MSME lender U Gro Capital’s Shachindra Nath pitches for new NBFC category | Mint
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Business News/ Companies / News/  MSME lender U Gro Capital’s Shachindra Nath pitches for new NBFC category

MSME lender U Gro Capital’s Shachindra Nath pitches for new NBFC category

Over the next three years, U Gro Capital aims to capture 1% market share of the MSME credit that currently stands at about ₹22 lakh crore

 U Gro Capital’s managing director Shachindra Nath.Premium
U Gro Capital’s managing director Shachindra Nath.

New Delhi: U Gro Capital’s managing director Shachindra Nath believes there should be a new category of non-banking financial companies (NBFCs) serving micro, small and medium enterprises. 

“Just like NBFC-MFI and HFC (housing finance companies), there should be NBFC-MSME," Nath told Mint. 

“The recent move by the Reserve Bank of India (RBI) to increase the risk weight on consumer loans will have an impact on NBFCs with the bank borrowing cost increasing. However, it does not impact the NBFCs serving the MFI and housing finance segments. The RBI move is going to increase our borrowing cost from banks," he added without revealing further details.

The publicly-listed MSME lender on Tuesday partnered with Laghu Udyog Bharati, an organization dedicated to supporting micro-enterprises, to launch awareness programmes to empower MSMEs with knowledge about government schemes and digital credit.

“A research report shows that when it comes to credit, 28% MSMEs are self-financed; 12% have raised financing through informal channels; while only 10% are financed through formal institutions such as banks and NBFCs. NBFCs share in MSME lending is just 10%," Om Prakash Gupta, All India general secretary, Laghu Udyog Bharati, said during a press conference. “We will organize awareness programmes for MSMEs with U Gro in 100-150 locations across India in next few years. We believe the awareness around credit will be a game-changer for small businesses in India."

Large NBFCs’ MSME lending exposure is not more than 12-15%, Nath claimed. “We have so far built a loan book of 8,000 crore and served about 90,000 MSMEs. Over the next three years, our aim is to capture 1% market share of the MSME credit that currently stands at about 22 lakh crore. This means we will build a book of 25000 crore and target a base of over 10 lakh MSMEs."

U Gro Capital, which works with seven public sector banks and four private sector banks, operates on a co-lending model where the NBFC finances 20% of the loan amount, while 80% is financed by traditional banks.

Earlier this year, the Delhi-based NBFC had raised close to 340 crore in equity funding led by IFU (Investeringsfonden for Udviklingslande) via its Danish Sustainable Development Goals Investment Fund. 

In 2018, Shachindra Nath acquired listed NBFC ‘Chokhani Securities Limited’, renamed it U Gro Capital and simultaneously raised over 900 crore from NewQuest, PAG, ADV Capital, Sameena Capital and other domestic family offices and public market investors.

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Arti Singh
Arti Singh has been a business journalist for 15 years. Over the last five years, she has closely tracked India's fintech space and written important deep-dive stores. As deputy editor, she covers the intersection of finance and tech at Mint.
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Published: 05 Dec 2023, 06:03 PM IST
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