U Gro Capital | An OverviewDecember 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 economies in the world

However, the credit to GDP ratio is still much lower than other markets

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

Significant government impetus and for the growth of credit

14.1 13.9

9.010.9

8.210.0

17.915.6

18.816.6

14.6

21.2

FY13 FY14 FY15 FY16 FY17 FY18

Credit Growth rate (%)

Bank NBFC

▪ Grant of universal banking, payment banking and small finance banking licenses

▪ Focus on financial inclusion – Jan Dhan Yojna, Pradhan Mantri Awas Yojana

▪ India Stack – Cashless, Paperless, Presence-less

3

25.120.2

10.35.5 4.2 4.0

China US India Japan Germany Russia

6.9% 2.3% 6.7% 1.3% 2.2% 0.19%

GDP PPP – US$ Tn, Real GDP Growth

160.0%

73.6%44.8%

99.9%54.3% 49.1%

China US India Japan Germany Russia

Total credit to non-financial corporations as a % of GDP

1,080 1,155 1,219 1,2361,426

2013 2014 2015 2016 2017

Total credit to the private non-financial sector, US$ Bn

The overall lending market in India is expected to grow at 10-11% with NBFCs growing at 15-17% over the

next 5 years

PSU Banks▪ ¾ of total credit▪ Limited by high NPA▪ Low CAAR (Basel-III)▪ Systematic issues

NBFC▪ Diversified geographical

presence ▪ Higher assessment

ability ▪ Limited by cost of funds

and capital investment

PVT. Banks▪ Increasing NPA▪ Limited Geo. reach▪ Limited assessment

ability

• Constrained credit growth

• Structural issues

• Higher NPA

• 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 assessment ability & distribution reach.

• Pricing Advantage & Structural support available.

• Favorable demographics

• Increasing income

• Increasing debt appetite

• Faced with heavy price competition

• Need strong capital base and long gestation period.

The lending market can be broadly divided into three segments…

4

Consumer

SME

Corporate,Infra,

Real Estate

Current Scenario Future Projection

------

-

+++

+

+

--

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

5

With most SMEs depending on either self financing or informal channels

India lags behind other emerging markets when it comes to credit access for MSMEs

237

616

FY17 FY23P

Expected to become a USD 600+ Bn market

US$ Bn

The SME financing opportunity is large

CAGR 17%

14% 14% 16% 16% 18%

30% 31%

India Mexico Malaysia Russia Argentina Brazil Poland

% of MSMEs that have access to credit

NBFCs have been stepping in to fill the need gap in the market

Fragmented market with very few specialised players

Although MSMEs account for 45% of the Indian Industrial output – the segment has been starved for

capital from formal sources

Private banks

PSU banks

NBFC

Diversified geographical presence and more specialized assessment ability provide NBFCs the

competitive advantage

Private banks

PSU banks

NBFC

FY18FY16

Category 1

SME lending market share

IndiaBulls LIC HF DHFL Shriram City Union

HDFC Cholamandalam Bajaj Finance Capital First

PNB HF Others

Market dominated by large LAP providers and diversified NBFCs – Absence of players with specialized focus on the

SME segment

Debt - Formal Sources

Self - Equity

Own Savings

Family Business

Family Savings

0%

20%

40%

60%

80%

100%

120%

Category 1

Source of SME financing

70% of the market still funded through the equity of the owner/family

Specialization is key to success in the SME lending space…

Credit & Portfolio

▪ 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

Distribution

▪ 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

How specialization helps

Difficult to understand businesses/cash flows

Fragmented set of customers

High dependence on the ecosystem

Lack of data

Challenges in lending to the SME segment

High cost of customer acquisition

6

?

