ValuePickr Forum

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

Thanks to contributors for good discussion. Adding some thoughts/questions here

  • The USP has been mentioned as digital underwriting. Is it so unique? Ultimately it is aggregation of multiple variables/criteria’s to arrive at a decision. The Business Banking divisions of major banks (ICICI, HDFC) would have already cracked it, there can’t be such a huge difference in approval timelines.

  • Does the approval time difference of couple of days, if at all, matter so much in business loans? This is a long term relationship between the lender and borrower.
    Quite unlike a consumer buying electronics in a shop where they want instant approval. The SME/MSME problem is more of a formalization challenge then a quick approval game.

  • They have selected 8 key sectors for lending after some analysis. A closer look at them and the sub-sectors, I felt covers almost all possible businesses. It doesn’t help (identifying safe sectors), we know how the Education K-12 sector is reeling due to the Covid impact. Risks can pop-up anytime anywhere.

  • So I feel, this is pure micro NBFC and should be analyzed and valued as such. They need to prove themselves by performing across multi-year cycles. We as public market investors can enter after looking at the performance.

Having said this, I also feel the way they have setup the company, the investors and other points are quite interesting. So we should keep a track of how it performs going ahead.

Scuttlebutt by fellow valuepickrs can help here.

  1. They have lot of investors and if anyone has access to any of them, it will be good to understand their reasons for investing here.
  2. Hope someone lives nearby to their branch. Visit their branches and provide feedback from there.

p.s. - Btw, I found the pied piper like profile description of Mr. Nath on company website quite amusing. Its okay if some business magazine sings these paeans after company succeeds but on the company website? Does he really have the credentials & track record??


In my evaluation, no this is not very unique. Most lenders do this now.

Most lenders do this now.

Key differentiator here might be that they have built separate score card models for each sub-sector. Need to verify from industry experts like @manikya_saiteja_gund whether this is an industry norm or whether ugro has some sort of differentiated business model here.

Yes, agreed 100%. This is why i am closely following this thread, but not ready to invest yet. I feel there is definitely a lot of fluff in the IP about fintech but i do not consider it to be a big negative. A lot of companies do this. It is our job as investors to separate the wheat from the chaff, even insider an IP :smiley: that is why we are on ValuePickr.

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Thanks for initiating this thread @Admantium and for your valuable inputs @Malkd , @sahil_vi and others. Personally, have been tracking the business since Feb’20 and slowly building positions over the last few months to upto ~5% of my portfolio now. It has been interesting to see the repeated emphasis of the management on their corporate governance frameworks both within investor presentations and external talks. What has been more interesting for me was the transition in commentary or notes in some of the investor presentations (hence this post).

For eg: this was one of the first presentations I went through in early Feb/March 2020 I think and given my first filter is around management competency/shenanigans, it was interesting to see the below profile of Mr.Nath where 3/5 bullets referred to his experience at Religare.

Contrast this to the latest presentation wherein the team has explicitly mentioned a line about ‘misalignment in corporate governance leading to exit’

Despite the very valid concerns around corporate governance raised on this forum, the way I read this change in commentary is that the management is trying to be transparent. Obviously, the scalability and quantitative feasibility of this business is another story but just wanted to portray why this business cleared my first filter around corporate governance earlier.

Disc : Invested and biased. Not financial advice. Not SEBI registered.


Cheers @Soumyadeep_Majumdar
That is the only mention on public domain on why Mr nath left religare and it was so invisible that only someone doing extreme diligence could have found it. This alongside the barrage of corporate governance and social responsibility talks and mentions by management in both interviews and presentations re affirms that they are trying to ensure the public that their religare history is behind them.
We may never be able to sit in a room with mr nath and get direct answers from him but I’m sure the authorities have and trusted him and the PE funds did that too and threw money at him. As investors we tend to discount what it’s like to work in an actual company at high levels. Someone in a position that Mr nath was in wherein he has promoters above him, has employees to worry about under him, a goal to aim towards and a career you need to balance too would find it difficult to become a whistle-blower and blowing all of that up isn’t for everyone. Sometimes just walking away and trying to do better elsewhere is the only option. Thanks @Chins too for going down this rabbit hole with me. Hopefully we can just concentrate on the business performance now and we know what to look out for in the future.
Disc: same as above


