UGRO Capital , a leading non-banking financial company (NBFC), has taken a significant step to strengthen its capital base. The company's Investment and Borrowing Committee has approved the issuance of up to 5,000 non-convertible debentures (NCDs) worth Rs 500.00 crore, with an additional green shoe option of Rs 1,000.00 crore.

Key Details of the Debenture Issue

Strategic Implications

This move is strategically important for UGRO Capital as it aims to bolster its Tier II capital. The company plans to use this subordinated debt to enhance its capital adequacy in line with the Reserve Bank of India's (RBI) regulations, specifically the Master Direction – Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) Directions, 2023.

Financial Structure

The debentures will be redeemed at par upon maturity. In case of any delay in interest or principal payments, a default interest of up to 2% per annum may apply, as agreed between the company and investors.

Market Impact

This substantial capital raise could potentially strengthen UGRO Capital's position in the NBFC sector, providing it with additional resources to expand its lending activities and maintain regulatory compliance. The successful placement of these debentures may also reflect positively on investor confidence in the company's financial health and growth prospects.

As the financial landscape continues to evolve, particularly for NBFCs, such capital-raising initiatives are crucial for maintaining robust balance sheets and supporting sustainable growth. Investors and market watchers will likely keep a close eye on how UGRO Capital utilizes this additional capital to drive its business forward in the competitive NBFC space.

UGRO Capital , a data-tech NBFC focused on MSME lending, has reported a robust financial performance for the second quarter, with significant growth in key metrics.

Strong Financial Performance

The company's net profit for Q2 stood at Rs 433.00 million, marking a substantial 22% increase from Rs 355.00 million in the same quarter last year. This growth was underpinned by a notable rise in revenue, which reached Rs 4.55 billion, up from Rs 3.30 billion in the corresponding period of the previous year.

Assets Under Management (AUM) Growth

UGRO Capital's Assets Under Management (AUM) showed impressive growth, reaching Rs 12,226.00 crore as of September 30, representing a 20% year-on-year increase. This growth in AUM reflects the company's expanding market presence and effective lending strategies in the MSME sector.

Disbursements and Income

The company reported net disbursements of Rs 1,789.00 crore for Q2, contributing to a half-yearly disbursement of Rs 3,388.00 crore. Total income for the quarter stood at Rs 461.00 crore, a 35% increase year-on-year, while the half-yearly income rose to Rs 883.00 crore, up 37% from the previous year.

Asset Quality and Capital Adequacy

UGRO Capital maintained a strong focus on asset quality, with Gross Non-Performing Assets (GNPA) at 2.40% and Net Non-Performing Assets (NNPA) at 1.50% of AUM. The company's provision coverage ratio stood at a healthy 47%, with 93% of assets classified as Stage 1, indicating robust asset quality.

The Capital to Risk-weighted Assets Ratio (CRAR) was reported at 25.40%, well above regulatory requirements, ensuring strong capital headroom for future growth.

Strategic Developments

The company has made significant strides in its co-lending and fintech partnerships, with 43% of its AUM now off-book, spread across 16 co-lending and over 40 fintech partnerships. This diversification strategy helps in risk mitigation and expansion of lending capabilities.

Management Commentary

Shachindra Nath, Founder and Managing Director of UGRO Capital, commented on the results: "Q2 marked a period of strategic recalibration and operational steadiness. With our Emerging Market network now at 303 branches and the Embedded Finance platform scaling rapidly, UGRO is entering a phase of structural profitability improvement."

Future Outlook

With the completion of its physical network expansion and a shift towards branch-level productivity and risk calibration, UGRO Capital is poised for improved operating leverage and sustained value creation in the coming quarters.

The company's focus on data-driven underwriting and its diverse MSME lending portfolio positions it well to capitalize on the growing credit demand in the MSME sector.

UGRO Capital's strong Q2 performance, coupled with its strategic initiatives, sets a positive tone for its growth trajectory in the evolving landscape of MSME financing in India.