Products

▪ 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

… leading to the emergence of niche, focused SME lenders in India

…

Product Focussed

Sector Focused Geography/Segment Focused

Online Community

Specialized

NBFCs

Focus: Travel, HospitalityAUM: NACapital Raised: INR 100 crores

Focus: Loans against machineryAUM: INR 400+ croresCapital Raised: INR 100+ crores

Focus: POS LendingAUM: ~INR 1,000 croresCapital Raised: INR 400+ crores

Focus: K12 SegmentAUM: INR 1,000+ croresCapital Raised: INR 300+ crores

Focus: Tamil Nadu/sub-primeAUM: INR 1,000+ croresCapital Raised: INR 1,000+ crores

Focus: Rajasthan/sub-primeAUM: NACapital Raised: INR 100+ crores

7

The U GRO Incarnation

The Assimilation of Aspirations

8

Reputed founder backed by marquee private equity funds

▪ After 26 years of working with large corporates, Mr. Nath decided to embark on his entrepreneurship journey by acquiringcontrol 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 - SMEfocused lending, Retail Broking, Life Insurance, Health Insurance, Mutual Funds, Capital Markets, Investment Banking andAsset Management

▪ Some of his marquee achievements include successfully leading the IPO process for Religare in 2007, establishing newbusinesses as well as stitching together successful joint ventures and partnerships together with global financial servicesfirms

▪ Mr. Nath is a qualified lawyer and a University Rank holder from the Banaras Hindu University (India)

Mr. Shachindra NathExecutive Chairman and Managing Director

Key Investors

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▪ Over 25 years of experience across BFSI, Consumer, Telecom,healthcare

▪ Was the President & CBO of Religare Finvest where he managedan AUM of INR 18,000 crores and 1,500+ employees

▪ Alumnus of Kellogg, XLRI, HAYS Group▪ Previously worked with

▪ 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

▪ 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

Manish Agarwal - Chief Risk Officer

Abhijit Ghosh - Chief Executive Officer

Anuj Pandey - Chief Operating Officer

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

▪ 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

J Sathiayan - Chief Business Officer

Management team with a strong track record of execution…

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… and guided by an independent board comprising of industry stalwarts

Name Designation Description

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

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

Satyananda Mishra Independent Director, Head of the CSR Committee

▪ Ex –Chairman of MCX and the Chief Information Commissioner of India▪ Over 40 years with the Indian Administrative Services (Batch of 1973)

Rajeev K. Agarwal Independent Director, Head of the Stakeholders Committee

▪ Ex-Whole time member of the SEBI▪ Over 30 years of with experience with SEBI, FMC and Indian Revenue Service (Batch of 1983)

NK Maini Independent Director, Head of the Risk Management Committee

▪ Ex-Deputy Managing Director of SIDBI▪ Over 38 years with experience in prestigious organizations like SIDBI, UCO Bank and IDBI

Abhijit Sen Independent Director, Head of the Audit Committee

▪ Ex-CFO of Citi, Indian sub-continent▪ Over 20 years of experience in corporate treasury, financial planning, product control and tax

Ranjana Agarwal Independent Director, Head of the Nomination & Remunerations Committee

▪ Ex-Senior Partner, Deloitte▪ Over 30 years of experience in audit, tax, risk assurance and due diligence

S. Karuppasamy Independent Director, Head of the Compliance Committee

▪ Ex-Executive Director of Reserve Bank of India▪ Over 40 years of experience with the RBI across various departments

Chetan Gupta Non-executive Director▪ Managing Director, Samena Capital▪ Over 15 years of experience in private equity and equity research

Amit Gupta Non-executive Director▪ Founding Partner, NewQuest Capital Partners▪ Over 20 years of industry experience across investment banking and PE

Manoj Sehrawat Non-executive Director▪ Founding Partner, ADV Partners▪ Over 22 years of experience in PE, distress debt acquisition and resolution, and restructurings

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Represents an independent director

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

ED & CEO

Abhijit Ghosh

CRO

Manish Agarwal

CFO

Kalpesh Ojha

Head - Marketing

COO

Anuj Pandey

CHRO

Rajni Khurana

CBO

J Sathiayan

Head Legal/ComplianceRajiv Kumar

Head – Policy

Head – Collateral

Head-Underwriting (2)

