UGRO Capital’s Strategic Leap: Profectus Acquisition to Boost MSME Lending

UGRO Capital has announced the acquisition of Profectus Capital for Rs 13.99 billion, which is a significant growth of its MSME lending book. The transaction is expected to achieve cost savings of Rs 1.15 billion and enhance operational efficiencies.

Transaction highlights:

The transaction will be funded from proceeds of a preferential issue of compulsorily convertible debentures, thereby having a structured financial approach.

UGRO Capital board meeting on June 20 will finalize the revised preferential allotment, entrenching the funding strategy.

Profectus Capital is Rs 3,468 crore asset under management and 28-branch mid-sized NBFC with seven states of operation.

Value accretive from day one is anticipated from the transaction, adding to UGRO's high-yielding emerging markets franchise.

Following the acquisition, UGRO Capital anticipates incremental Rs 2,000 crore loan growth opportunity, expanding its secured lending scope.

The transaction, executed at 1.07 times Profectus' approximated FY26 net worth, aligns with UGRO's long-term growth strategy.

Market influence and future outlook:

UGRO Capital has raised over Rs 2,500 crore in equity investment since 2018 and has become a major MSME financier.

The transaction is expected to add net profit by Rs 150 crore annually and improve return on assets by 0.6-0.7 percentage points.

Shareholders' and RBI regulatory approvals have been delayed but the transaction is expected to be concluded within two to three months.

Sources: Moneycontrol, Business Upturn, Rediff Money.