Found one more source where Sachin Bansal (Flipkart) and Adar Poonawalla group invested in debt securities of Ugro in 2019. Here is the link

Hope this gives further assurance of Mr. Naths credentials/Character

Disc. Initiated tracking position recently

I’m going to attempt to answer a few FAQs here so everyone can get their answers regards all of the questions on here and we can get back to analysing the business:

Why are the net interest margins so low?
Ugro capital began disbursals in Jan 2019. As of now they have a majority of secured loans at 12 to 13 percent interest which take up nearly 70 percent of the portfolio. Unsecured loans take up the balance 30 and and their plan is to increase this allocation over the next few years once they have a vintage secure book. They also have zero new to credit customers since they are playing it safe with credit history customers. Their micro lending branches will open in 2 quarters and they are targetting approx 30 percent of new customers when they do begin. The margins here will be obviously higher too.
Their cost of income is currently around 10.12 percent which has dropped from 12 percent in just a year. This won’t decrease drastically anytime soon but should remain stable. They are targetting 9.5 percent in 5 years. Overall as costs decrease and their book gets more unsecured and new to credit customers the NIMs will icrease… Their target is 8.5 percent in 5 years.

What about gnpas?
Last year gnpas were under 0.1 percent but that is obviously not sustainable since they just began operations. Gnpas are currently 2.3 percent. This is obviously due to covid however one must remember that this is with a majority secured book and no new to credit customers. In latest Concall management confirmed that due to vintage book they would have had gnpas anyway but covid increased it. This is within their comfort zone though. Going forward as they target riskier segments(unsecured, micro, new to credit) Post covid the gnpas will increase anyway. So expect gnpas in this region for the next few years. When targetting high yields this is just the norm. If gnpas cross 5 percent and nnpas cross 3 percent is when panic needs to come in. As long as its within range however I wouldn’t be too worried. Currently 3.9 percent of their books are restructured and they expect a max of 20 percent more over covid 2.0. However, these are customers they are sure will pay but have short term issues. If they found someone with a really bad issue they did not offer restructuring and classified as npa. They have given sufficient provisions and are well capitalised so there is 0 existential threat here. So over the next few years NIMs will increase and expect gnpas of 2.5 or so percent. Again, if these suddenly balloon past 5 percent it would show somethings gone really wrong with their underwriting process. Uptil 4 to 4.5 percent max I’d be comfortable. Anymore and I’d be a bit worried.

What’s this sector based targeting?
The sectors and process is mentioned above. However I’d like to add that these sectors are very broad. For eg if a caterer supplies food exclusively to a school the caterer falls under the education sector since majority income is from there. This was an actual example taken from mr nath. Also when they move to micro lending ie under 25 lakhs they won’t be too fussed about sectors since they don’t see a difference between a pharmacy or kirana shop at that size(source latest Concall). So they have core sectors that they target and have created underwriting models for each of those with the help of crisil but they also have underwriting models outside of these sectors for micro and the models can pick up someone like the caterer above.

Do they handle digital lending?
Yes they will start that this fiscal year. But don’t panic. They aren’t doing a lenden club. They are targetting new customers not via Google etc but with tie ups with sectors and databases and then offering those loans to potential customers when they already pass their filters. They are limiting this to max 10 to 15 percent of their book. So don’t expect too much here and don’t get too worried either. We ll know more later this year when we see it in practice.
They also are bullish on colending via their platform too. They’ve already partnered with some big names and with recent rbi directives for colending they are expecting this to be a good source in the future.

Are they a fintech?
No and yes. You could consider tech side to be their digital lending platform which will contribute about 10 percent and their colending platform. They are just a normal Nbfc otherwise however they have embraced the use of technology. They have branches and gro partners that they disburse loans from and use their scorecard based sector models to help them figure out if their customer is credit worthy which takes them just 1 hour to get an inprincipal approval. Its then a human hand that gets involved just like any other Nbfc but due to the quick 1 hour approval by their scorecard(I’ve attached a screenshot from their corporate presentation which shows how they do it) they can spend more time on good leads rather than bad.

At the end of the day they use tech to improve efficiency just like anyone else. They have final approval and collection agents just like an other Nbfc so don’t expect gnpas to blow up as much as one would expect with a fintech… This is nt exactly one. BTW they’ve applied for a patent for their underwriting process and have won an award for it but at the end of the day humans look at the output and spend about 2 days deciding if the loan should be approved or not so imo overall whether you want to name them a fintech or a very digitally enabled Nbfc is just a label.

