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    Ugro Capital Limited

    UGROCAP
    Financial Services·28 Apr 2025
    Management Summary

    Ugro Capital delivered strong Q4 and FY25 results, with disbursements growing 30% YoY to INR 7,651 Crores and AUM reaching INR 12,003 Crores, up 33% YoY. The company is aggressively expanding its Emerging Market portfolio, targeting 32-35% of AUM in 6-8 quarters, and aims for a 4% ROA within the same timeframe. While regulatory changes in co-lending and warrant conversions present some near-term considerations, management remains confident in its DataTech-driven model and market opportunity.

    Highlights

    5

    • Disbursement of INR 7,651 Crores in FY25, marking a 30% year-on-year increase.

    • Q4FY25 origination of INR 2,436 Crores, up 57% year-on-year and 16% quarter-on-quarter.

    • Total Asset under Management stood at INR 12,003 Crores as of March 2025, up 33% year-on-year and 8% quarter-on-quarter.

    • Net total income for FY25 rose 27% year-on-year to INR 814 crores.

    • PAT for FY25 was INR 144 Crores, up 21% year-on-year, and Q4 PAT was INR 41 Crores, 24% year-on-year growth.

    Concerns

    3

    • OPEX for the Emerging Market vertical is currently elevated at 8% to 9% due to branch expansion.

    • Warrant conversion depends on market price, which is not in the company's hand, posing a risk for investors.

    • Initial hiccups are expected (max 60 days) during the transition to new co-lending guidelines.

    What Changed1

    vs Q1 FY26

    Guidance items8 → 12 (+4)
    Key financials

    Metrics

    9

    Periods

    4

    Headline

    4
    • AUM (as of Mar 2025)
      ₹12,003 Cr
      YoY+33%QoQ+8%
    • GNPA
      2.3%
    • NNPA
      1.6%
    • Cost of Borrowing (as of Mar 2025)
      10.6%

    Q4

    1
    • PAT
      ₹41 Cr
      YoY+24%

    Q4FY25

    1
    • Origination
      ₹2,436 Cr
      YoY+57.0%QoQ+16%

    FY25

    3
    • Disbursements
      ₹7,651 Cr
      YoY+30%
    • Net Total Income
      ₹814 Cr
      YoY+27%
    • PAT
      ₹144 Cr
      YoY+21%

    Segment breakdown

    Emerging Market
    22% AUM Contribution₹669 Cr Q4 Disbursement
    Prime Intermediate Secured Business
    ₹300 Cr Q4 Exit Run Rate
    Business Loan
    ₹285 Cr Q4 Exit Run Rate
    Green and Asset Channel
    ₹287 Cr Q4 Exit Run Rate
    Embedded Financing Platform (MyShubhLife)
    ₹743 Cr AUM (as of Mar 2025)
    List

    Guidance & targets

    12
    CategoryTargetPriority
    Branch Expansion
    Total Branches
    400
    		High
    Profitability
    ROA
    4%
    		High
    AUM Composition
    Emerging Market AUM Contribution
    32-35%
    		High
    Productivity
    Productivity per branch (Emerging Market)
    INR 1.1 Crore
    		High
    Portfolio Yield
    Average Portfolio Yield (Emerging Market)
    17.6%
    		High
    Credit Cost
    Credit Cost (Emerging Market)
    1%
    		High
    Operating Expense
    OPEX (Emerging Market)
    4%-4.5%
    		High
    Segment Growth
    Prime Intermediate Secured Business Growth
    +20%
    		High
    Segment Growth
    Business Loan Reduction
    -30%
    		High
    Segment Growth
    Green and Asset Channel Growth
    +20%
    		High
    Segment Growth
    Digital Channel Growth
    Same level
    		High
    Co-lending
    Co-lending Market Expansion
    3x
    		Medium

    Warrant Conversion Status

    Next quarter (warrants expire Dec 2025)
    CurrentOngoing dialogue with investors; depends on market price.
    TargetClear path or actual conversion of INR 1,010 Crores warrants.

    Why it matters

    Successful conversion is crucial for strengthening the equity base and supporting growth plans.

    We are quite hopeful that, you know, most of these investors would not like to lose their money and will convert warrant when the time would come. And company is also considering ways and means to see that how these warrant holders get comfort and convert and commit their capital to the company.

