Target: ₹179

CMP: ₹148.80

U GRO Capital Ltd (U GRO), a new-age, technology-enabled lending company focused on financing the MSME sector, has created its underwriting methodology that uses GST, bureau, and banking data to assess borrowers’ creditworthiness. The company expects to reach ₹20,000-crore AUM with over one million consumers by FY25, partly by deployment of technology across all business functions.

The company reported the highest operating profit of ₹38.9 crore, an increase of 20 per cent q-o-q and 169 per cent y-o-y, driven by loan growth (16 per cent q-o-q/97 per cent y-o-y), traction in its off-balance AUM at 35 per cent (29 per cent in Q2FY23), a sharp improvement in the yield on loans (10 bps q-o-q/140 bps y-o-y), and strong growth in other income (21 per cent q-o-q/144 per cent y-o-y).

Its co-Lending book AUM grew to ₹1,800 crore in Q3FY23 (35 per cent of total AUM) as against ₹1,300 crore in Q2FY23 (29 per cent of total AUM). The company is targeting an off-balance sheet AUM of about 50 per cent of the book in the next two years. Gross disbursement stood at ₹1,900 crore, up 78 per cent y-o-y because of aggressive distribution channels.

U GRO Capital has raised ₹3,000 crore in equity and debt capital from private equity and public market investors via QIP and preferential allotment during the past three years. Total debt stood at ₹2,900 crore and the overall debt to equity ratio was 3x, with lender count standing at 67 as of Q3FY23. We expect this capital to be sufficient for its off-book co-lending model.