U Gro Capital, which offers loan to capital-starved SME sector, on Thursday announced first Q1 results for FY21. The BSE listed NBFC reported a net profit or PAT (profit after tax) of Rs 3.73 crore and a healthy CRAR of 99.42% for the first quarter of the current financial year. The company’s quarterly profit seems to have taken a hit as compared to the last quarter, when U Gro reported a healthy net profit of Rs 20.3 crore for Q4 of FY20. However, the company seems to have rebounded when compared with the Q1 of FY20, when it reported a net loss of 1.84 crore.
The company’s AUM (assets under management) at the end of June 30, 2020 stood at INR 847.4 crores across 7,343 customers. U Gro claimed that nearly 69% of its loan book constitutes of secured loans, with Education, Light Engineering and Electrical Equipment & Components constituting almost 54% of company’s total loan book.
The company’s GNPA or gross non-performing asset and NNPA/ net non-performing asset stood at 1.02% and 0.57% respectively. The firm’s total liabilities stood at INR 387 crores and net worth at Rs. 926.1 crores as of June 30, 2020. Its book value per share is currently hovering INR 131.31. As per the market estimate, the company’s commands a market valuation of roughly Rs 726.44 crores.
U Gro’s shares are currently trading at Rs 103.50, up 3% from the previous closing.
As for COVID-19 impact is concerned, U Gro claimed that its July loan disbursal bounced back to 80% of pre-COVID levels. The company claimed that it has conservative provisioning of Rs 11.63 crores of which Rs. 4.49 crores is specific to COVID-19. The company claimed that this is a significantly higher provisioning coverage than required by regulatory norms.
Mr. Shachindra Nath, Executive Chairman and Managing Director of U GRO Capital stated, “Stepping into 2020, businesses were already facing the brunt of economic slowdown, when the pandemic arose to exacerbate the pain. For us, the circumstances called for a degree of improvisation in the form of digitalization, so as to be able to operate effectively in these unprecedented times. Having done so, our disbursals across all U GRO locations have gained ground amid the lockdown scenario, with our July disbursal figures reaching approximately 80% of pre-COVID levels.
Nath further added “With the economy gradually opening, Indian small businesses have started taking small steps towards regaining their operational potential and are thus looking for liquidity infusions, as reflected in our success with Sanjeevani program and ECLGS. Our loan book cover under Moratorium 2.0 is at 63%, which is a significant reduction from the 81% as during the Moratorium 1.0.”
The SME sector at present is facing one of its worst crises in the wake of COVID-19 crisis. At the heart of this crisis is the liquidity problem, which has been exacerbated due to the COVID challenge. However, it must be noted that NBFC’s liquidity crisis started long before coronavirus started casting its shadow on the Indian economy. At the root of this problem is NBFC’s rising NPAs and this led to subsequent erosion of trust as banks refused to lend more capital to NBFC. Notably, NBFC mostly depend on bank borrowings and commercial business papers to source capital & finance.
Most analysts claim that NBFC’s liquidity crisis needs to be addressed urgently since MSME sector largely depends on them for availing their credit needs. According to recent study by the International Financial Corporation, India’s MSME sector is currently facing credit gap of $240 Bn.
