Profectus has been acquired, profit increased on consolidated level and return metrics fell asleep expected. We will have to wait till next quarter on how it performs. Although it is not that much of a rosy picture but price to book seems bottomed, because even the companies posting losses are also at same valuation.
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What do u make out of their decision to exit all channels except emerging markets and embedded finance.
I don’t think they have said anything like that, what I got from that is that they will focus on that channel as it has good return ratios
UGRO Q3 FY26 concall summary:
Main themes
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Ugro is shifting from a “scale building” phase to an “institution building” phase focused on two core businesses: emerging market small-ticket loan-against-property (LAP) via its 300+ branch network and embedded merchant financing through digital platforms (via the MyShubhLife/“my life” acquisition).
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The company is realigning its portfolio away from low-yield, high-opex, intermediated and high-ticket products (e.g., high-ticket LAP, machinery loans, certain DSA business loans) and wants a higher share of granular, secured, higher-yield assets that generate annuity-like interest income rather than transaction-led co-lending/direct-assignment income.
Key financials and operating metrics
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Consolidated AUM as of December 2025 is about ₹15,454 crore, up roughly 40% year-on-year and 26% quarter-on-quarter, with Q3 FY26 disbursements of about ₹2,217 crore.
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Emerging market LAP and embedded finance together form roughly 32% of consolidated AUM and are expected to rise as the mix shifts toward higher-yield, cash-generating assets.
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Asset quality is reported stable: gross NPA at 2.2%, net NPA at 1.4%, collection efficiency around 99%, and about 94% of AUM in Stage 1 assets.
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On a consolidated basis, profit after tax for Q3 FY26 is cited at about ₹46 crore with 23% year-on-year growth, while standalone PAT is about ₹6 crore versus ₹43 crore in the previous quarter, mainly due to shifting direct-assignment gains to the acquired subsidiary (Profectus) and one-off items like wage-bill provisions.
Strategic and cost actions
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Management highlights a strategic “mix shift” rather than aggressive balance sheet expansion: legacy, lower-yield portfolio is allowed to run down at roughly 15–20% annually, while LAP and merchant lending grow faster.
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Ugro is executing an annualized cost rationalization of about ₹220 crore, with roughly half already actioned and the rest expected to flow through over the next few quarters as people, infrastructure, and technology costs are optimized post-Profectus acquisition.
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Off-book AUM (co-lending, DA) now stands around 36%, largely reflecting Profectus’s on-book portfolio; management expects reduced reliance on co-lending/DA to improve durability and quality of ROA even if headline ROA guidance (previously 4%) is toned down or achieved later.
Guidance and Q&A color
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Management repeatedly asks investors to evaluate performance on a consolidated basis post-acquisition, stressing that lower standalone profit this quarter is not reflective of underlying business deterioration.
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They indicate that finance costs were elevated due to higher liquidity held for the transaction and higher-cost subordinated debt, with some normalization expected in coming quarters.
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For FY27 and the next 2–3 years, they guide toward: improving ROA and higher quality of earnings (more spread/interest income, less transaction-linked income), growth funded largely from internal accruals, and no near-term need for fresh primary capital given capital adequacy and the revised, more annuity-driven model.
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This has turned out to be a disaster. The Management has for long been taking its shareholders for sure and now the whipping is too much. They kept on saying we will do this and do that and despite that rarely delivered, at best all they could manage was keeping NPAs stable, no ROE or ROCE or ROA improvement. Again and again capital dilution and that too below book value. When you yourself are not respecting you company then outsider shareholders surely won’t.
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Look at it this way, thwy have expanded to 300 odd branches and still reported profits every quarter and increasing profits yoy.
Yes, the pace promised was much faster but the execution is on track. Opening 300 brqnches would have cost them atleast 100cr… which should hv been otherwise seen in profits. So they used the DA and colending profits to build the infrastructure. Now that they have the infrastructure to do a better yielding business they are stopping the former.
The disappointment is understandable but they are on track to doing well going forward.
Having said that, they did go wrong in the assumption that they could be competing with the big boys with ultra low COB and they felt they didnt have to compete with the fivestars of the world who do subprime. But now they have clearly understood building an instituition to compete with the nbfcs with parentage is difficult in india.
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I agree. It’s a little surprising to see the stock being beaten to less than 0.65 times book. They’ve been profitable and not had any major fraud. Would have thought they’d at least trade at book value.
Fair point.. i personally think (and i could be wrong) the reason the price is slipping so much is because of thin holding. The drop from 175 to 115 is hardly 25 lakh shares or less than 2%.
Too many big players holding large quantities. 40k retail participation isnt good for a stock. Big players dont buy in the market or have already reached fund level saturation.
Unless management entices new investors i.e. atleast a 1 lkh retail participants or mutual funds etc the slippage cost will be high if anyone has to exit.
Given the business is doing well, one way to show confidence is to pay a dividend even a small token amount say 1 or 2 rs to bring in more stable retail investors or funds who buy value for dividend pkay
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Hi all, I was following this company few years back. Assuming this is a good company I bought bonds of the company. However, in April 2025, I received a intimation that company has breached its capitalisation covenants. To compensate for that they were planning to give some penal interest. I tried looking for company announcements on BSE and NSE but I could not find it. If anyone can find please share. This will mean that company was transparent.
Interestingly credit rating agencies also did not mention about the breach. As I have credit rating background, I understand that covenant breach is considered a significant trust breach among lenders and credit rating agencies.
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The management explained this in the earnings call last year. The covenant breach was rectified immediately by the fund raise in 2024.
