Detailed Narrative
Q2 FY26 Performance Overview
Ugro Capital reported a robust Q2 FY26, with total income growing 35% year-on-year to INR461 crores and Profit After Tax (PAT) increasing 22% year-on-year and 27% quarter-on-quarter to INR43 crores. The company's Asset Under Management (AUM) stood at INR12,226 crores as of September 30, 2025, marking a 20% year-on-year growth. H1 FY26 disbursals totaled INR3,380 crores, with Q2 disbursals at INR1,789 crores, reflecting a conscious moderation.
Asset Quality and Risk Management
The company maintained stable asset quality, with Gross Non-Performing Assets (GNPA) at 2.4% and Net Non-Performing Assets (NNPA) at 1.5%, supported by a 47% Provision Coverage Ratio (PCR). Collection efficiency improved to 100% this quarter from 96% last year, with 93% of assets in Stage 1. Management tightened underwriting standards in the unsecured segment, reducing throughput rates from 30% to 20%, and ceased lending below INR7.5 lakh ticket size in emerging markets due to signs of overleverage in the micro and small MSME segments.
Strategic Acquisitions and AUM Growth
The proposed acquisition of Profectus Capital is expected to add approximately INR3,000 crores inorganically to AUM, bringing the total AUM to over INR15,200 crores. This, along with the ongoing integration of the MyShubhLife (MSL) platform, which has grown its AUM to INR1,270 crores within four quarters with Q2 disbursals of INR713 crores, strengthens UGRO's digital credit ecosystem and embedded finance play. The company aims for consolidated AUM to grow by over INR3,500 crores by year-end FY26, reaching INR16,500 crores.
Funding and Capital Adequacy
Ugro Capital successfully raised INR535 crores of equity earmarked for the Profectus acquisition, leading to an upgrade in its long-term rating to IND A+ / Rating Watch with Positive Implications by India Ratings. The cost of borrowing improved to 10.37%, a 38 bps year-on-year reduction, reflecting a diversified and high-quality lender base. The Capital Adequacy Ratio (CRAR) stood strong at 25.4%, providing ample growth headroom, and the company expects no need for additional capital for at least the next 18-24 months.
Branch Network and Productivity
The expansion phase for the emerging market vertical (micro-LAP) is complete, with 303 branches across 13 states, contributing INR2,997 crores to AUM (25% of total). The focus has now shifted to branch-level productivity, with 29 branches already exceeding INR1 crore in monthly disbursements. An additional 86 branches are expected to reach this level within 12 months, and the remaining 188 within 18 months, aiming for an average blended yield of 18%-18.5% from these branches.
Profitability and Future Outlook
UGRO Capital is transitioning from an expansion-led to a productivity-led and profitability-driven phase. The company targets a steady-state Return on Asset (ROA) of about 4% and Return on Equity (ROE) of 16-18% within the next two years, up from the current 2-2.5% ROA. Management expects consolidated AUM to reach INR18,000-19,000 crores by FY27, with long-term growth between 20-25%, while aiming to moderate off-book AUM to around 35% post-Profectus acquisition.