UGRO Capital Aims To Open 400 Branches By 2026, Expanding Reach In Tier 3 & 4 Cities

UGRO Capital, a leading MSME-focused lender, is pioneering financial inclusion through innovative credit solutions tailored to small businesses. With a robust presence in over 200 cities, the company leverages government initiatives such as the Account Aggregator framework and ONDC to enhance credit accessibility, particularly in underserved regions.

"Emerging opportunities include higher credit demand from industries supported by government incentives and schemes, creating avenues for the firm to expand its customer base," says Kishore Lodha, Chief Financial Officer, UGRO Capital in an exclusive conversation with Bizz Buzz. Focused on data-driven models, UGRO aims to scale its network to 400 branches by 2026, emphasising 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 credit accessibility to small businesses, particularly in underserved regions.

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

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

Over the past 12-13 years, we have witnessed multiple economic cycles, including the slowdowns of 2008 and 2013, the 2018 financial crisis, and the impact of both Covid waves. In the financial services industry, staying prepared for macro, micro, and regulatory events is essential. Key focus areas to navigate such challenges include: strong Asset-Liability Management (ALM), regular stress testing to ensure adequate capital buffers, optimizing costs, maintaining robust governance, and transparent communication with stakeholders. These strategies are crucial for ensuring resilience during unforeseen economic shifts.

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

The firm aims to establish itself as a premier MSME lender by revolutionizing small business financing in India. The company’s vision is built on leveraging data, technology, and innovation to deliver tailored credit solutions to underserved MSME markets. By 2026, it plans to scale its branch network to 400, with a strong focus on tier 3 and tier 4 cities in high-growth 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 business of all MSMEs under these sectors and, therefore, address their individual credit needs. Our presence is currently in over 200 cities with micro-enterprise branches where we service the credit needs of small business customers by understanding their business and cashflows and extending credit to them.

With our wide suite of products and geographical reach, we are catering to the every credit need of every MSME, taking funds to the last mile. Our product offerings include loans backed by property, business loans without collateral, machinery and equipment finance, rooftop solar finance, supply chain finance, retailer finance, GRO X, etc. We offer loans with wide-ranging tenures, from 7-day to 15-year term loans. The loans also range from Rs. 50,000 to Rs. 5 Cr. Our distribution model is truly geared towards catering to MSMEs across all geographies and ticket sizes.

While the perception may exist that the MSME lending space is highly competitive, the reality is quite different. The credit gap in this segment stands at an astounding Rs 92 lakh crore. Even with significant advancements, achieving full saturation in this sector remains highly improbable within the next 30 years.

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

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

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

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

The firm has set ambitious financial goals to enhance shareholder value and solidify its market position. Key target would be to, achieve a Return on Assets (RoA) of 4 per cent, and reach a cost-to-income ratio below 45 per cent. To achieve these objectives, it plans to significantly expand its customer base from the current 1,00,000 to over 2,50,000 MSMEs by focusing on high-potential markets.

The company will increase its penetration in tier 3 and tier 4 cities, where opportunities are abundant, particularly in sectors like manufacturing and trade. UGRO’s strategic focus on micro-loans and co-lending partnerships will drive sustainable growth while diversifying risk. Operational efficiency will be enhanced through digital initiatives and data-driven processes, ensuring that these financial targets are met without compromising on 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-faceted approach to ensure sustainability and growth during a challenging economic cycle. The company leverages its capital-light co-lending model to diversify risks and enhance scalability. By partnering with over 10 banks and NBFCs, it shares risks and accesses larger pools of capital.

A significant focus is placed on expanding the micro-loans segment, supported by the proprietary GRO Score underwriting model, which provides precise and data-driven credit decisions. This ensures a well-balanced portfolio with stable asset quality.

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

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