Fraud control & Audit

Head Collections & Litigation

CTO

Head -Product & Strategy

Head- Analytics

Head - Operations

Head - Cross-sell

Head Treasury

Finance Controller

Investor Relations

Regional HR (2)

Compensation & Benefits

Learning & Development

HR operations

Corporate Channel

Regional Heads (5)

Branch Heads (3)

Sector Heads (8) Company Secretary

Corporate Legal

CGO

ETJ

Business Head –BFSI

Business Head –Co-lending

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▪ Policy of hiring only 4/5 rated employees

▪ A deep and large ESOP pool to ensure the long term alignment of incentives

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…

| 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 |

Formation of Chokhani SecuritiesFirst Round of Preferential

AllotmentQualified Institutional Placement

Reinvigoration of Chokhani Securities

Second Round of Preferential Allotment

1994: Formation of Chokhani Securities 1995: Listing of Chokhani Securities2004-Present: 14 year track-record of profitability

Raised INR 435 Cr of capital fromglobal private equity firms - ADVPartners, NewQuest and IndGrowth

Raised INR 112 Cr of capital frompublic market funds, insurancecompanies and private equity funds

Acquisition of Chokhani Securities(later renamed as UGro Capital) byShachindra Nath followed by arevamp of the management teamApproval for the demerger of thelending business of Asia Pragati – INR175 Cr

Raised INR 192 Cr of capital fromlarge family offices / HNIs through apreferential allotment of shares

19

94

-2

01

7

De

c, 2

01

7

De

c, 2

01

7

Au

g, 2

01

8

Disbursements to begin in

January

May

, 20

18

14

…leading to a highly diverse shareholding structure

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

Add: Dilutive Instruments

Compulsorily Convertible Instruments 3,11,62,792

Warrants 87,83,785

Total Shares Issued & Outstanding (Fully Diluted Basis) 5,97,89,687

Add: Total number of shares to be issued post demerger 1,35,65,892

Total Shares (Fully Diluted Basis) 7,33,55,579

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

INR 37 Cr Initial Capital in the acquired company

INR 611 Cr Capital raised through

shares/CCPS/CCDs

INR 175 Cr Capital to be raised

through the demerger

INR 953 Cr Overall Capital

Infused

INR 130 Cr Capital raised through issuance of warrants

Promoters4%

NewQuest 21%

ADV Partners21%

PAG18%

Samena16%

IndGrowth5%

Others15%

15

Initial fund raise from large PE funds, public market, insurance firms, family offices and HNIs

Our Mission

16

Our Mission

To Solve the Unsolved

India’s US$ 600Bn SME Credit Availability

Problem

17

Our Approach

Know More, Grow More

Fin-touch + Fin-tech

Liability First

Deep sector specialization to understand, reach, and service the customer better

Leverage the best practices of traditional NBFCs and the

modern fin-tech providers to create a technology and data

centric organization

Create an organization that pro-actively address the

‘needs’ of rating agencies and liability providers

18

Know More, Grow More

Sector based approach to specialization

19

Deep analysis of macro and micro economic factors…

Top 8 Sectors

Future business prospects

Size of lending opportunity

Relative competition

lending

Impact of regulatory developments

180+ Sectors

20 Sectors

Interest coverage

Asset Turnover

ratio

Demand supply gap & cyclicality in

demand

Impact of change in

technology

Working Capital Cycle

Revenue Growth

EBITDA Margins

Upgrade & downgrade

ratio

Median rating

Gearing

Sector specific government

policy

Environmental issues

Input risk

Criteria

20

Criteria

An 18 month process involving extensive study of macro and micro economic parameters carried out in conjunction with market experts like CRISIL

