Ugro Capital

UGRO Capital is undergoing a strategic realignment to sharpen its focus on two core businesses: emerging market secured LAP through its branch network and embedded merchant financing through digital platforms. This shift aims to reduce dependence on income linked to co-lending and direct assignment, increasing the share of recurring interest income over time. As of December 2025, these segments collectively account for approximately 32% of the consolidated AUM, with expectations for this share to steadily increase as the portfolio rebalances towards high-yielding, cash-generating assets. The company expects to grow its emerging market LAP and merchant lending business by 20-25% over a two-year horizon, while allowing lower-yielding portfolios to run down by 15-20% annually.

For Q3 FY26, UGRO Capital reported a consolidated AUM of INR15,454 crores, representing a robust 40% year-on-year growth and a 26% quarter-on-quarter growth. Disbursements during the quarter totaled INR2,217 crores. Consolidated Profit After Tax (PAT) for the quarter was INR46 crores, reflecting a 23% year-on-year increase. However, stand-alone PAT was INR6 crores, a significant decrease from INR43 crores in the previous quarter, primarily due to direct assignment transactions being executed at the Profectus level to manage cash on UGRO's balance sheet.

The company has initiated an annualized cost rationalization program of approximately INR220 crores, with about 50% of these savings already achieved. The remaining savings are expected to flow into the P&L from Q4 FY26 and significantly in FY27, as they are linked to notice periods for contracts and personnel. Management anticipates that this cost reduction, combined with a shift towards annuity-led interest income, will lead to improved profitability and a healthier quality of earnings over the next 2-3 quarters, replacing income previously derived from transactional gains.

UGRO Capital's cost of borrowing improved to 10.24% in Q3 FY26, down from 10.37% in the previous quarter, supported by easing macro conditions. The company raised approximately INR400 crores in sub debt during the quarter, which carried a higher cost (150-200 bps above normal borrowing). Additionally, UGRO held significant cash of about INR1,140 crores, primarily for the Profectus acquisition, which contributed to higher finance costs. Management expects a reversal in finance costs from the next quarter as liquidity normalizes.

India's MSME credit market remains large and underpenetrated. UGRO Capital has built a pan-India branch network of over 300 branches for small ticket secured lending and developed proprietary data analytics (GRO Score 3) for underwriting. Through the acquisition of MyShubhLife, the company has also established embedded finance and merchant lending capabilities. This dual approach leverages physical presence for granular credit demand and digital platforms for transaction-led merchant financing, aiming for higher yields (average 25% for merchant lending and 17.5% for LAP) and sustainable annuity-led returns.