Are they a risky bet?
The corporate governance issues above regards Mr nath and religare are something you need to know about and need to decide for yourself regards that.
They are leveraged at just 0.59 times and are well capitalised and plan to increase leverage slowly so that isn’t a worry at all.
They are in a comfortable position to grow so that won’t be a issue either and giving money away is never a problem so they’ll continue disbursing loans too.
The risk is will they get the money back? You need to accept that NIMs are low now so you need to track that they increase over the next few years and that their gnpas remain on track.
Also, the liquidity is super low(at least upto this past week) and you need to see if you are comfortable with the way the company is structured such that the promoter percent is just 2.88 percent.
They also just do about 3 to 4 crores per quarter so far in normal tax conditions.
Their costs are huge currently because a lot has been upfront ie staff and branches etc. One needs to track that the costs come down to a more manageable figure(currently 7 to 8 percent… Ideally 1 to 2 percent) as their leverage and profits increase.
So while the potential is huge(their targets are in the investor presentation) the risks are now laid out for everyone to decide if its worth it or not.
Personally, Even though I’m invested and I’ve gathered most of the information available in the public domain im still not sure if the risk/reward is favourable even now.

Anyway, I hope this answers most questions that have been unanswered in this thread. My sources were the Concalls, video interviews and the corporate presentations. Cheers

Disc: Invested. Not a buy or sell reco. Not a sebi advisor.

  • I tried searching on google maps and was only able to locate 2 branches on it. Reviews were mixed and positive reviews across 2 branches were from same person. I checked if it is same for other small lenders as well, but I was able to locate branches for other small NBFCs.
  • On glassdoor some director level employee was calling it a ponzi scheme but it could be due to spite as well.
    I have not copy pasted the reviews or negative feedbacks from customers as they can hamper the brand’s image.
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They have 9 branches in total along with 25 micro branches. These 9 branches are real. All the addresses are on the company website in then contact us section(though I found an error with the Google map. Double checked the location though and it’s real)
The 25 micro branches are just touch points for sales in the vicinity of their main branches but in the more inaccessible areas. These are more like sales points in rural areas around their main branch that are difficult to reach. I don’t think these will ever be on Google. Their target market for these won’t be using Google maps and their aim would be to get this customer digitised(one of the examples from the Concall/interview was about how 70 percent of these customers find have their aadhar to phone linked so they need a different strategy in these areas) . I was worried about this too until I looked deeper and realised what was happening.
However I agree, while I understand the 25 microbranches I do agree they should improve the visibility and basic Google business and seo of their 9 branches especially for a company that has embraced digitization. I’ve attempted. To email the Cs. Let’s see if he responds.
I usually look at the overall reviews and flavour of the majority on glass door. Here there were too few so that one review stood out too. There are plenty of those single reviews on every company though. In time as their headcount improves we ll know the overall work atmosphere there but again… Now it’s just too early to gauge it.
Add these to the risks I’ve written above. Literally everything is an early phase here lol. I’m hoping all these issues get addressed as time Passes by.

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How come there is a sudden increase in volume? I do understand that a lot of new investors might be interested in buying after seeing the post here. But how come some i investors have started selling their shares?

The volume increase began the moment this thread was made and has been ultra weird. I noted this above in my comments. The liquidity is so low that I’m pretty sure the thread here has had some part to play and I’ve seen similar things happen in other companies with low liquidity. But the volumes were just too high yesterday vs normal. It can’t all be accounted to this thread. That got me looking deeper because it seemed fishy. I still have no idea what happened. Maybe there are still some shareholders from erstwhile chokhani securities who hold shares. The only time the volume was so high was when the ceo resigned. That led me down the path to dig even deeper to try and find out if there was anything I’d missed about the company. Seeing the volume and finding out about religare spooked me and I’m still not very comfortable with the liquidity situation due to this.

Disc: Invested. Not a sebi advisor.

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This heading of this thread does attract but when you compare with many big players like M&M financials at just 1.3 times of Book value appears to be far better and fundamentally strong company than ugro capital.
I Believe geographical risk also to be factored by any investor before taking investment decisions for any finance company.

New ratings update from the 21st of May, they’ve secured another small ticket NCD of 20 Cr.

