UGRO Capital, a leading MSME-focused lender, is driving financial inclusion through innovative credit solutions tailored for small businesses. With a strong presence in over 200 cities, the company leverages government initiatives such as the Account Aggregator Framework and ONDC to increase credit access, especially in underserved areas.

“Emerging opportunities include higher demand for credit from industries supported by government incentives and schemes, creating opportunities for firms to expand their customer base,” says Kishor LodhaChief Financial Officer, UGRO Capital in an exclusive conversation with Bizz Buzz. Focusing on data-driven models, UGRO aims to expand its network to 400 branches by 2026, with an emphasis on tier 3 and 4 cities.

The government has shown strong support for MSME financing. How has the firm aligned its operations with these policy initiatives, and what opportunities do you see emerging from these developments?

UGRO Capital has aligned its operations with the government’s MSME-focused initiatives, such as schemes under the Account Aggregator (AA) framework, ONDC, and sector-specific subsidies. By leveraging these frameworks, the firm ensures access to credit for small businesses, especially in underserved areas.

The company’s branch expansion strategy to Tier 3 and Tier 4 cities complements the government’s vision of financial inclusion and economic growth. It also actively participates in co-lending and priority sector lending (PSL) programmes, enabling it to contribute to the government’s mission of empowering MSMEs. Emerging opportunities include higher demand for credit from industries supported by government incentives and schemes, creating opportunities for the firm to expand its customer base and further diversify its product offering.

As a CFO, what key financial strategies are you using to ensure the company remains resilient amid economic uncertainty?

Over the past 12-13 years, we have witnessed several economic cycles, including the recessions of 2008 and 2013, the financial crisis of 2018, and the effects of both Covid waves. In the financial services industry, it is important to be prepared for macro, micro, and regulatory events. Key focus areas to navigate such challenges include: robust asset liability management (ALM), regular stress testing to ensure adequate capital buffers, optimizing costs, maintaining strong governance Keeping, and communicating transparently with stakeholders. These strategies are important to ensure resilience during unpredictable economic changes.

UGRO Capital has positioned itself as a specialized MSME lender. What is your long-term vision for the company, and how do you plan to grow your market share in the highly competitive MSME financing sector?

The firm aims to establish itself as a leading MSME lender by revolutionizing small business financing in India. The company’s vision is built on leveraging data, technology, and innovation to provide tailored credit solutions to underserved MSME markets. By 2026, it plans to expand its branch network to 400, with an emphasis on tier-3 and tier-4 cities in highly developed states like Tamil Nadu, Madhya Pradesh, Telangana, Karnataka, etc.

Given our sectoral focus and understanding of sectors and 180 sub-sectors, we are able to understand the businesses of all MSMEs under these sectors and, therefore, cater to their individual credit needs. We currently have a presence in over 200 cities with micro enterprise branches where we cater to the credit needs of small business customers by understanding their business and cash flow and providing credit to them.

With our wide product portfolio and geographical reach, we are catering to every credit requirement of every MSME, taking funds to the last mile. Our product offerings include Property Backed Loans, Unsecured Business Loans, Machinery & Equipment Finance, Rooftop Solar Finance, Supply Chain Finance, Retailer Finance, GRO X etc. We offer wide term loans from 7 days to 15 days. – Annual term loans are also available from Rs. 50,000 to Rs.5 Crore Our distribution model is truly geared to cater to MSMEs across all geographies and ticket sizes.

While there may be a perception that the MSME lending space is highly competitive, the reality is quite different. The credit gap in this segment is Rs 92 lakh crore. Even with significant progress, achieving full saturation in the sector in the next 30 years is highly unlikely.

How do you envision the MSME lending landscape in the next 3-5 years?

The next 3-5 years are set to witness a significant shift in the MSME lending landscape, characterized by a shift from traditional mortgage-based lending to digital data-driven frameworks and cash flow-based lending models. There is change. Innovations like Open Credit Enablement Network (OCEN), Account Aggregator (AA) and Open Network for Digital Commerce (ONDC) are set to redefine access to credit, making it faster, more transparent and inclusive.

The firm is at the forefront of this evolution, with an emphasis on technology adoption and seamless integration into these emerging ecosystems. The company’s AI-powered underwriting model, GRO Score, ensures real-time credit assessment, enabling faster decision-making and a better customer experience. It also evaluates the customer’s creditworthiness based on banking, bureau and GST records, making the data the core of the company’s operations. Its investment in digital capabilities, such as its GRO Xstream, an API-driven platform, further strengthens its ability to adapt to changing market dynamics. By being agile and focusing on customer-centric innovation, it aims to lead the digital transformation of MSME financing and shape the future of the industry.

What specific financial goals or metrics are you focusing on for the coming fiscal year to increase shareholder value?

The firm has set ambitious financial targets to enhance shareholder value and consolidate its market position. The key target is to achieve a return on assets (RoA) of 4 percent, and bring the cost-to-income ratio to less than 45 percent. To achieve these objectives, it plans to significantly expand its customer base from the current 1,00,000 to 2,50,000 MSMEs and focus on high potential markets.

The company will increase its reach in Tier 3 and Tier 4 cities, where opportunities are huge, especially in sectors like manufacturing and trade. UGRO’s strategic focus on microloans and co-lending partnerships will drive sustainable growth while diversifying risk. Operational efficiency will be enhanced through digital initiatives and data-driven processes, ensuring these financial goals are met without compromising asset quality or customer satisfaction.

Given the current economic cycle and its impact on the consumption economy, how is the firm adjusting its lending strategies to ensure sustainability and growth?

It has adopted a multi-pronged approach to ensure sustainability and growth during a difficult economic period. The company leverages its capital-light co-lending model to diversify risks and increase scalability. By partnering with more than 10 banks and NBFCs, it shares risks and accesses larger pools of capital.

A key focus is on expanding the microloan segment supported by the proprietary GRO Score underwriting model, which provides accurate and data-driven credit decisions. This ensures a balanced portfolio with stable asset quality.

Additionally, its focus on Tier 3 and Tier 4 cities allows it to tap into high-growth areas where demand for MSME financing remains strong.

Technology-driven solutions, such as real-time data analytics and AI-enabled credit assessment, enable the company to dynamically adapt to changing market conditions while maintaining the pace of growth.