U Gro Capital | An Overview

December 2018
The SME Lending Market
A large yet untapped market opportunity

2
India represents a large, significantly underpenetrated market

One of the largest and fastest growing However, the credit to GDP ratio is still Significant government impetus and for
economies in the world much lower than other markets the growth of credit
GDP PPP – US$ Tn, Real GDP Growth Total credit to non-financial
corporations as a % of GDP ▪ Grant of universal banking, payment banking and
25.1 small finance banking licenses
20.2 160.0%
▪ Focus on financial inclusion – Jan Dhan Yojna,
99.9%
10.3 73.6% Pradhan Mantri Awas Yojana
5.5 44.8% 54.3% 49.1%
4.2 4.0 ▪ India Stack – Cashless, Paperless, Presence-less
China US India Japan Germany Russia China US India Japan Germany Russia
6.9% 2.3% 6.7% 1.3% 2.2% 0.19%

Leading to high credit growth in the country led by the NBFC sector

Total credit to the private non-financial

sector, US$ Bn Credit Growth rate (%)
21.2
1,426 17.9 18.8
1,080 1,155 1,219 1,236 15.6 16.6
14.6
The overall lending market in India
is expected to grow at 10-11% with
14.1 13.9
10.9 10.0
NBFCs growing at 15-17% over the
9.0 8.2
next 5 years
2013 2014 2015 2016 2017 FY13 FY14 FY15 FY16 FY17 FY18

Bank NBFC

3
The lending market can be broadly divided into three segments…

-• Constrained credit growth

Corporate,
-• Structural issues

Infra,
-• Higher NPA

Real Estate
-• Low Rating and Leverage
-• Long term sustainable ROE is challenged
-• No Equity Value Creation.

+• Healthy credit growth

-• Current players are limited by credit availability, lower
SME assessment ability & distribution reach.
+• Pricing Advantage & Structural support available.

+• Favorable demographics
+• Increasing income
Consumer +• Increasing debt appetite
-• Faced with heavy price competition
-• Need strong capital base and long gestation period.
PSU Banks PVT. Banks NBFC
▪ ¾ of total credit ▪ Increasing NPA ▪ Diversified geographical
▪ Limited by high NPA ▪ Limited Geo. reach presence
▪ Low CAAR (Basel-III) ▪ Limited assessment ▪ Higher assessment Current Scenario Future Projection
▪ Systematic issues ability ability
▪ Limited by cost of funds
and capital investment

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.. of which the SME segment is the most under-served

India lags behind other emerging markets when With most SMEs depending on either self
it comes to credit access for MSMEs financing or informal channels
120%
% of MSMEs that have access to credit Source of SME financing
30% 31% 100%

14% 14% 16% 16% 18% Family

80% Savings
70% of the market
60% Family still funded
India Mexico Malaysia Russia Argentina Brazil Poland Business
through the
Although MSMEs account for 45% of the Indian
40% Own Savings equity of the
The SME financing opportunity is large Self - Equity owner/family
Industrial output – the segment has been starved for 20% Debt - Formal
capital from formal sources Expected to become a USD 600+ Bn market Sources
0%
Category 1
616
CAGR 17%

NBFCs have been stepping in to fill the need 237

Fragmented market with very few specialised
gap in the market players
FY16 FY18 SME lending market share
FY17 FY23P
US$ Bn
IndiaBulls LIC HF DHFL Shriram City Union
PSU Private HDFC Cholamandalam Bajaj Finance Capital First

banks banks PNB HF Others

NBFC NBFC
PSU Category 1
Private
banks
banks

Market dominated by large LAP providers and diversified

Diversified geographical presence and more NBFCs – Absence of players with specialized focus on the
specialized assessment ability provide NBFCs the SME segment
competitive advantage 5
Specialization is key to success in the SME lending space…

Challenges in lending to the SME segment

?
Difficult to understand Fragmented set of High cost of customer High dependence on Lack of
businesses/cash flows customers acquisition the ecosystem data

How specialization helps

Products Distribution Credit & Portfolio

▪ Create broader, more customer centric
product offerings
▪ Ability to design products that have EMIs,
tenors, collateral customized to the
customer business and cash flows
▪ Ability to build and sell customized third
party products like insurance
▪ Build proprietary, differentiated and
customized distribution channel
▪ Better selection/appraisal of the
distribution channel due to the dedicated
focus
▪ Understanding of customer needs which
helps in ecosystem based lending strategies
▪ Greater homogeneity leading to better
understanding of risk
▪ Deep understanding of the ecosystem and
hence cash flows, funding needs and risks
▪ Ability to leverage data from public sources
▪ Ability to assess macro-environment to
build early warning systems