That is also a reason why they want to reduce DA and co-lending. As in both, you can book upfront (Npv) profits in P&L for the full maturity period of loan for the NIM diff, but the profit isnt accretive to the networth by RBI mandates. So they had to raise new funds.
They wrongly assumef that the share price would keep increasing zand dilution was an option. Now almost all esops and managements own holdings are undervalued. So they are switching to a model where profits are purely lending and receiving cash
No fee income which isnt roa accretive… so no new fund raise until stock price appreciates. That also means AUM growth cannot be more than ROE in % terms. So if ROE is 8% which is roughly what it is now, they can only grow AUM at 8%.
So they shd reduce opex (many ppl from prime lending hv already left according to linkedin) and now bottom line should improve
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Hi @vishy64 thanks for coming back on this.
You mention fund raised in 2024 but breach happened in 2025. Also question is did they announce the breach on nse and bse filings. If yes please share it. That’s where we understand the transparency.
Another issue I note that is on standalone basis they report loss in latest quarter. On console basis they report profit. Reason is totally out of my understanding. Consolidation of profectus is in last few days of December but funnily they were able to transfer all Colending to console level. Just crazy crazy.. generally there are merger related one offs which should impact profits negatively. But our management is genius to gain synergies of many crores immediately.
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Sorry my apologies i meant 2025… with the rights…
They have a very good explanation filed with the exchange on why they did the DA (not colending) at profectus level and not ugro portfolio this quarter. Please read the communication…its available on screener too.
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Bought again today at 108. I have heard the management and of view that expansion phase is over and now ugro in stabilization phase. With reduction in Cost to income ratio and improvement in NIM, Roa will increase.
Imo at this price there is not much to lose in ugro. Earlier in brexit event , I sold all my holding and at today when US Iran war is ongoing, I bought at my full force. Sometimes things take their own time to understand. This is how it is.
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Ok now its starting to look like a joke… ugro the combined enity is trading at less than myshubhlife and profectus acquisition price.
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Market takes its own time to recognize the value, sometimes it takes years. In 2-3 years if ROA>3.5-4% and CoB<8.5%, we may see Ugro at 600-750 @2.5P2.5P/B. Even at that price, the Mcap will be just 10k.
Only time will tell if or when it happens. It’s just management accepted the mistake (that they should’ve done years before) of over reliance on co-lending. Things should improve materially from now on, I reckon.
Disc: Adding on decline. I exited some months back at 175 and have started accumulating from 108. I may add more. Do your own research.
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Hi @Chins I would like to know your approach regarding this counter. What is your perspective? You have discussed UGRO extensively in previous posts.
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I have not studied the company in details but the NPA numbers look too good @ 2.2% in addition to the collection efficiency of 99%. Even people lending at less yield and at lower ticket sizes struggle to show these kind of numbers.
Posting 7% ROE at 17.2% portfolio yield with a significant part of the book being co-lending requires a special kind of management. I studied this earlier as well but stopped once management talked about 220 Cr in bogus synergies. Unless you are firing thousands of employees, mergers don’t ever work that way.
These GNPA numbers seem too good to be true in this climate. If you substitute the numbers presented by the management with industry average numbers and subtract the same from their book value P/B comes to between 0.75-0.8. Their numbers can also be worse than industry average as well :)
| Loan Segment | UGRO GNPA (%) | Industry Avg. GNPA (%) | Variance (Basis Points) |
|---|---|---|---|
| Secured Business Loan (LAP) | 1.4% | 2.8% – 3.5% | ~140-210 bps lower |
| Business Loan (Unsecured) | 5.3% | 5.5% – 7.5% | ~20-220 bps lower |
| Emerging Market Loan (Micro) | 1.0% | 3.5% – 4.5% | ~250-350 bps lower |
| Machinery Loan (Equipment) | 2.2% | 3.2% – 4.0% | ~100-180 bps lower |
| Partnerships & Alliances | 1.0% | 2.5% – 3.5% | ~150-250 bps lower |
| Embedded Finance (Digital) | 1.5% | 2.8% – 4.2% | ~130-270 bps lower |
| School Finance | 0.4% | 1.5% – 2.2% | ~110-180 bps lower |
| Total Portfolio (AUM) | 2.2% | ~4% | ~160-230 bps lower |
Just out of curiosity, where did u get the industry averages from?
If u add the 100 cr spent on branch expansion what is the roe you get?
Sometimes market price makes us change the narrative… i have seen ultra bullish narratives for the worse numbers from the same management when prices were arnd 250.
If u ignore the market price and look at the business, for a company with a short vintage these defaults are normal. As management has said in the past their expected gnpa and credit costs are higher than what they see now as it increases to industry average with vintage.
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Data is based on other lenders that I track as well as the vintage of the loan book. Why is every good lender being conservative or reducing their growth guidance but ugro is still pushing its foot to the pedal?
When something looks too good to be true, it usually isn’t. Same issue I have seen with Northern Arc, they are giving out loans at 70% APR (yield + processing cost + insurance) - either they will get hammer from RBI (who has always asked APR to be below 50%) or they will face defaults
When did ugro mention high growth recently. They have mentioned no fund raise for 2 to 3 years (if they dont keep up that is a different problem) but at roe of 8% they can only grow at 8%.
The price drop should stabilize from tomorriw as the tax loss realization period is over as of tomorrow. The company must understand that with extremely concentrated pe investors and very few retailers holding 45% the stock price is no longer representing the business but technical things like fund vintage for the pe investor and tax loss harvest for public investors..
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With all due respect, RBI follows risk based APR not a 50 % based cap.
70% based APR is too high. Where you got such information. Can you share with us.