UGRO Capital Targets 4% Return On Assets In Next Two Years
UGRO Capital plans to achieve a 4% return on assets by expanding its operations, with a key focus on increasing its branch footprint and growing its micro-enterprise business from 250-400 locations.
Tech-enabled small business lender UGRO Capital Ltd. aims to achieve a 4% return on assets (ROA) in the next eight quarters by expanding operations, according to Founder and Managing Director Shachindra Nath.
In the quarter that ended in September, the company reported an ROA of 2% and stated, in its investor presentation, that this figure would rise to 4% within the next eight quarters.
Talking to NDTV Profit, Nath shared the company’s plan to achieve the targeted ROA. He said that while the consistency of performance can increase ROAs, one needs to have the leverage to achieve a return on equity.
“For somebody like us, return leverage is kind of impossible. But we have found a way to offset that by creating an off-balance sheet business,” he said.
The MD stated that expanding branches is key to increasing UGRO Capital's ROA.
“So our wait and approach to get to 4% is to continuously increase our branch footprint. We were 25 branches in 2021; we went to 75,” he said.
On the micro-enterprises business front, the company is now at 250 locations and aspires to be at 400 locations, Nath revealed.
“Last year we were comfortable with what we call the micro-enterprises business. These are small ticket-size secured loans of Rs 9 lakh to Rs 15 lakh. Then we started investing very happily. We are at around 250 odd locations. We should be at 400 locations,” he said.
By 2026, UGRO Capital aims to increase its micro-enterprise segment's contribution to 35% of total business. This will help push the ROAs further, according to Shachindra Nath.
“Today, our micro-enterprise business as of September was roughly around 11%. We are hoping that that would become 35% by 2026,” Nath said.
“That portfolio is at a yield of around 19%. It would come down to 18%. But the sheer contribution of that business going up would increase the ROA,” he added.
Shares of UGRO Capital Ltd. were trading 0.74% higher at Rs 242.50 on the NSE as of 11:36 am on Tuesday, while benchmark Nifty 50 was down 0.29% at 24,264.80 points.