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… leading to the emergence of niche, focused SME lenders in India
Focus: K12 Segment
AUM: INR 1,000+ crores
Capital Raised: INR 300+ crores
Sector Focused Geography/Segment Focused
Focus: Tamil Nadu/sub-prime Focus: Rajasthan/sub-prime
Focus: Travel, Hospitality AUM: INR 1,000+ crores AUM: NA
AUM: NA … Capital Raised: INR 1,000+ crores Capital Raised: INR 100+ crores
Capital Raised: INR 100 crores
Specialized
NBFCs
Product Focussed
Online Community
Focus: Loans against machinery Focus: POS Lending
AUM: INR 400+ crores AUM: ~INR 1,000 crores
Capital Raised: INR 100+ crores Capital Raised: INR 400+ crores
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The U GRO Incarnation
The Assimilation of Aspirations

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Reputed founder backed by marquee private equity funds

Mr. Shachindra Nath

Executive Chairman and Managing Director

▪ After 26 years of working with large corporates, Mr. Nath decided to embark on his entrepreneurship journey by acquiring
control of a listed NBFC - Chokhani Securities Limited
▪ As the Group CEO of Religare from 2010, he had led the entire integrated financial services business of the group - SME
focused lending, Retail Broking, Life Insurance, Health Insurance, Mutual Funds, Capital Markets, Investment Banking and
Asset Management
▪ Some of his marquee achievements include successfully leading the IPO process for Religare in 2007, establishing new
businesses as well as stitching together successful joint ventures and partnerships together with global financial services
firms
▪ Mr. Nath is a qualified lawyer and a University Rank holder from the Banaras Hindu University (India)

Key Investors

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Management team with a strong track record of execution…
Abhijit Ghosh - Chief Executive Officer
▪ Over 25 years of experience across BFSI, Consumer, Telecom,
healthcare
▪ Was the President & CBO of Religare Finvest where he managed
an AUM of INR 18,000 crores and 1,500+ employees
▪ Alumnus of Kellogg, XLRI, HAYS Group
▪ Previously worked with
Manish Agarwal - Chief Risk Officer
▪ Over 20 years of experience in underwriting, credit policy review,
business risk management and portfolio management
▪ Over INR 1,20,000 crores of portfolio managed
▪ Chartered Accountant from ICAI, ICWA
▪ Previously worked with
Anuj Pandey - Chief Operating Officer
▪ Over 19 years of experience in product & strategy, P&L management,
business planning, and portfolio management
▪ Over INR 12,000 crores of AUM handled
▪ BE from Thapar Institute and PGDM from IIM Lucknow
▪ Previously worked with
Kalpesh Ojha - Chief Financial Officer
▪ Over 20 years of experience in treasury, corporate finance, fund
raising
▪ Was the ED and CFO of Aspire Home Finance
▪ Chartered Accountant from ICAI and Masters in Financial
Management from JBIMS
▪ Previously worked with
J Sathiayan - Chief Business Officer
▪ Over 25 years of experience in managing large sales &
distribution setups, portfolio review and collection management
▪ Over INR 8,000 crores of AUM handled
▪ BE from Sastra University
▪ Previously worked with
Rajni Khurana - Chief Human Res. Officer
▪ Over 18 years of experience in human resources management,
performance and talent development, employee engagement
▪ Masters Degree in Human Resource Management
▪ Previously worked with
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… and guided by an independent board comprising of industry stalwarts
Name Designation Description

Shachindra Nath ▪ Over 26 years of experience across lending, insurance and asset management
Executive Chairman & MD
▪ Qualified lawyer and a University Rank holder from the Banaras Hindu University (India)

Abhijit Ghosh ▪ Over 25 years of experience across BFSI, Consumer, Telecom and healthcare
Chief Executive Officer & Director
▪ Alumnus of Kellogg, XLRI and HAYS Group

Satyananda Mishra Independent Director, Head of the CSR ▪ Ex –Chairman of MCX and the Chief Information Commissioner of India
Committee ▪ Over 40 years with the Indian Administrative Services (Batch of 1973)

Rajeev K. Agarwal Independent Director, Head of the ▪ Ex-Whole time member of the SEBI
Stakeholders Committee ▪ Over 30 years of with experience with SEBI, FMC and Indian Revenue Service (Batch of 1983)