… to arrive at a set of eight sectors…

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

▪ Even within these sectors, U Gro has selected 38 sub-sectors on which to focus

▪ Ratified by

▪ These 8 sectors constitute ~50% of the overall lending market

— Validated independently by CRIF, CRISIL and the company distribution team

21

Large lending opportunity

Lower impact of regulatory changes

Secular consumption driven growth

Low geographical concentration

Relatively lesser competition from

banks

Top 8 Sectors

Healthcare

Education

Chemicals

Food processing/

FMCG

Hospitality

Electrical equipment

and components

Auto components

Light engineering

…and sub-sectors and key clusters to focus on

Healthcare Education Chemicals

Food processing/FMCG

HospitalityElectrical equipment

and components

Auto components Light engineering

Key Sub-sectors: General nursing homes, eye clinics, dental clinics, diagnostic labs, radiology/pathology labs, pharma retailersKey clusters: NCR, Mumbai, Bengaluru, Hyderabad and Chennai

Key Sub-sectors: Fine dining (standalone), QSRs, fine dining chains, manpower agencies, boutique hotels, guest housesKey clusters: NA

Key Sub-sectors: K-12 Schools, Play SchoolsKey clusters: NCR, Mumbai, Coimbatore, Chennai, Hyderabad and Pune

Key Sub-sectors: Dyes and pigments, bulk and polymers, agro-chemicals, other chemicals (except specialty chemicals)Key clusters: Mumbai, NCR, Ahmedabad, Vadodara and Surat

Key Sub-sectors: B2B, B2CKey clusters: NCR, Pune, Bengaluru, Chennai, Aurangabad and Rajkot

Key Sub-sectors: Engine parts, drive transmission and steering parts, body and chassis, suspension and breaking parts, electrical parts, other equipment, tradersKey clusters: NCR, Mumbai, Kolkata, Hyderabad and Bengaluru

Key Sub-sectors: Dairy and dairy products, non-alcoholic beverages,consumer foods, poultry, sea food, food and beverage tradersKey clusters: NCR, Mumbai, Chennai, Hyderabad and Pune

Key Sub-sectors: Casting and forging, medical equipment and devices, pipes, process control instruments, tradersKey clusters: NCR, Chennai, Pune, Ludhiana, Bengaluru, Ahmedabad and Rajkot

22

Product Approach

23

Product Offerings

Secured Loans

Ticket Size: INR 50 lakhs to 5 Cr

Interest rate: 10.5% to 12%

LTV: Up to 80%

Unsecured Loans

Ticket Size: INR 10 to 50 lakhs

Interest rate: 16% to 19%

LTV: NA

Supply chain financing

Ticket Size: INR 3 to 30 lakhs

Interest rate: 13% to 15%

LTV: NA

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

Loan Structuring

Collateral TenorAssessment Parameters

Pricing

Moving beyond conventional products…

24

Deep sectoral understanding leading to finely tailored solutions

PricingRate of Interest / Processing Fee

Methods of assessment| Financial |Banking|Turnover |

CollateralMovable/ Immovable

Property

TenorRepayment Frequency/

Repayment Period

3

Sector based product

parameters

Loan structuringAbility 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

Scenario: Healthcare▪ Super distributor supplying to retailers; data on prospective

borrower is provided by super distributor ▪ Data includes monthly / yearly procurement and payment pattern

which is used to create customized products▪ Sales and recovery report from the supplier / super distributor

are taken as document proofs

Scenario: Education▪ Repayment frequency to match the frequency of fee receipt ▪ If the fee is received once in a quarter, the EMI frequency can

also be structured accordingly.

25

Scenario: Education Industry▪ Future fee receivables of an educational institute to be

taken as primary collateral along with the institution building as a secondary collateral for a secured loan

Scenario: Type of collateral available in a sector▪ ROI to vary basis the collateral available▪ Self occupied residential property to have lower ROI as

compared to a vacant residential property▪ Education institute building/ Hospital buildings to have

higher ROIs.

