Non-Banking Financial Company UGRO Responds to Concerns Over Executive Compensation

UGRO Capital Dismisses Concerns Over Vice-Chairman's Re-Appointment

UGRO, a non-banking financial company (NBFC) focused on micro, small, and medium enterprises (MSMEs), has responded to concerns raised by a proxy advisory firm over the re-appointment of its vice-chairman and managing director, Shachindra Nath. The proxy advisory firm has advised its institutional investor clients to vote against the resolution for the re-appointment in the upcoming annual general meeting scheduled for May 29.

According to a regulatory filing to stock exchanges, UGRO stated that the proposed compensation for Nath is at or below market median, as independently confirmed by Aon, one of the world's foremost compensation advisory firms, commissioned by the company's 100% independent Nomination and Remuneration Committee in April. UGRO alleged that these proxy advisory firms have routinely advised against the appointment of managing directors of comparable NBFCs. In each case, the compensation was similar or higher, shareholders rejected the advisory recommendation, and the respective individuals continue in their roles today.

The proxy advisory report's most pressing concern was the proposed share price-linked variable pay component, which the firm characterised as akin to cash-settled Stock Appreciation Rights (SARs) prohibited for promoters under SEBI's share-based employee benefits regulations. However, UGRO chairman Satyananda Mishra, ex-Chief Information Commissioner of India, stated that should the variable pay resolution be approved, any compensation determined will be benchmarked independently against comparable companies, with the sole objective of aligning the founder's interests with those of all shareholders.

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It is worth noting that Nath has voluntarily guaranteed ₹1,830 crores of the company's borrowings – without a single rupee of commission or fee, while building an institution that employs 2,500 professionals and serves 2,50,000 MSMEs across India. This level of personal commitment is rare in Indian corporate life. During the same period, Nath's promoter entity, Poshika Financial Ecosystem Private Ltd, raised a stake in the company via share purchase from the open market. Poshika acquired 18,54,374 equity shares at prevailing market prices - between ₹107.65 and ₹110.94 per share - investing approximately ₹20 crore of personal capital.

Here's a comparison of the compensation package for Nath with other comparable NBFCs:

Nath founded UGRO Capital in 2018, built it from a dormant listed shell into India's first listed MSME-focused DataTech lending NBFC, and enabled more than ₹2,500 crore of equity capital raises over eight years. His own shareholding was diluted to below 3 per cent as a direct consequence - dilution-to-build, not disengagement. This promoter classification permanently excludes him from ESOPs, SARs, and every equity-linked long-term incentive that every comparable professional MD in India receives in addition to cash.

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