NK Maini Independent Director, Head of the Risk ▪ Ex-Deputy Managing Director of SIDBI
Management Committee ▪ Over 38 years with experience in prestigious organizations like SIDBI, UCO Bank and IDBI

Abhijit Sen Independent Director, Head of the Audit ▪ Ex-CFO of Citi, Indian sub-continent
Committee ▪ Over 20 years of experience in corporate treasury, financial planning, product control and tax

Ranjana Agarwal Independent Director, Head of the ▪ Ex-Senior Partner, Deloitte

Nomination & Remunerations Committee ▪ Over 30 years of experience in audit, tax, risk assurance and due diligence

S. Karuppasamy Independent Director, Head of the ▪ Ex-Executive Director of Reserve Bank of India
Compliance Committee ▪ Over 40 years of experience with the RBI across various departments

Chetan Gupta ▪ Managing Director, Samena Capital

Non-executive Director
▪ Over 15 years of experience in private equity and equity research

Amit Gupta ▪ Founding Partner, NewQuest Capital Partners

Non-executive Director
▪ Over 20 years of industry experience across investment banking and PE

Manoj Sehrawat ▪ Founding Partner, ADV Partners

Non-executive Director
▪ Over 22 years of experience in PE, distress debt acquisition and resolution, and restructurings

Represents an independent director

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…supported by a strong, “fully formed” second layer team…

ED & CEO
Abhijit Ghosh

CRO COO CFO CHRO CBO CGO Head Legal/

Manish Agarwal Anuj Pandey Kalpesh Ojha Rajni Khurana J Sathiayan ETJ Compliance
Rajiv Kumar

Head – Policy Head - Marketing Head Treasury Regional HR (2) Corporate Channel Sector Heads (8) Company Secretary

Compensation & Regional Heads (5) Corporate Legal

Head – Collateral CTO Finance Controller
Benefits Branch Heads (3)

Head- Head -Product & Learning & Business Head –

Investor Relations
Underwriting (2) Strategy Development BFSI

▪ Policy of hiring only 4/5 rated

Fraud control &
Audit
Head- Analytics HR operations
Business Head –
Co-lending
employees
▪ A deep and large ESOP pool to
ensure the long term alignment
Head Collections &
Litigation Head - Operations of incentives

Head - Cross-sell

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The U Gro ethos | High levels of corporate governance

❶ Choice of a listed vehicle: High degree of regulatory oversight, transparency and the ability to create an institution for perpetuity

❷ Corporate Governance Code: The U Gro Corporate governance code that captures best practices is enshrined into the Articles of Association
▪ A Strong Board:
▪ Independent directors to comprise more than half of the Board (Currently 6 of 11 members are independent)
▪ Any shareholder holding more than 10% in the company to qualify for a board seat
▪ Key committees like NRC, Audit, Risk Management to be headed by an independent member with required credentials
▪ Auditors: Mandatory requirement for a Big 4 firm to be appointed as the statutory and internal auditors
▪ Deloitte appointed as the statutory auditor and PWC appointed as the internal auditor

❸ Organization Structure:
▪ Strategy driving structure → Unlike other NBFC start-ups, all key positions have been filled with senior individuals with more than 20 years of
relevant experience
▪ Collections head, collateral specialist, policy head appointed on day one
▪ Clear line of separation between risk/credit and the business teams to ensure independence of the risk/credit function

❹ Processes and policies: Systems and processes in place to ensure checks and balances
▪ Any loan disbursed by the Company exceeding 1% of the net worth or to a related party to require the unanimous approval of the Asset –
Liability Committee and be subject to the approval of the Board
▪ SOPs for all critical processes, board approved credit authority delegation matrix and deviations from policy to need C-level approval

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Our journey so far | Capital raise through multiple modes…

First Round of Preferential

Formation of Chokhani Securities Qualified Institutional Placement
1994 - 2017

Allotment

Dec, 2017

Aug, 2018
1994: Formation of Chokhani Raised INR 435 Cr of capital from Raised INR 112 Cr of capital from
Securities global private equity firms - ADV public market funds, insurance
1995: Listing of Chokhani Securities Partners, NewQuest and IndGrowth companies and private equity funds
2004-Present: 14 year track-record of
profitability

Acquisition of Chokhani Securities Disbursements

to begin in

May, 2018
(later renamed as UGro Capital) by
Dec, 2017

Shachindra Nath followed by a

revamp of the management team Raised INR 192 Cr of capital from
January
Approval for the demerger of the large family offices / HNIs through a
lending business of Asia Pragati – INR preferential allotment of shares
175 Cr