Illustrative Examples

26

Combination of property, fees receivable

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) Collateral

Hospitals

General Practitioners/Diagnostic labs

Medical Devices

Term loan for capacity expansion/upgradation. Medical equipment financing

Working capital term loans

Receivables discounting, supplier chain finance, working capital loan

Equipment financing, working capital loan

Combination of property (business + personal), inventory, receivables

Healthcare

Education

Auto

Schools - K12

Vocational Institutes Primarily working capital loan

Term loan for capacity expansion, working capital loan

Auto components

Auto dealers

Auto shop traders

Receivable discounting, supply chain finance, term loan, working capital

Primarily working capital

Primarily work capital loan, working capital term loan

Combination of property, inventory, cash flows

Number of patients per day, Doctor’s experience, Bed capacity, Share of IPD

revenues

Area covered, Client concentration, Length of relationships with customers

Vintage of practice, Quality of equipment, Degree of practitioner

Number of branches, premises owned or leased, Increase in salaries

Promoter's experience, Number of existing branches, Type of locality

Ability to pass on price hikes, Average credit period, Discounts offered

Location of the entity, type of dealer (distributor, stockiest)

Assessment Parameters

Area covered, turnaround time, proportion of slow moving inventory

Distribution Approach

27

Client Acquisition Strategy

28

Co-lending with NBFCs

Industry Partnerships

Digital Channels

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 ofcustomers

▪ 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

▪ Develop strong relationships with DSAs and DSA aggregators operating in target segments / geographies

▪ Driven by competitive commissions/ sales contests, faster processing, better experience, etc.

▪ Partner with specialized NBFCs in order to co-lend with the partner

▪ E.g. Partnerships with NBFC specializing in K12 lending

▪ Leverage third party digital origination platforms for lead sourcing, if available in specific segments

▪ Create own digital channels – to acquire directly and as a support to own sales force

▪ E.g. Partnerships with loan aggregation platforms

Channels Role

Direct Sales Agents

Channels Role

Trad

itio

nal

Ch

ann

els

New

Ch

ann

els

Evolution of the U Gro

distribution network

Distribution Network

Locations identified through extensive analysis of portfolio and SME cluster performance

Delhi

Jaipur

Hyderabad

Bangalore

Ahmedabad

Kolkata

Mumbai

Chennai

Head Office

Branch Office

29

▪ 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

Rigorous DSA Selection Criteria

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

1,200+ DSAs

▪ Selection criteria

‐ Minimum three year track-record

‐ Infrastructure Readiness

‐ Portfolio performance: Bounce rate, NPAs

▪ DSAs selected have a track-record of acquiring INR 5,000+ Cr on a monthly

basis

▪ An onboarding fee charged from each channel partner – A first in the

industry

Partnerships to boost productivity of sales team

Phase I - Locations

Credit Appraisal and Portfolio Approach

30

Credit Appraisal Process | A Three Pronged Approach

31

~8 segment specific statistical scorecards

Sourcing Channel

▪ Sourcing through a mix of channel partners and own staff

▪ AI based OCR software▪ Channel partners with

direct LOS integration

Pre-defined Criteria Met?

