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.