Reinvigoration of Chokhani Second Round of Preferential

Securities Allotment

| One of the only companies in the lending space to start with INR 950+ Cr of capital | The listed company structure provides access
to permanent source of capital |
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…leading to a highly diverse shareholding structure

Calculation of Shares Outstanding Shareholding Pattern (Fully Diluted Basis, Post the demerger)

# Shares Issued & Outstanding (as on November 30, 2018) 1,98,43,110

IndGrowth Others
5% 15%
Add: Dilutive Instruments Promoters
4%
Samena
Compulsorily Convertible Instruments 3,11,62,792 16% Initial fund raise from large
PE funds, public market,
Warrants 87,83,785 NewQuest insurance firms, family offices
21%
and HNIs
Total Shares Issued & Outstanding (Fully Diluted Basis) 5,97,89,687
PAG
18%
Add: Total number of shares to be issued post demerger 1,35,65,892
ADV Partners
Total Shares (Fully Diluted Basis) 7,33,55,579 21%

INR 37 Cr INR 611 Cr INR 130 Cr INR 175 Cr INR 953 Cr

Initial Capital in the Capital raised through Capital raised through Capital to be raised Overall Capital
acquired company shares/CCPS/CCDs issuance of warrants through the demerger Infused

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Our Mission

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Our Mission

To Solve the Unsolved

India’s US$ 600Bn SME

Credit Availability
Problem

17
Our Approach
Know More,
Grow More
Deep sector specialization
to understand, reach, and
service the customer better
Fin-touch +
Fin-tech
Leverage the best practices of
traditional NBFCs and the
modern fin-tech providers to
create a technology and data
centric organization
Liability
First
Create an organization that
pro-actively address the
‘needs’ of rating agencies and
liability providers
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Know More, Grow More
Sector based approach to specialization

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Deep analysis of macro and micro economic factors…
180+ Sectors

Demand
Working Impact of Sector specific
supply gap & Input Environmental
Capital change in government
cyclicality in risk issues
Cycle technology policy
demand
Criteria

Asset Upgrade &

Revenue EBITDA Median Interest
Turnover downgrade Gearing
Growth Margins rating coverage
ratio ratio

20 Sectors

Relative
Future business Size of lending Criteria Impact of regulatory
competition
prospects opportunity developments
lending

Top 8 Sectors
An 18 month process involving extensive study of macro and micro economic parameters carried out in conjunction with market
experts like CRISIL
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… to arrive at a set of eight sectors…

Healthcare
▪ Unlike most NBFCs that have a negative sector list, U Gro
Light
will have a positive list of sectors that we will lend to Education
engineering

▪ Even within these sectors, U Gro has selected 38 sub-

sectors on which to focus
Auto Top 8 Chemicals
▪ Ratified by components Sectors
▪ These 8 sectors constitute ~50% of the overall lending
market Electrical
Food
equipment
processing/
and
— Validated independently by CRIF, CRISIL and the FMCG
components
company distribution team Hospitality

Relatively lesser
Large lending Lower impact of Secular consumption Low geographical
competition from
opportunity regulatory changes driven growth concentration
banks

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…and sub-sectors and key clusters to focus on

Key Sub-sectors: General nursing Key Sub-sectors: K-12 Schools, Play Key Sub-sectors: Dyes and pigments,
homes, eye clinics, dental clinics, Schools bulk and polymers, agro-chemicals,
diagnostic labs, radiology/pathology Key clusters: NCR, Mumbai, other chemicals (except specialty
labs, pharma retailers Coimbatore, Chennai, Hyderabad and chemicals)
Key clusters: NCR, Mumbai, Bengaluru, Pune Key clusters: Mumbai, NCR,
Hyderabad and Chennai Ahmedabad, Vadodara and Surat

Healthcare Education Chemicals

Key Sub-sectors: Fine dining Key Sub-sectors: B2B, B2C

(standalone), QSRs, fine dining chains, Key clusters: NCR, Pune, Bengaluru,
manpower agencies, boutique hotels, Chennai, Aurangabad and Rajkot
guest houses
Key clusters: NA

