.
I have one question if someone could answer it or could guide me where to find it…
As per one of the presentations, the credit market opportunity is worth $600 bn and they aim to be 1% of it. Any clue about the opportunity in the 8 particular sectors & subsectors that they’ve shortlisted among the 180 odd sectors and are lending to? Also, this is a pretty naive question but would they add more sectors to that list once they feel their criterias are somewhat being fulfilled?
My point here is, if the opportunity of the sectors they’ve shortlisted is ~$10bn and if they intend to be ~1% (as mentioned by them) of the total market i.e - $6bn, they’re aiming to be the #1 player in that with over 50% market which I feel would be quite difficult to achieve. However, this is for a later stage. For now, it looks like the company is going to go through a good couple of years. The institutional holding surely gives confidence to get some and hold on for a good journey.


By the looks of it they are trying to grow to a stable base and hence why they are targeting these sectors . Once a few years pass and growth stalls and their underwriting tech proves that it can control npas even with scale they’ll probably pivot to other sectors. Just this first 5 year journey will be a long one though. As investors we ll just need to look at the next 5 years and ensure that YOY they hit the targets they talk about and then set new goals. We ll get to know management better too over the next 5 years and will know their thought process and capability better. It’s such a new company that
I’m revisiting my thesis almost everyday to make sure I dint miss anything and this doesn’t go by the way of stampede capital (so far everything looks real and I’ve found no red flags but diligence is a must) :slight_smile:

Disc: I am invested. I am not a sebi advisor. Not buy or sell recommendations. Please do your own due diligence before investing.


Thanks for this thread. Picked up a small position(some even at 90!). For reasons already mentioned above, I do think this is an interesting calculated risk to take. I see this as an opportunity to invest in a startupesque business, with scale, tech and a good promoter. Not too many chances for retailer investors in India, unlike in the US where platforms like seedinvest allow you to do so. I also think it is less risky than a startup because at the given price point and book size, the market hasn’t overbought/factored the story completely yet(?). If npas remain low, even with slow growth, we can expect this to be rewarding.


NPAs will show less than actual as assets will grow too fast.

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This looks like promising opportunity in the making. What should be target valuations for this company from 5 year perspective- in line with growth ambitions presented by their chairman?

Considering the company has been disbursing loans for just 4 quarters now there isn’t a lot of information out there. There are 2 years worth of. Concall and presentations and 1 annual report. However, there are 3 long interviews of Mr. Nath available and I’d recommend anyone interested in the company to watch all 3 of them. Linking them below with a bit of info regards what to expect in each of them

  1. This interview is from last July. With this you’ll understand the overall business along with how covid is an opportunity for them since they have a huge advantage due to starting post the liquidity crisis and with a huge capital base. It will also show you how ugro isn’t a fintech… Rather an Nbfc which has embraced digital to improve the underwriting and disbursal process :
  1. This interview is from last August and will give you a clear understanding regards the corporate governance in place and why the method of listing was chosen and Mr Naths fantastic understanding of the economy and lending and the use of tech to facilitate the same. You’ll also learn about how and why he took on PE investors and why he gave them the company for cheap(and we are getting it cheaper)
  1. This interview is the most recent ie from Jan 2021 and will give you a personal insight into Mr. Nath and why he chose to become an entrepreneur along with how he struggled to raise capital for 3 years before he could create ugro and why he hates the word fintech… Especially when it comes to credit. You’ll also understand his 10 to 15 year plan to create a generational institution

I won’t summarise any more. The videos are fantastic and considering the little information available on the company they are must watches as far as investing in it is concerned.

Even though I’m fully done studying every aspect of this company that I can(there really isn’t that much to study in public domain) I won’t post my personal thoughts here to avoid clutter and to let the videos speak for themselves

Disc: I am invested. I am not a sebi advisor. Not buy or sell recommendations. Please do your own due diligence before investing.


I just wanted to point out that a bet on a lender is primarily a bet on them being able to grow while maintaining quality of the book. Otherwise one can end up in a yes bank style scenario with all equity wealth getting wiped out. For this reason, past performance of lender serves as a good proxy for how they handled stress in the past. Without that past performance, we are investing with “hope”. Absolutely nothing wrong with that, but we must be prepared for our capital to be wiped out, and thus size the position appropriately.

With a 1 year lending track record (gathered that from this thread), it means that a very large part of their lending happened post covid, after they knew which sectors had been hit the hardest and what the status of each lender post covid was. Despite that, their GNPA is 2.3% and 3.9% of the book has been restructured. Restructuring provides a handy tool to hide stress IMHO and is a risk that investors must consider.

Traditionally, MFIs are able to absorb 8-10% credit costs because they have 15-16% NIMs. With a target 8% NIM, what kind of NPAs can Ugro capital absorb comfortably? Given that covid second wave is yet to hit, how much more stress can we expect to build on ugro books? I think these are pertinent questions all potential investors must ask themselves.

For me personally, I am still trying to decide whether to study the co in detail or not (have only read the VP thread until now). Even in a best case scenario where i absolutely love the co, i would not invest more than 1-2% of net worth in an unproved lender since it can blow up dramatically if asset quality cannot be maintained (growing 20x in 5-6 years while maintaining quality of book is not something that everyone can do, digital or not). An unproved NBFC is essentially exactly like a PE investment. Please ask PE firms whether they invest 5-10% of net worth into 1 investment. Just wanted to add a word of caution :smiley: hope nobody would mind. Also thanks to @Admantium for starting this thread.


In the latest Concall they said that restructuring could go up to 6 percent. I’d add another 2 percent to that too to be safe since covid 2.0 wasn’t so severe pre concall. BTW the company began disbursals in Jan 2019. So they had a full year pre covid. So they were as exposed to covid as every other institution when it hit. Considering that I’d say the npas and restructuring is well within limits especially for someone looking to invest at cmp. That being said you are right. The risks here are insane. I have tried typing out the risks above.
One needs to accept that they may never see their capital again here since almost everything is forward looking with barely anything to look back on and covid being the only real test to the company. However, with their current capital adequacy and cash in hand at cmp that risk is softened a bit though it could come roaring back a year or two from now when they scale. Considering the illiquidity exiting post a poor quarter/another ilfs or similar situation in the nbfc space could be a nightmare if large amounts are put here so one should only put capital here they are willing to forget about for the long term.

Disc: I am invested. I am not a sebi advisor. Not buy or sell recommendations. Please do your own due diligence before investing.


On the contrary, as per the FY20 AR, Mr Nath’s salary was as high as Rs 3.19cr and Mr Abhijit Ghosh’s salary was Rs 1.52cr.

Mr Nath does not have any shares individually, but he is a designated partner of Poshika Advisory Services LLP which had 4.28% of the shares in March 2020. There are other funds/corporates among the top shareholders, but I did not check Mr Nath’s ownership in those.

Mr Ghosh resigned as CEO and Director with effect from 30th April.