Financial 'Sanjeevani' for MSMEs from U GRO Capital

In an exclusive conversation with SMEStreet, Anuj Pandey COO of U GRO Capital explained trends and his observations in the MSME lending space. The discussion precisely highlighted the status of economic & financial boosters that are designed for this sector in the post-COVID-19 scenario.

Please elaborate on the purpose of U GRO Capital and how was it started?

U GRO Capital is a small business lending platform which is applying knowledge & technology to bring useful credit solutions to customers. Our mission is to “Solve the Unsolved”, to bridge the large credit gap which exists for the MSME sector in the country.

The Company was founded and capitalized on the core belief that funding underserved MSMEs could only be accomplished through a novel combination of deep sectoral knowledge and use of innovative technology. To this end, U GRO Capital underwent an 18-month sector selection process alongside CRISIL, culminating in the selection of eight sectors which are systemically important to the Indian economy and make up ~50% of overall MSME credit.

U GRO Capital was incorporated in 1993 as an NBFC-ND, and has been BSE-listed since 1995, with a demonstrated track record of profitability. The Company was re-capitalised in 2017 by a consortium of global institutional investors and revitalised with a new management team. This was one of India’s largest institutional capital raises.

Can you please elaborate on key markets and sectors focused by you? What is the average loan size you offer?

We focus on 8 key sectors which includes Healthcare, Education, Chemicals, Food Processing/FMCG, Hospitality, Electrical Equipment and Components, Auto Components and Light Engineering. We offer unsecured loans up to INR 25 lakhs and secured loans up to INR 2 crore. Tenure for the unsecured loans is up to 36 months and for secured loans is up to 144 months.

What is the role of technology in your model?

For a model like ours, which caters to MSMEs and small businesses with a wide canvas of requirements, agility in our offerings and innovation centred processes play massive roles, so it is safe to say that technology is the backbone of our business. Data driven decision making is at the very core of what we do. We have consciously designed a “zero data loss” storage architecture, where every bit of customer data is stored for future analysis in a central repository. This is bolstered by API partnerships where bank statements, tax reports and credit bureau reports are converted to machine readable data. We have invested in globally acclaimed statistics and machine learning software.

To be able to serve in the post Covid environment, we have further added to our technology stack. We have invested in applications which will help us achieve a 100% digital journey with our customers viz. video KYC and E-sign for agreements. We are also working on completely digitizing the personal discussion process with customers.

Can you elaborate on Sanjeevani program?

The MSME sector, which was already feeling the effects of an economic slowdown coming into 2020, became capital starved by May 2020. ‘Sanjeevani’, which is an end to end digital platform, was launched during the pandemic induced lockdown to give a shot of revival to fledging small businesses and the MSME sector in an entirety.

The Sanjeevani program makes the whole borrowing experience simple and convenient by allowing the entire physical process of application filling, sharing documents, and getting disbursal to be completed from your workplace, and that too within 3-5 business days. The physical verification processes have been rendered completely digital through video KYC, video Personal Discussion and digital signatures for contactless loan disbursals of up to INR 2 Crore, and in doing so we became the first in the industry to offer an end to end digital journey.

How have you revised your risk assessment model post COVID- 19?

We are constantly evolving our risk assessment approach. In the current scenario, the focus is to identify stress arising in businesses which are solely due to the impact of Covid and then making an assessment on finding requirements which help these businesses stem the tide quickly.

We are doing this through in-house built algorithms which take into account and compare repayment behaviour and cash flows of customers Pre & Post Covid. We also project future cash flows for the customer looking at both micro & macro-economic factors.

How did Covid-19 impact the overall SME/ MSME segment and what initiatives can be taken to revive the segment?

The MSME segment has borne the brunt of COVID pandemic. A lot of livelihoods are likely to be lost. A recent letter by Consortium of Indian Associations mentioned that nearly 35% of the 650 million small businesses in the country are looking at business closure.

Government’s initiatives like the Moratorium offers, ECLGS scheme etc. have helped a lot, but much more needs to be done. More stimulus is required to generate demand and revive the economy.

Please share your thoughts on the outlook for business loans segment in India

MSMEs and small businesses have various fund requirements and expenses like working capital needs, unexpected work orders, expansion requirements. To cater to these needs, business loans are the best resort. The nature of the needs for various businesses might vary, but it does exist in one form or the other. Post Covid, issues related to delayed payments and Working Capital cycles getting elongated have only increased. So overall, need for business loans by MSMEs will continue to increase.

Lenders like us are constantly trying to innovate our product offerings and using analytics and technology to customize our offers to customers while maintaining a sharp focus on portfolio performance.

Post-Covid, what is the role of digital in the MSME Financing segment?

Of all the things that have been done, the pandemic has accelerated the digital transformation of the Business Lending segment. The situation of social distancing has demanded the lending segment to devise processes which are contactless, data driven and quick. The logical outcome of this is the introduction of Video KYC, Video Personal Discussion and Digital Stamping or E-signatures. This is complimented by integrating machine learning based customer assessment and approval processes.