The structurer is 4DegreeWater Private Limited (Wint Wealth) that provides fixed income security investment options to retail investors. Wint Wealth is backed by investors like Zerodha, Kunal Shah (Founder - CRED), amongst others.

Interestingly, all of the NCDs are PP-MLDs, and the maturity term is 8 years!

The Proposed PP-MLDs are linked to BSE Sensex 30(Reference Index), yield on the NCD depends on the performance of the Reference Index from the Initial Fixing Date to Final Fixing Date. The legal maturity of the transaction is 96 Months from the deemed date of allotment.

We can contrast this with the other NCD they have for 30Cr, given in the May 5th ratings report, and that’s due in 18 months.

@ganesh_bastwadkar the geography mix is already diverse.

Regarding M&M Financial Services, the similarities start and end with the current price and the book value. An immediate look at the sectoral mix tells you that one can’t compare the two…

Perhaps you could tell us more.

@hcpl2000, I was referring to the discussion surrounding the results and increase in prime loans in the IDFC thread, but that was an unsubstantiated example. I was pointing out that the governance structure at Ugro is set up in a way that Mr. Nath can’t make large decisions without the approval from the board (great check against misconduct), but the trade off is that you’d want him to make decisions in the same way that one is invested in IDFC First for Mr. VV’s leadership. I’ll remove that part of the comment as there isn’t any need to refer to IDFC.


Appreciate your efforts in providing the information but I would like to make a point that the scale of branches is only 9 which makes it vulnerable to shocks compared to strong players.

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Cheers @Chins.
The key trigger events too aren’t as ridiculously harsh as last time and shows the increasing trust and decreasing risk. The timing of this ie 21st may explains the huge increase in volume yesterday too so this kills off dual worries for me. I was terrified I’d somehow started a gamestopesque situation here accidentally and had even brought it to the notice of Donald sir since I dint want any trouble for anyone haha.

@ganesh_bastwadkar I’d recommend going through the posts from the start. One cannot compare an investment thesis here with the likes of m&m etc. The reason to invest here is to avoid legacy books and start afresh with a company that can grow while others survive. There isn’t a geography risk here but rather a size risk. This really is a small company and hence why they just have 9 branches. It’s about looking forward and seeing where they will be a few years from now and not where they are today ie if they are capable of opening their planned 45 branches and 225 microbranches by fy25

Disc: same as above


Another interesting aspect is the sellers. Volume increases on both sides. My suspicion is the sellers are the DII who want to get out desparately. Look at the dii ownership pattern and how it’s been coming down for years :


The actual number of shares owned by DIIs all follow this pattern shown here(I’ve just taken akakkus growth fund as the example). Back in 2018 they were allotted shares when only a few existed and the overall number of shares increased with the funding rounds. The actual number of shares owned is the same(and in this case kept on increasing) . I’d take Jan 2020 as the starting point since that is when majority of fund raising was completed and they actually began disbursals. Due to the restructuring and addition of a LOT of new shares up until January 2020 everyone just got diluted. There was some selling post Jan 2020 but it was not a huge amount (for eg Abu bakkar sold some 0.02 percent) but it was mostly stable.

I could be wrong in this assessment. I have never looked at the ownership of a startup in such huge funding stages and haven’t matched the dates with their funding exactly so Im not sure if I’ve got this right. Attaching indgrowth capital fund too below so anyone looking at this can confirm the same

Disc: same as above. Source is trendlyne


I actually got a response from the company secretary :)…

This is the full response. I’m just happy they replied(though the addresses in the presentation are what we already had before its Fantastic that they reply to retail shareholders and we can check on their Google update in a few weeks and see if they actually do it). Hopefully there’s a nice open line now to ask any queries that come up:

Disc: Invested. Not a sebi advisor


71 pages of investor presentation with zillions of dashboards, man, do they have a dashboard factory or something, joking.
Earning report displays the professionalism and willingness to share information with investors.
They seam to be having a strong analytics team through which they are extracting deep insights in to their customers
Disc: Invested 2% of portfolio, may increase to 5% based on future earnings. Not a recommendation for sure

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I would like to add here that on last Saturday I attended a webinar, wherein Nath sir was one of participants among many veterans. He discussed a lot about collaborative banking and suggested regulatory changes in that direction.

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UGRO Capital.pdf (622.5 KB)

They are Raising the funds but the quantum is not shared yet.

Thank you