Credit and Finance for MSMEs: The first half of FY2021 is likely to see reduced disbursements by NBFCs that are also staring at the reality of degraded asset quality and to a significant extent, affected collections.
Credit and Finance for MSMEs: While the government has taken significant steps to support MSMEs financially but a lot needs to be done to ensure they can avail the much-required credit in a timely manner, according to MSME lender U GRO Capital’s Executive Chairman and MD Shachindra Nath. For instance, under the Rs 3 lakh crore Emergency Credit Line Guarantee Scheme (ECLGS), there is a sovereign guarantee to financial institutions in case of a loan default by the MSME, however, “this sovereign guarantee should also cover term loans between banks and NBFCs who are working specifically towards lending to MSMEs,” Nath told Financial Express Online.
On the flip side, some MSMEs are shying away from availing credit as they lack the confidence to scale up operations in the face of reduced demand. According to Nath, this has been brought about because of massive job losses, the reduced purchasing power of consumers and a change in their mindset to purchase only bare necessities in the short to medium term. Considering these implications, the first half of FY2021 is likely to see reduced disbursements by NBFCs. NBFCs are also staring at the reality of degraded asset quality and to a significant extent, affected collections.
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However, “the liquidity demand will only rise, and effective lending practice is the need of the hour. For that, we are enhancing our self-sufficiency to be able to address the varied credit requirement of the MSMEs. With our recently launched platform ‘Sanjeevani’, we are committed to reaching out to 500,000 MSME clients by end of 2020,” Nath added.
U GRO Capital may also pivot its distribution strategy by evaluating an entry into newer markets by identifying product white spaces while the partnership business models like co-lending, onward lending and partnerships with digital aggregators or marketplaces will also see a thrust. Nath said that the company’s partnership and alliances should contribute at least 20 per cent of our its overall disbursement. The company is also looking to deepen its existing channels and expand its physical presence and serviceable locations. Also, it would be expanding into the micro-ticket segment.
The period from March to June 2020 saw low business activity for U GRO. However, its July figures post-launch of its end-to-end digital lending platform Sanjeevani, according to Nath, scaled up to 80 per cent of the company’s pre-Covid monthly achievement. Sanjeevani was launched in June to accelerate instant loans of up to Rs 2 crore apart from offering an in-built, upfront, moratorium up to three-months to aid businesses whose working capital cycles was disrupted due to Covid.
For Q1 FY21, U GRO’s asset under management stood at Rs 847.4 crores across 7,343 customers. Of the total loan book, 69 per cent was secured. Its liability book reached Rs 387 crores during the quarter, sourced from multiple public and private sector banks in various forms including term loans, NCDs and commercial papers. U GRO’s total income was Rs 30.79 crores for Q1 FY21 with a PAT of Rs. 3.73 crores while the company’s net worth stood at Rs 926.1 crores with book value per share being Rs 131.31. Its gross NPA and net NPA figures stood at 1.02 per cent and 0.57 per cent respectively.