Electrical equipment
Hospitality and components

Key Sub-sectors: Engine parts, drive
transmission and steering parts, body
and chassis, suspension and breaking
parts, electrical parts, other
equipment, traders
Key clusters: NCR, Mumbai, Kolkata,
Hyderabad and Bengaluru
Auto components
Key Sub-sectors: Dairy and dairy
products, non-alcoholic beverages,
consumer foods, poultry, sea food,
food and beverage traders
Key clusters: NCR, Mumbai, Chennai,
Hyderabad and Pune
Food processing/FMCG
Key Sub-sectors: Casting and forging,
medical equipment and devices, pipes,
process control instruments, traders
Key clusters: NCR, Chennai, Pune,
Ludhiana, Bengaluru, Ahmedabad and
Rajkot
Light engineering

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Product Approach

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Product Offerings
Moving beyond conventional products…

Secured Loans Unsecured Loans Supply chain financing

Ticket Size: INR 50 lakhs to 5 Cr Ticket Size: INR 10 to 50 lakhs Ticket Size: INR 3 to 30 lakhs

Interest rate: 10.5% to 12% Interest rate: 16% to 19% Interest rate: 13% to 15%

LTV: Up to 80% LTV: NA LTV: NA

To create sub-sector specific products by modulating the following attributes to meet customer requirements…

Collateral Assessment Tenor Loan Pricing

Parameters Structuring

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Deep sectoral understanding leading to finely tailored solutions
Loan structuring
Ability to offer structured disbursement
and repayment solutions
Scenario: Hospitality/restaurants; franchise set up
▪ 1st disbursal – Rs 50 lac security transferred to master
franchisee account – repayment to start post 6M
▪ 2nd disbursal – Rs 1 crore to borrower for infrastructure
development – repayment post 6M
▪ 3rd Disbursal – Rs 3.5 crores after 3 months of first disbursal
as a line of credit, valid for 12M, quarterly bullet repayments

Collateral Methods of assessment

Movable/ Immovable | Financial |Banking|Turnover |
Property
Scenario: Education Industry
Scenario: Healthcare
▪ Future fee receivables of an educational institute to be
taken as primary collateral along with the institution
Sector based ▪ Super distributor supplying to retailers; data on prospective
borrower is provided by super distributor
building as a secondary collateral for a secured loan product ▪ Data includes monthly / yearly procurement and payment pattern
parameters which is used to create customized products
▪ Sales and recovery report from the supplier / super distributor
are taken as document proofs

Tenor
Pricing
Rate of Interest / Processing Fee
3 Repayment Frequency/
Repayment Period
Scenario: Type of collateral available in a sector
▪ ROI to vary basis the collateral available Scenario: Education
▪ Self occupied residential property to have lower ROI as ▪ Repayment frequency to match the frequency of fee receipt
compared to a vacant residential property ▪ If the fee is received once in a quarter, the EMI frequency can
▪ Education institute building/ Hospital buildings to have also be structured accordingly.
higher ROIs.
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Illustrative Examples

Based on our sectoral capabilities, we would deliver customized solutions, faster TAT, better yields through a combination of higher loan to value and
exposure limits, vis-à-vis being a pure play LAP focused lender

Sector Sub-sector Products (basis cash flow) Assessment Parameters Collateral

Term loan for capacity expansion/upgradation.
Hospitals Medical equipment financing
Healthcare Working capital term loans
General Practitioners/
Equipment financing, working capital loan
Diagnostic labs
Receivables discounting, supplier chain
Medical Devices
finance, working capital loan
Number of patients per day, Doctor’s
experience, Bed capacity, Share of IPD
revenues
Combination of property
Vintage of practice, Quality of (business + personal),
equipment, Degree of practitioner inventory, receivables
Area covered, Client concentration,
Length of relationships with customers

Education Term loan for capacity expansion, working Promoter's experience, Number of
Schools - K12 existing branches, Type of locality
capital loan Combination of property,
Number of branches, premises owned or fees receivable
Vocational Institutes Primarily working capital loan
leased, Increase in salaries

Receivable discounting, supply chain finance, Ability to pass on price hikes, Average
Auto components
Auto term loan, working capital credit period, Discounts offered
Primarily work capital loan, working capital Location of the entity, type of dealer Combination of property,
Auto dealers
term loan (distributor, stockiest) inventory, cash flows
Auto shop traders Primarily working capital Area covered, turnaround time,
proportion of slow moving inventory

26
Distribution Approach

27
Client Acquisition Strategy

Channels Role
Direct Sales Agents
Traditional Channels

▪ Develop strong relationships with DSAs and DSA aggregators operating in target segments / geographies
▪ Driven by competitive commissions/ sales contests, faster processing, better experience, etc.

