UGRO Capital to acquire Profectus Capital in Rs 1,400-crore all-cash deal to boost MSME lending

Ugro Capital acquires Profectus Capital

UGRO Capital has acquired Profectus Capital Private Ltd in a Rs 1,400 crore all-cash deal, the mid-sized non-banking finance company (NBFC) announced on June 17.

The acquisition, said to be value accretive from Day 1 of consolidation, was made through a share-purchase agreement with global private equity investors Actis PC Investment and Actis PC (Mauritius).

Profectus Capital manages assets worth Rs 3,468 crore, with a presence in seven states, a network of 28 branches and a team of over 800 employees.

The deal is seen as strategic move to scale UGRO’s presence in high-yield emerging markets, embedded finance and school financing, a new segment for the company, thereby resulting in an incremental Rs 2,000 crore worth of loan growth potential.

According to sources, this transaction has been executed at 1.07 times Profectus’ projected FY26 net worth. The deal is funded through proceeds from UGRO’s recently completed equity raise and internal accruals, the lender said in a press release.

After acquisition, Profectus will become a wholly owned subsidiary of UGRO Capital.

Moneycontrol was the first to report on July 12, 2024 that PE firm Actis promoted Profectus Capital is in stake sale mode.

The transaction, which is subject to RBI and shareholder approvals, is expected to close within two to three months. Until then, both companies will maintain independent operations and strategies during the integration phase.

The acquisition is expected to transform UGRO’s asset portfolio by adding fully secured lending capabilities with zero origination costs. Post consolidation, UGRO Capital is expected to benefit from operational efficiencies to the tune of Rs 115 crore (anualised) and boost net profit by Rs 150 crore.

The improvement in operational efficiencies could help the company's return on assets (RoA) increase by 0.6-0.7 percentage points and UGRO Capital may likely close FY26 with an RoA in FY26 to 3.5 percent, and 4.5 percent in FY27, sources said.

UGRO has already partnered with 17 banks and NBFCs for co-lending and built an off-balance-sheet asset book comprising 42 percent of its total assets under management.

UGRO Capital has raised more than Rs 2,500 crore in equity funding since 2018 and plans to capture 1 percent of the MSME market share in the coming years.

To facilitate the discharge of purchase consideration for the acquisition, the company is proposing to add acquisition to the object of the existing preferential issuance of CCDs by seeking fresh approval from the board and shareholders.