Great summary!
Additionally its important to note that this 1600 crore company has (potentially) gained 250 crores in warrant premium this year.However this now has tax implications as well.
The board members probably looked at this from win win angle and the rights issue is just a way to compensate bullish investors for the dilution.
Investors unwilling to participate due to bearish view or percieving risk of future dilution as too high, will be diluted.
After the 1315 Cr raise, what should be the new Book Value per share for UGRO?
Fully diluted book value calculation
Networth is 2046 crores, with current diluted shares at 9.8 cores (implied by diluted annual eps of 14.7 as per march presentation), plus qip of 4.95 crore shares , and rights issue of 2.16 crore shares.
Total.number of diluted outstanding shares =
9.8+4.95+2.16 = 16.91 crore shares
2046 plus fundraise of 1315 is 3361, which divided by 16.91 is Rs 198.80.
Can someone double check ?
The warrant conversion is @ 265 in December…and its very probable that the stock price of ugrocap will be around 250 by december or maybe earlier. …the long term charts are suggesting so. So its not certain that the old warant will not be subscribed too
As Sachindranath said…ugro may end up getting additional equity of 300-400 crores by December
So - if the stock delivers 50-60 percent from here, you are worried about 15 pc dilution ? It’s a win win because capital will anyway be needed in 2026 year end, the only issue is depressed roe in the mid term - if only the company’s finance team can buy Shriram finance ncds with excess liquidity …
I know that you have a thread on TA. I read that before. But this prediction (based on business updates) w.r.t time frame you have mentioned is surprising. So, I am interested to know what makes you say this. Can you explain from technicals standpoint?
I presume existing shareholders received an email about rights issue. It’s my first time dealing with “rights”. I am allocated some rights in my demat based on my UGRO holdings. What would be a smart thing to do now - sell the rights, do nothing, or convert rights to shares by investing more? My avg invested price is Rs. 240. My view is neutral to slightly bullish long term. My perception is that UGRO may be undervalued. The management seems clean (no red flags). The upcoming cycle of RBI rate reduction could be a mid-term tailwind.
What do you all think? Open to all opinions.
Why did promoter want to raise fund at such low valuation? Simple answer may be they need funds to maintain growth pace of AUM. But since market is not recognising it’s potential why ugro management slow down its growth and first focus on ROA no.Does they fear further drop in valuation? What is the thought process of management in current situation?
And for experience fellow how to deal with open offer of ugro as it is our first time experience? What are things to look before applying or leaving open offer. Any guidance from senior members is highly appreciated.
Disclaimer: holding at average price of 172 rupees
We have two weeks to go before the rights issue closes on 20th June.
I am expecting Ugrocap share price to go to 200+ or maybe even 220ish in June / july…i would say that 200+ by 20th June is a high probability target
It makes sense to apply for rights issue only if the price is above 200 as on 19th June…otherwise just sell the rights entitlement and lower your average purchase price by a few rupees.
Decide after looking at the price action for the next 9 trading days…
Read the concall and what I infer that management has hinted about right issue indirectly by saying that " They are in talk with warrants holder, to look for what can be done best. Management exact wordings are, "We are trying to see that what is the best form. We are hopeful either the share price recovers so that the warrant holders don’t lose money, and the company gets the required capital,or we are in discussion with alternative route.
I can only tell you this much that all of our warrant holders and some of them, especially, one of our investors, which is an investor who sits on our board, along with other warrant holders, are fully convinced with the UGRO’s business model. The growth it has delivered and that its performance is on track. So, we are in continuous dialog and there are discussions on. We will see how it evolves. There is nothing which I can report right now and I can tell you till the time we have an approval from our board and our shareholders.
I got a few personal messages to share my opinion on right issue and on Ugro in general, so here are my two cents.
Highest ever borrowing:
They are very satisfactory, highest ever borrowing i.e, 4600+ Cr in FY25. This is too good to be true; I mean when there were significant market concerns around NBFC sector growth and sustainability, Ugro was able to mobilize this huge amount. This shows the trust and reputation Ugro has among its creditors. Be mindful of the fact that lending from Bank to smaller NBFCs (not the established ones i.e, likes of Ugro) is way more stringent than general lending to bigger well established NBFCs. If there had been some ballooning for NPAs or impending deterioration in the asset quality, way before market, lenders would have already tightened the tap for Ugro.
Emerging market engine:
One of the growth areas I am out-rightly banking on is the Emerging market. They have already opened 85 Emerging market branches in FY25 and around 65 would be opened by the end of CY2025. The green shouts are already visible as of Q3 2025. This will further improve when the opened branches get stabilized and break even, should be visible in or before the result of Q32026.