Branch Sales Team ▪ Leverage branch sales teams for customer acquisition through outreach/ walk-ins; support with technology
▪ Build targeted sales force with sector / segment experience and community understanding to ensure deep knowledge of
customers

Channels Role
Evolution of
Digital Channels ▪ Leverage third party digital origination platforms for lead sourcing, if available in specific segments the U Gro
▪ Create own digital channels – to acquire directly and as a support to own sales force distribution
▪ E.g. Partnerships with loan aggregation platforms network
New Channels

Industry Partnerships
▪ Develop partnerships in prioritized segments with key participants e.g. sector specific lenders, industry bodies
▪ E.g. Anchor led supply chain financing, partnerships with equipment suppliers

Co-lending with NBFCs

▪ Partner with specialized NBFCs in order to co-lend with the partner
▪ E.g. Partnerships with NBFC specializing in K12 lending

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Distribution Network

Locations identified through extensive analysis of portfolio and

Rigorous DSA Selection Criteria
SME cluster performance

▪ An initial list of 130+ channel partners arrived at post rigorous vetting of

1,200+ DSAs
▪ Selection criteria
Branch Office
‐ Minimum three year track-record
Head Office ‐ Infrastructure Readiness
‐ Portfolio performance: Bounce rate, NPAs
Delhi
▪ DSAs selected have a track-record of acquiring INR 5,000+ Cr on a monthly
Jaipur
basis
▪ An onboarding fee charged from each channel partner – A first in the
Ahmedabad
industry
Kolkata
Mumbai
Hyderabad
Partnerships to boost productivity of sales team

Bangalore Chennai ▪ Analytics led pre qualification basis data available from partner platform
▪ Upfront application of underwriting rules using data-driven indicators
▪ Partner-led customer campaign with pre-populated eligibility amount/
rates
▪ Personal discussion by credit manager to be done before disbursal
Phase I - Locations

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Credit Appraisal and Portfolio Approach

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Credit Appraisal Process | A Three Pronged Approach

File Flow For A Secured Loan In principal

approval in 60
~8 segment specific mins
statistical scorecards

Pre-defined Statistical Sub-sector ~Sub-sector specific

Sourcing Channel Data Enrichment PD templates
Criteria Met? Score-cards Policies
▪ Sourcing through a mix
of channel partners
and own staff Criteria 1,000+ Parameters
▪ AI based OCR software evaluated Feedback
▪ Channel partners with ▪ Defined ticket size, Loop
direct LOS integration sectors, turn-over Expert
▪ Geographical location 20+ Data Sources Scorecards
▪ Borrowing history ~30 sub-segment
specific
scorecards

Data and Analytics Led Experience Led

Onward processing towards disbursal
Quarterly
Monitoring Loan Approved Pre-approval checks

▪ Legal verification
▪ Fraud Control Unit Check
▪ Field Investigation
Final approval in ▪ Valuation
48 to 72 hours
Physical Verification/Visit Led

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Credit Scoring Model – Currently being used by NBFCs / banks

Parameters Factors Factor weightage

Increase In ATNW in last 2 years 2%
EBITDA margin for the last audited year 4%
Current Ratio 10%
Financial Risk TOL/ATNW 5%
Business Risk
10% Inventory + Debtor Turnover Period 3%
Total Debt to NCA 3%
Financial Risk Interest Coverage 3%
30% Promoter property profile / Net worth 12%
Management
Parameter Risk Promoter Bureau 5%
Weights Business Vintage in the same line of business 3%
Transaction
Number of business loans taken 10%
History
40% Credit summation as percent of TO 6%
Management Risk
Transaction Average limit utilization in last 6 months 6%
20%
History Interest servicing for last 6 months 8%
Overdrawing in OD/CC Account 5%
Inward cheque return due to financial reasons 5%
Supplier concentration 6%
Business Risk
Buyer concentration 4%

Generic template for all companies within the SME space | Focus only on financial parameters

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Data based decision making
Ability to front-load the entire credit assessment cycle
‘’Destination state” data infrastructure

▪ Universal data environment storing data from all source systems, such Credit evaluation
as LOS, LMS, Accounting, HRMS ▪ Borrowing and repayment history
▪ 360 degree view of financial assessment through credit bureau, ▪ Sales transaction data from
financials, banking data all coming into one platform partner platform
▪ Digitization of traditionally unstructured information such as
Personal Credit Appraisals, FI data, collateral valuation data, policy
parameters
▪ API integrations making it possible to bring a fast evolving data Verification of authenticity
ecosystem into the fold ▪ Negative database de-dups
▪ Comprehensive litigation search
▪ Other entity linkage