    How to verify

    capital_allocation.shareholder_returns

    Risks & concerns

    4
    RiskSeverity

    Regulatory Scrutiny on NBFCs

    Public markets expressed concerns about NBFC growth and sustainability over the past 18 months, with RBI implementing several regulatory measures (increased risk rate on bank exposure to NBFCs, cease and desist orders for some NBFCs). However, recent rollbacks are positive. — Management acknowledged

    medium

    Warrant Conversion Dependency on Market Price

    The conversion of INR 1,010 Crores in warrants, issued at INR 265 per share and expiring in December, depends on the share price, which is not in the company's control. Management is in continuous dialogue with investors and exploring ways to ensure conversion. — Management acknowledged

    medium

    Initial Hiccups with New Co-lending Guidelines

    While the new co-lending guidelines are broadly positive, there might be 'initial hiccups' or 'operational hassle' during the transition period, estimated to last a maximum of 60 days. — Management acknowledged

    low

    Elevated OPEX in Emerging Markets

    The OPEX for the Emerging Market vertical is currently high (8-9%) due to aggressive branch expansion. This is expected to normalize to 4-4.5% as branches mature and become productive within 9-12 months. — Management acknowledged

    low

    Q&A highlights

    8

    “this resolution which has been approved by the board is nothing but a standing resolution. Every year, in order to tap the market opportunity, if required, we pass an enabling resolution so that whenever there is an opportunity, we should be able to raise capital through a QIP. It does not entail or give an indication that we are about to do a QIP.”

    Clarifies that the QIP resolution is a routine annual renewal, not an immediate plan for capital raise, addressing investor concerns about potential dilution.

    asked by Rushi

    3 min read6 chapters

    Detailed Narrative

    01

    Strong Q4 and FY25 Financial Performance

    Ugro Capital reported robust financial results for Q4 FY25 and the full financial year. FY25 disbursements grew 30% year-on-year to INR 7,651 Crores, with Q4 origination reaching a record INR 2,436 Crores, up 57% year-on-year. Total AUM as of March 2025 stood at INR 12,003 Crores, a 33% year-on-year increase, while maintaining stable asset quality with GNPA at 2.3% and NNPA at 1.6%. Net total income for FY25 rose 27% year-on-year to INR 814 crores, and PAT for FY25 was INR 144 Crores, up 21% year-on-year.

    02

    Strategic Expansion in Emerging Markets

    The company is aggressively expanding its Emerging Market portfolio, which currently contributes 22% to AUM, with a target to increase this to 32-35% in the next 6-8 quarters. This expansion is supported by adding 85 new branches in FY25, bringing the total to 235, and aiming for 400 branches by March 2026. Management expects productivity per branch to reach INR 1.1 Crore, with an average portfolio yield of 17.6% and credit cost of 1% in this segment, while OPEX is projected to normalize from 8-9% to 4-4.5%.

    03

    Roadmap to 4% Return on Assets (ROA)

    Ugro Capital is targeting a 4% ROA within the next 6-8 quarters, driven by four key levers. These include increasing portfolio yields by 75-100 basis points, reducing OPEX-to-AUM ratio by 50 basis points, decreasing cost of borrowing by 50 basis points, and a 50 basis point increase in credit cost. The company believes these initiatives, coupled with increased scale and portfolio seasoning, will lead to the desired profitability levels.

    04

    Evolving Regulatory Landscape and Co-lending

    Management addressed recent RBI regulatory actions, noting that while some measures initially impacted NBFCs, recent rollbacks and new co-lending guidelines are positive. The new guidelines broaden the scope of co-lending, allow for First Loss Default Guarantee (FLDG), and leverage technology, which is expected to expand the co-lending market significantly, potentially by three times. Despite minor initial operational hiccups, the company views these changes as beneficial for market expansion and funding.

    05

    Capital Raising and Warrant Conversion

    The company has a standing resolution for QIP, renewed annually, to enable future capital raises if required, but there are no immediate plans for a QIP. Discussions are ongoing regarding the conversion of INR 1,010 Crores in warrants, part of a INR 1,265 Crore capital commitment raised in June 2024 at INR 265 per share, which expire in December. Management is hopeful for conversion, citing investor confidence in the company's growth and performance, and is exploring ways to facilitate this.

    06

    Technology-Driven Underwriting and MSME Focus

    Ugro Capital emphasizes its DataTech-driven business model, leveraging technology for quick underwriting decisions, with in-principle approvals in 60 minutes for prime intermediated customers. For Emerging Markets, templated credit underwriting models are used across 9 sectors and 300+ sub-sectors, enabling detailed cash flow analysis for diverse businesses. The company focuses on MSMEs with INR 15 lakhs to INR 15 Crores turnover, differentiating itself from microfinance and maintaining a competitive edge through specialized underwriting and faster service.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.