Credit and Finance for MSMEs: MSME loans disbursed via small business lending platform U GRO Capital have jumped 2.5X from Rs 1,278 crore in FY21 to Rs 3,138 crore in FY22. According to an exchange filing by the company on Tuesday, Rs 963 crore loans were disbursed during Q4 FY22, up 114 per cent from Q4 FY21, but down 8.5 per cent from Rs 1,053 crore loans disbursed during Q3 FY22, indicating some impact of the third wave of the pandemic. March disbursements had jumped 76 per cent to Rs 345 crore in comparison to Rs 196 crore loans disbursed during March 2021. 

“January (disbursement) during the fourth quarter was low due to the third wave of the pandemic. There was also the second wave impact. Despite that, we are exiting FY22 at over Rs 3,000 crore and we would be continuing to grow month-on-month. So, if we are disbursing nearly Rs 400 crore a month, we would be at almost Rs 5,000 crore disbursements in FY23 which is around 1.5X growth. However, I think we would grow at least 2.5X of FY22,” Shachindra Nath, Executive Chairman and Managing Director, U GRO Capital told Financial Express Online in an interaction.

April and May disbursements during the second wave last year had dipped to Rs 70 crore and Rs 68 crore respectively before bouncing back to Rs 193 crore in June and Rs 260 crore in July, according to the Q4 FY22 results shared by the company. However, details on the current number of MSME borrowers weren’t disclosed. As of December 2021, over 16,500 MSME loans were disbursed. 

In terms of defaults, the gross non-performing asset (NPA) ratio for the company was around 2 per cent while collection efficiency as of March 2022 was near 100 per cent. “Despite Covid distress, our portfolio quality has demonstrated that the MSME sector is resilient and if you have a method of collection driven by data and not by judgmental underwriting, you can create a good business,” said Nath.

The company uses artificial intelligence (AI) based underwriting model of US-headquartered AI-powered credit decisioning platform Scienaptic Systems for a better early warning signal mechanism for underwriting and to improve loan decisioning. 

U GRO Capital has already switched to the Reserve Bank of India’s non-performing assets (NPA) upgradation norms. The central bank February this year had extended the deadline for NBFCs to adhere to the new asset classification norms, issued in November last year, from March 31 to September 30. The new norms, which would bring NBFCs at par with banks, require loan accounts to be upgraded to standard from NPA only if all the arrears of interest and principal are paid by the borrower instead of upgrading accounts even if the complete dues were not cleared.  

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The RBI had also asked NBFCs to classify borrower accounts as overdue as part of their day-end process irrespective of the time of running such process and classify accounts as SMA as well as NPA as per the day-end process for the relevant date instead of month-end.

“We are entering into an era of collaboration between NBFCs and banks. So, if we have to make the co-lending model successful, then the two would have to come on a common platform. While there was a jump of roughly around 30 basis points in our gross NPAs because of the upgrdation but one has to adjust,” said Nath.

U GRO Capital has more than 53 digital lending partners on its platform such as Indifi, Lendingkart, and Kinara Capital; and around five co-lending partners such as SBI, Central Bank of India, ZipLoan, IDBI Bank, and more. The company launched the co-lending programme Pratham in July last year in partnership with the Bank of Baroda. The lending amount ranges between Rs 50 lakh and Rs 2.5 crore at an interest rate beginning from 8 per cent and a maximum tenure of 120 months.

“We are the largest player in co-lending in India. In Q4, we disbursed over Rs 200 crore loans under co-lending out of the total disbursements during the quarter. We are looking at almost 40 per cent of the loan originated in FY23 to be via co-lending model,” said Nath.

U GRO’s total revenues during the nine-month period ended December 31, 2021, were Rs 199 crore while net profit stood at Rs 8.46 crore vis-a-vis Rs 104 crore revenues and Rs 27.17 crore net profit during the year-ago period. The revenues and net profit for FY21 were Rs 153 crore and Rs 28.73 crore respectively. “We have generated significant profitability for the business. Absolute profit in FY23 would be 4X of what we would end up at in FY22,” added Nath.