A fast evolving data ecosystem

Customer Credit Business Location/ Business prominence

Verification worthiness footprint Property ▪ Presence in listing sites
▪ Promoter and company profile on
social media

Collateral valuation
▪ Using places data, base property
price index & borrower profile in
the neighborhood

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Proprietary Statistical Scorecards For Assessment At The Application Stage

Illustration of scorecard benefit: Default rate across score ranges Visible reduction in residual default rates after removing bottom 20%

Segment overall default rate

‘Bad rates’ across intervals Healthcare 0.56%
3.45% 0.18% Bad rate post removing bottom 20%

Chemicals 0.90%
0.16%

Auto parts 0.76%

0.28%

Education 0.85%
0.34%

Hospitality 1.23%
0.60%
1.23%
Electrical equipments 0.49%
0.15%
0.75%
0.56% Food processing 1.20%
0.40% 0.45% 0.44%
0.26%
0.12% 0.08% Light engineering 0.74%
0.00% 0.24%
718 751 798 823 846 871 907 980 1341 1500

▪ Scorecards developed in consultation with CRIF basis 80,00,000 loans in the bureau database basis borrowing behavior
▪ Loan base selected on ‘look-alike’ basis to resemble target segments after filtering out known negative segments with high default rates
▪ Analyzed ~ 1.43L loans and more than 850 parameters
▪ Prediction of default using logistic regression method, validated statistically – GINI coefficient: 60%+, KS statistic score: 45%+
▪ Score able to eliminate ~70% of ‘bads’ by rejecting 20% of population

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Expert Scorecards
Case A: Less than 20 bedded nursing home Case B: 20-50 bedded nursing home Case C: 50-100 bedded nursing home

Financial Facility
20% Facility 20%
Facility Financial 30%
40% 40%
Financial Operational
60% 20%
Operational
40% Operational
30%

Parameters Factors Case A Case B Case C

Vintage of the entity 20% 15% 10% ▪ Combination of operating parameters
Facility Doctor’s Experience 20% 15% 10% specific to the sector and financial
related Arrangement with pharmacy unit 30% 30% 40% parameters
NAHB accreditation 30% 40% 40% ▪ Scorecards developed in consultation
Share of IPD revenues in overall nursing home revenue 15% 20% 20% with CRISIL market experts combining
Share of insurances cases in overall IPD admissions 15% 20% 20% market research with CRISIL’s in-house
Share of government empanelled cases in overall rating knowledge
Operational 10% 10% 10%
insurance admissions ▪ Methodology
Occupancy rate 30% 20% 20% — Scorecards based on 1,000+ personal
Revenue per occupied bed 30% 30% 30% interviews across 9 locations,
Operating margins 15% 15% 15% collecting responses for over 50+
Return on Capital Employed 20% 20% 20% curated questions for each sub-sector
Financial Interest coverage 30% 30% 30%
Asset turnover ratio 20% 20% 20%
Receivable days 15% 15% 15%
Sector: Healthcare
Sub Sector: Nursing Homes
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Strong Risk Management Framework

PORTFOLIO LEVEL RISK ENTERPRISE LEVEL RISK

Appraisal Asset Liability Management

Policies and deviations are standardized
Liquidity equivalent to 6 months of liability and 2 months of
Completely automated CAM to prevent manual errors and advances to be maintained at all times
ensure quality/shorter TATs The one year bucket mis-match will be positive or equivalent
Data pulling from source through APIs mitigating fraud to zero
Asset strategy influenced by liability strategy
FCU Checks
An independent team with deep market expertise
Partnerships with multiple FCU agencies and Hunter
Fraud Risk
Property appraisal
Background/Fraud checks on all outsourcing partners,
Collateral specialist hired
agencies and employees before onboarding
2 valuation agencies appointed for loan disbursal > INR 1 crore Seeding checks conducted regularly
FI verification
Personal visits by employees
Geo-tagging of customer location Operational Risk

End-to-end automation of FI initiation and completion Standard operating procedures defined for all processes
Early warning systems
End to end automation of processes to limit manual
Automated, analytics led, early warning systems basis intervention
proprietary rules framework incorporating social, sector,
macro-economic feeds
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Fin-touch + Fin-tech
Building a Technology enabled organization