Cost of borrowing
When the cost of borrowing of most of the AA- or AA NBFCs saw a significant spike, Ugro demonstrated a rather stable number and you can even see it dipping downwards as of Q32025. After 3 consecutive RBI rate cuts, the recent one even was 50bps, Ugro is, in my opinion, heading towards 10% within the next 4 quarters.
Major Issue with the slow pace of reduction in cost of borrowing : One of the major issues that Ugro is facing, and would always face until it scale past some 50k AUM, is the un-availablity of a strong parent on the top. This leads to a risk premium whenever Ugro either ask for a rating upgrade or credit from lenders. Ugro is one of the very unique NBFC which is non-promoter driven from the day 1. What ever they have achieved is the reflection of their governance and business model (good or bad, I leave this on the readers to decide).
Stable asset quality:
When the entire NBFC sector is struggling with maintaining asset quality and elevated credit cost, Ugro has demonstrated rather stable asset quality; nothing that is out of order. Only caveat is with rapid expansion in AUM, the NPA/GNPA numbers look artificially depressed. So, I will take the reported number with a pinch of salt and would rather also trust the management commentary where they said that the credit cost will be stabilized at 2%.
In a nut shell:
Ugro is a long term bet for me, I have invested significantly in the past 1 year with my average price at 220INR. I might apply for 50% of the rights issued to me and sell the rest if get good premium. That’s the plan as of now and it may change at any time. Company is doing very good and I do not see any red flags. If I were to invest basis market sentiments, I wouldn’t have invested in any of my portfolio companies. At this valuation; considering the growth; IMHO; there is nothing to loose in Ugro. I will take a pause here.
Disc.
Invested and biased, please do your own due diligence before taking any investment decision.
My two cents on the rights issue. The thing to decide is simple. Is Ugro Capital a good buy at 0.8 times book value? What’s the potential downside from here?
In my opinion the answer to this question boils down to this- is there a chance of massive NPAs tumbling out of closet somewhere over the next few quarters? Because barring this, I don’t see a significant downside from here.
I suppose it comes down to trust in the management. If you believe they have something to hide, then better stay away from the rights issue. Else it might not be the worst investment option available right now.
Ugro-Re is currently trading at 8 rupees with almost 35.64% negative. What does it implies? Why buying is not allowed? And why selling is allowed? Any senior fellow can clear this? Thanks in advance and curious to know what is happening.
Applying(buy) to RE is similar process like IPO, it cant be done in demat directly, should be bank transaction with ASBA facility.
What you see is market price of RE based on demand supply of RE. Its shown to existing shareholders only so that they can sell the RE is not interested in applying for it.
RE jumped up to closing to around 8 rupees. Anybody buying RE around this price is equivalent to buying ugrocap through rights issue @170 (162+8)…this does not make much since because the stock closing price is just 172…unless they expect ugrocap share price to go up significantly in the next week.
I am expecting a good rise in ugrocap stock price in the next week…lets see how the stockprice is placed by Thursday closing. If the stock price stays below 195, then thats not a good indication…not a right signal to apply for rights issue.
How one is expecting good rise in ugro stock price? Is it based on purely technical or something else? Will be very grateful to valuepicker community to understand the whole scenario. Thanks for everyone for valuable insights. It is treasure for newbie like us.
Can someone explain the maths, how CCD fundraise is unfavourable for the buyer at 240-280, as per this clip
A retail investor like you and me, who bought at Rs. 240+, is sitting on 30% notional loss and licking ones wound. But what do the investors who invested in warrants last year at Rs. 264 get?
They have convinced/arm-twisted the Management to issue fresh warrants at lower conversion price and also get paid 25% interest on the new CCD as a compensation for the 25% of Rs 264 (Rs 66) they will forfeit as they won’t be subscribing to the original warrants. Mind you, the Management would not have needed much convincing as they themselves had invested in the warrants last year as a ‘show of their commitment’.
It is not the greatest example of good Corp Governance, specially from someone who keeps talking about good CG. It’s like having the cake and eating it too or Heads - the management and big investors win, Tails they get compensated via CCD interest and massive retail shareholder dilution.
This is my understanding, if I misunderstood, please correct me. Thanks.
PS: Seems they acquired a company called Profectus Capital Private Limited. Not sure how they calculated that this small company can help save cost of Rs 115 cr.
Source
ugro capital acqusition.pdf (3.1 MB)