Onward processing towards disbursal

Loan Approved Pre-approval checksQuarterly

Monitoring

Feedback Loop▪ Defined ticket size,

sectors, turn-over▪ Geographical location▪ Borrowing history ~30 sub-segment

specific scorecards

▪ Legal verification▪ Fraud Control Unit Check▪ Field Investigation▪ Valuation

Criteria 1,000+ Parameters evaluated

20+ Data Sources

Data Enrichment~Sub-sector specific

PD templatesStatistical

Score-cards

Expert Scorecards

In principal approval in 60

mins

Final approval in 48 to 72 hours

File Flow For A Secured Loan

Sub-sectorPolicies

Data and Analytics Led

Physical Verification/Visit Led

Experience Led

Parameters Factors Factor weightage

Financial Risk

Increase In ATNW in last 2 years 2%

EBITDA margin for the last audited year 4%

Current Ratio 10%

TOL/ATNW 5%

Inventory + Debtor Turnover Period 3%

Total Debt to NCA 3%

Interest Coverage 3%

Management Risk

Promoter property profile / Net worth 12%

Promoter Bureau 5%

Business Vintage in the same line of business 3%

Transaction History

Number of business loans taken 10%

Credit summation as percent of TO 6%

Average limit utilization in last 6 months 6%

Interest servicing for last 6 months 8%

Overdrawing in OD/CC Account 5%

Inward cheque return due to financial reasons 5%

Business RiskSupplier concentration 6%

Buyer concentration 4%

Credit Scoring Model – Currently being used by NBFCs / banks

32

Financial Risk30%

Management Risk20%

Transaction History

40%

Business Risk10%

Parameter Weights

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

Data based decision making

▪ Universal data environment storing data from all source systems, such as LOS, LMS, Accounting, HRMS

▪ 360 degree view of financial assessment through credit bureau, financials, banking data all coming into one 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 ecosystem into the fold

‘’Destination state” data infrastructure

A fast evolving data ecosystem

Customer Verification

Credit worthiness

Business footprint

Location/ Property

33

Credit evaluation▪ Borrowing and repayment history▪ Sales transaction data from

partner platform

Verification of authenticity▪ Negative database de-dups▪ Comprehensive litigation search▪ Other entity linkage

Business prominence▪ 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

Ability to front-load the entire credit assessment cycle

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%

0.24%

0.44%

0.15%

0.60%

0.34%

0.28%

0.16%

0.18%

0.74%

1.20%

0.49%

1.23%

0.85%

0.76%

0.90%

0.56%

Light engineering

Food processing

Electrical equipments

Hospitality

Education

Auto parts

Chemicals

HealthcareSegment overall default rate

Bad rate post removing bottom 20%

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3.45%

1.23%

0.75%0.56%

0.40% 0.45%0.26%

0.12% 0.08% 0.00%

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

‘Bad rates’ across intervals

Expert Scorecards

Parameters Factors Case A Case B Case C

Facilityrelated

Vintage of the entity 20% 15% 10%

Doctor’s Experience 20% 15% 10%

Arrangement with pharmacy unit 30% 30% 40%

NAHB accreditation 30% 40% 40%

Operational

Share of IPD revenues in overall nursing home revenue 15% 20% 20%

Share of insurances cases in overall IPD admissions 15% 20% 20%

Share of government empanelled cases in overall insurance admissions

10% 10% 10%

Occupancy rate 30% 20% 20%

Revenue per occupied bed 30% 30% 30%

Financial

Operating margins 15% 15% 15%

Return on Capital Employed 20% 20% 20%

Interest coverage 30% 30% 30%

Asset turnover ratio 20% 20% 20%

Receivable days 15% 15% 15%

35

Facility40%

Operational 40%

Financial20%

Case A: Less than 20 bedded nursing home

Facility30%

Operational 30%

Financial40%

Case B: 20-50 bedded nursing home

Facility20%

Operational 20%

Financial60%

Case C: 50-100 bedded nursing home

Sector: HealthcareSub Sector: Nursing Homes

▪ Combination of operating parameters specific to the sector and financial parameters

▪ Scorecards developed in consultation with CRISIL market experts combining market research with CRISIL’s in-house rating knowledge

▪ Methodology

— Scorecards based on 1,000+ personal interviews across 9 locations, collecting responses for over 50+ curated questions for each sub-sector

Strong Risk Management Framework

Asset Liability Management

Liquidity equivalent to 6 months of liability and 2 months of advances to be maintained at all times

The one year bucket mis-match will be positive or equivalent to zero

Asset strategy influenced by liability strategy

Fraud Risk

Background/Fraud checks on all outsourcing partners, agencies and employees before onboarding