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Hybrid Lending Model
Traditional – Fin-Touch
Traditional credit assessment models like
CIBIL scores
Physical processes such as visits to customers
Focus on collateral driven lending
Limited to term loans
Alternative – Fin-Tech
Alternate credit assessment models
leveraging analytics + publicly available data
Leverage technology to automate processes
thus reducing manual errors
Fin-Touch + Fin-Tech
Adopting a hybrid model
comprising best practices of Unsecured credit solutions
traditional lenders and
modern fin-tech companies
Variety in loan products
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The U GRO business model is backed by a “best in class” technology design…
Process
automation
System driven workflows at every
stage of the customer journey
▪ 15 different eligibility assessment
templates
In place ▪ 10 product specific onboarding modules
▪ 100+ policy rules digitized
▪ 40 APIs integrated
▪ 30+ credit scorecards configured
▪ Partner integrations
▪ Portfolio monitoring systems
Planned
Transaction
experience
Customized user interfaces for
internal and external stakeholders
▪ 12 user categories to participate/view
▪ Customized screens for collateral
assessment, FI, FCU
▪ Lead Management System
▪ Dedicated DSA screens
▪ Customer self service
▪ Chatbots
▪ Collection modules
Rapid
scalability
Cloud based architecture and
customization-oriented design
▪ All rules put in configurable box – easily
customizable
▪ End-to-end workflows on system
▪ Integration friendly design
▪ Cloud based architecture
▪ Integrate a large partner ecosystem,
facilitating innovation in risk
management & business acquisition
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..to complement traditional “touch and feel” across the value chain

Sourcing Verification and Disbursal Collection and Recovery

▪ Online process to augment traditional fraud ▪ Collection and litigation team already in place
▪ Partnerships with traditional/digital
control process ▪ Analytics led predictive collection model to
marketplaces to create customized offerings
▪ Collateral management team in place before start optimize efficiency of field collection
▪ Intuitive client and partner UI to
of business ▪ Bucket-wise collection strategy
streamline onboarding
▪ DSA integration into U Gro’s LOS

Underwriting Portfolio Monitoring

▪ End to end paperless journey with touch and
feel checks
▪ API integrations to pull credit bureau, financials,
social, legal and other relevant data
▪ Statistically validated automated credit models
through a bureau partnership
▪ Expert judgement based sub-sector specific
score-cards
▪ Automated, analytics led, early warning
systems basis proprietary rules framework
incorporating social, sector, macro-economic
feeds
▪ Quarterly visits by team members for account
review
▪ Yearly review of financials

60 mins 40+ 1,000+

In-principal Loan Approval API Integrations Parameters assessed
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Highly customized and flexible technology stack to meet business needs

Enterprise architecture design Service Oriented S/W

Client interfaces
for internal and
Customer portal and
Sales hierarchy Operations portal Reporting
external front end mobile apps Notification Engine
users

Advanced analytics/
DSA and partner apps Sales assistant Chatbots
Machine learning Web sockets

Orchestration Enterprise Service Bus API Gateway

layer to secure and Enterprise level software solution to orchestrate and Dedicated API server to secure data flow between Identity Access Management
optimize data flow optimize data flow within system internal/external sources and manage performance
▪ Script execution ▪ Authentication and authorization
▪ Synchronous and asynchronous processing ▪ Traffic maintenance and throttling
▪ Database execution ▪ Loan balancing Platform booting and runtime
▪ Integration gateway ▪ Circuit breaker configuration

Core systems and Audit and reporting

sub - modules tuned to LOS LMS GL HRMS
product customization
Monitoring, reporting, notification
Credit Business Workflow Partner and escalation
Dedupe Operations Databases
Engine Rule Engine
Integration engine management

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Liability First
The Missing Link

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Liability Strategy

Focus on building the “right” book

▪ Partner with ratings agencies from start to create the right quality of asset book
‐ Build a diversified granular book
‐ Start with a primarily secured book and slowly build the unsecured part. Unsecured book to not exceed 20% of the overall
book.

Diversify Provider Base Target to reach a D/E of 5x

▪ From Year 2, we will start leveraging our strong capital base and high quality, secured book to open credit lines from all forms and cost of borrowing of
of conventional liability sources 8.5% by FY23
▪ Diverse liability mix to include – all major banks, debentures, capital market and insurance companies
▪ Over a time period, increase the credit line exposure from existing providers

Specialized source of funding

▪ Access funding from new sources of funding such as multilateral agencies (IFC), impact funds, development banks (SIDBI) etc.
- Engage & understand the specific needs/development agenda of such multilateral agencies. Identify & construct part of
loan portfolio which is attractive to such lenders

| Build loan book starting from high equity/low leverage to higher leverage over a period of time | Achieve low cost of borrowing basis high credit rating
over a period of time |

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