At first glance, the deal appears attractively priced, with UGRO estimating an annualized PAT uplift of ₹150 Cr — implying a ~9.3x earnings multiple.
But here’s the real math:
The ₹150 Cr profit boost includes ₹115 Cr of cost and funding synergies, meaning Profectus’ standalone PAT is likely just ₹35 Cr. That implies UGRO is paying ~40x trailing PAT, a rich multiple by any NBFC M&A standard.
What I like -
Immediate scale with a 28-branch network across 7 states.
Boosts operating leverage and RoA (estimated +60–70 bps uplift).
My concerns
Steep Valuation (40x PAT): The deal only makes sense if synergies materialize fast and fully.
Integration Risk: Merging branch ops, credit culture, and systems is non-trivial — any misstep can affect asset quality.
Execution-Heavy: ₹115 Cr of synergy assumptions leave little margin for error.
Profectus has a 1.6% GNPA; integrating this book without credit slippage will be key
–
I don’t think market would like this acquisition, given ugro has been struggling to bring up its RoA and RoE. Adding an acquisition to an already fast paced business brings in very high integration risk. If I’m told in a quarter or two that RoE and RoA is further delayed, I’ll probably sell out of the counter.
My fear is that market will start looking at ugro as majority shareholder biased, and not give it the multiple it deserves, but then again, keeping the recent events in mind, does this stock even deserves to re-rated?
Disc : Invested