UGRO Capital Acquires Profectus Capital in Ambitious ₹1,400 Crore Deal
Strategic acquisition aims to turbocharge MSME lending, expand reach, and boost profitability for UGRO Capital
Introduction: A Landmark Deal in Indian Lending
The Indian non-banking finance company (NBFC) landscape is witnessing a transformative moment as UGRO Capital, a data-tech-driven lender focused on MSMEs, moves to acquire Profectus Capital for ₹1,400 crore in cash. This acquisition is not just a scale-up; it’s a strategic leap that will reshape UGRO’s business profile, enhance its risk metrics, and accelerate its ambition to capture a larger share of the MSME lending market.
The Acquisition: Key Details and Rationale
• Deal Structure:
The all-cash transaction will see UGRO Capital purchase 100% of Profectus Capital’s shares from its current owners, including global private equity firm Actis. The consideration will be paid in a single tranche at closing, funded through a mix of UGRO’s recent equity raise and internal accruals.
• Scale and Reach:
Profectus brings a fully secured loan book of ₹3,468 crore, a 28-branch network across seven states, and a workforce of over 800 employees. The acquisition will increase UGRO’s consolidated assets under management (AUM) by 29% to ₹15,471 crore, while expanding its branch footprint to 263 locations.
• Financial Impact:
The deal is expected to add approximately ₹150 crore to UGRO’s annualized profits and deliver operational cost savings of ₹115 crore post-merger. The company anticipates an improvement in return on assets (ROA) by 0.6–0.7 percentage points, with projections to reach 3.5% in FY26 and 4.5% in FY27.
Why Profectus? Strategic Fit and Synergies
• Robust Portfolio:
Profectus has maintained steady growth, reporting a gross NPA of just 1.6% and a net NPA of 1.1% as of March 2025. Its focus on fully secured lending complements UGRO’s risk appetite and strengthens the overall loan book quality.
• Diverse Lender Network:
The acquisition gives UGRO access to Profectus’ relationships with private sector banks and development finance institutions, broadening its liability profile and funding options.
• Operational Efficiency:
With zero origination costs for the acquired portfolio and significant cost synergies, UGRO expects to unlock substantial value from the integration.
• Market Expansion:
The deal positions UGRO to accelerate growth in high-yield segments such as supply chain finance, machinery loans, and embedded finance. It also marks UGRO’s entry into school financing, a new vertical for the company.
Integration and Next Steps
Both companies will maintain independent operations and strategies during the integration phase, which is expected to last two to three months pending regulatory and shareholder approvals. UGRO plans a seamless transition to maximize synergies while preserving the strengths of both organizations.
UGRO’s founder and managing director, Shachindra Nath, emphasized that the acquisition leverages the company’s recent equity raise to achieve instant scale and operational efficiency. Profectus CEO K.V. Srinivasan highlighted the complementary nature of the businesses and the potential for greater profitability and efficiency.
Market Reaction and Industry Impact
The announcement has been well received by the market, with UGRO Capital’s shares rising sharply following the news. Analysts view the acquisition as a value-accretive move that positions UGRO as a major force in MSME lending, with improved profitability and a stronger risk profile.
This deal also signals a broader trend of consolidation and strategic expansion in the NBFC sector, as lenders seek scale, diversification, and operational efficiencies to navigate a competitive and evolving market landscape.
Conclusion: A New Chapter for UGRO Capital
UGRO Capital’s acquisition of Profectus Capital marks a watershed moment in its growth journey. By combining Profectus’ robust secured lending portfolio and branch network with UGRO’s data-driven approach and capital strength, the merged entity is poised to set new benchmarks in MSME lending. The deal not only enhances UGRO’s scale and profitability but also strengthens its foundation for sustainable, long-term growth in India’s dynamic financial sector.
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