Seeding checks conducted regularly

Operational Risk

Standard operating procedures defined for all processes

End to end automation of processes to limit manual intervention

PORTFOLIO LEVEL RISK ENTERPRISE LEVEL RISK

Appraisal

Policies and deviations are standardized

Completely automated CAM to prevent manual errors and ensure quality/shorter TATs

Data pulling from source through APIs mitigating fraud

FCU Checks

An independent team with deep market expertise

Partnerships with multiple FCU agencies and Hunter

Property appraisal

Collateral specialist hired

2 valuation agencies appointed for loan disbursal > INR 1 crore

FI verification

Personal visits by employees

Geo-tagging of customer location

End-to-end automation of FI initiation and completion

Early warning systems

Automated, analytics led, early warning systems basis proprietary rules framework incorporating social, sector, macro-economic feeds

36

Fin-touch + Fin-tech

Building a Technology enabled organization

37

Hybrid Lending Model

Traditional – Fin-Touch Alternative – Fin-Tech

Adopting a hybrid model comprising best practices of

traditional lenders and modern fin-tech companies

Traditional credit assessment models like CIBIL scores

Alternate credit assessment models leveraging analytics + publicly available data

Physical processes such as visits to customersLeverage technology to automate processes

thus reducing manual errors

Focus on collateral driven lending Unsecured credit solutions

Limited to term loans Variety in loan products

Fin-Touch + Fin-Tech

38

The U GRO business model is backed by a “best in class” technology design…

System driven workflows at every stage of the customer journey

Customized user interfaces for internal and external stakeholders

Cloud based architecture and customization-oriented design

Process automation

Transaction experience

Rapid scalability

▪ 15 different eligibility assessment templates

▪ 10 product specific onboarding modules▪ 100+ policy rules digitized▪ 40 APIs integrated▪ 30+ credit scorecards configured

▪ Partner integrations▪ Portfolio monitoring systems

▪ 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

▪ 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

In place

Planned

39

..to complement traditional “touch and feel” across the value chain

4040

Sourcing▪ Partnerships with traditional/digital

marketplaces to create customized offerings▪ Intuitive client and partner UI to

streamline onboarding▪ DSA integration into U Gro’s LOS

Verification and Disbursal▪ Online process to augment traditional fraud

control process▪ Collateral management team in place before start

of business

Collection and Recovery▪ Collection and litigation team already in place▪ Analytics led predictive collection model to

optimize efficiency of field collection▪ Bucket-wise collection strategy

Underwriting▪ 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

Portfolio Monitoring▪ 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

In-principal Loan Approval API Integrations Parameters assessed

60 mins 40+ 1,000+

API GatewayDedicated API server to secure data flow between internal/external sources and manage performance▪ Authentication and authorization▪ Traffic maintenance and throttling▪ Loan balancing▪ Circuit breaker

Orchestration layer to secure and optimize data flow

LOS

Dedupe Credit Engine

LMS

OperationsBusiness

Integration

G L

DatabasesWorkflow

engine

HRMS

Partner

managementRule Engine

Core systems and sub - modules tuned to product customization

Enterprise Service BusEnterprise level software solution to orchestrate and optimize data flow within system▪ Script execution▪ Synchronous and asynchronous processing▪ Database execution▪ Integration gateway

Client interfaces for internal and external front end users

Customer portal and mobile apps

Sales hierarchy Operations portal Reporting

DSA and partner apps Sales assistant ChatbotsAdvanced analytics/

Machine learning

Highly customized and flexible technology stack to meet business needs

Notification Engine

Web sockets

Identity Access Management

Platform booting and runtime configuration

Audit and reporting

Monitoring, reporting, notification and escalation

Enterprise architecture design Service Oriented S/W

41

Liability First

The Missing Link

42

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.

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

43

Diversify Provider Base

▪ From Year 2, we will start leveraging our strong capital base and high quality, secured book to open credit lines from all formsof conventional liability sources

▪ 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

Target to reach a D/E of 5x and cost of borrowing of

8.5% by FY23

| 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 |