UGRO Capital Set to Acquire Profectus Capital, Exceeding Rs 15,000 Crore AUM Target This Month

UGRO Capital is on the verge of completing its acquisition of Profectus Capital within this month. This strategic move is set to inject Rs 3,000 crore directly into UGRO Capital's asset base, enabling it to surpass its previously announced target of Rs 15,000 crore in Assets Under Management (AUM). Founder and Managing Director Shachindra Nath stated that the company expects to conclude the fiscal year with a consolidated AUM ranging from Rs 16,500 crore to Rs 17,000 crore. This includes Rs 12,000 crore from its existing operations and the remainder from Profectus Capital, supplemented by organic growth. The company's AUM had already seen a year-on-year increase of 20%, reaching Rs 12,226 crore as of September 30. Future growth is projected to stem primarily from two key areas: micro LAP (loan against property) disbursed through its extensive branch network, and embedded finance facilitated by digital partnerships with platforms like PhonePe, Fino, and BharatPe. These segments are expected to contribute approximately Rs 1,000 crore in additional assets over the next two quarters. With significant scale now achieved, UGRO Capital is shifting its operational focus towards enhancing productivity and optimizing costs. The company is strategically moderating its organic disbursements to reduce its cost of borrowing by 100 basis points over the next six quarters. Furthermore, it anticipates that its 303 branches will achieve an average disbursement of Rs 1 crore within the next 18 months. Despite acknowledging past challenges with small-ticket micro-LAP and unsecured loans, UGRO Capital reports consistent portfolio quality. The integration of Profectus Capital, a fully on-book NBFC, will lead to a short-term moderation of UGRO's off-balance sheet book share to around 35% from the current 43%. The company aims to maintain this ratio between 30–35% long-term to balance risk and capital efficiency. UGRO Capital recently reported a net profit of Rs 43.3 crore for the quarter ended September, marking a 22% year-on-year increase.

Impact: This acquisition and aggressive AUM growth strategy significantly strengthens UGRO Capital's market position and financial outlook, potentially leading to increased investor confidence and stock valuation. The focus on specific growth segments and cost optimization indicates a maturing business model. Rating: 7/10.

Difficult terms: * Asset Under Management (AUM): The total market value of assets that a financial institution manages on behalf of its clients. * NBFC (Non-Banking Financial Company): A financial institution that provides banking-like services but does not hold a banking license. * Micro LAP (Loan Against Property): Small-ticket loans provided by financial institutions where the borrower pledges their property as collateral. * Embedded Finance: The integration of financial services into non-financial platforms or products, like offering loans directly within a retail app. * Basis Points: A unit of measure used in finance to describe the percentage change in a financial instrument. One basis point is equal to 0.01% or 1/100th of a percent. * Co-lending: A model where banks and NBFCs collaborate to lend to borrowers, sharing risks and rewards. * Off-balance sheet book: Financial assets or liabilities that are not recorded on a company's balance sheet, often used for risk management or regulatory compliance.