Incred Capital initiates 'add' rating on UGRO Capital, forecasts 36% potential upside

So far this year, shares of UGRO Capital tumbled over 5 percent

Incred Capital intiated 'add' rating on UGRO Capital and assigned target price at Rs 350 per share, indicating an upside of 36 percent from current levels. The bullish stance comes as analysts believe the data tech NBFC to benefit from rising market share in growing landscape of MSME lending.

UGRO Capital is a data-tech lending platform that provides financial services to small and micro businesses in India. It offers customised loan solutions to SMEs in eight sectors, including healthcare, education, chemicals, food processing, hospitality, and more. Additionally, it has co-lending relationships with more than 10 large public sector banks and large non-bank financial companies.

So far this year, shares of UGRO Capital tumbled over 5 percent, underperforming benchmark Nifty 50's 15 percent surge. Earlier, the stock had touched 52-week high of Rs 314 per share on May 3, 2024.

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Analysts at Incred believe that UGRO Capital is well-positioned to enter the next phase of its growth. They expect strong AUM growth with a stable margin over the next two fiscal years.

"We expect operating leverage to drive 4 percent return on asset (RoA) and 14 percent return on equity (RoE) by FY27," the brokerage firm added.

In the June-ended quarter, UGRO Capital's net profit increased by 20 percent on-year to Rs 30 crore, while net total income surged by 32 percent YoY to Rs 165 crore. The firm's assets under management (AUM) was up 36 percent at Rs 9,200 crore for the quarter, as against Rs 6,777 crore recorded in the same quarter during the year-ago period.

However, the gross loan origination was down 10 percent on-year at Rs 1,840 crore versus Rs 2,036 crore crore in the first quarter of FY24.

Currently, 3 brokerages cover UGRO Capital stock, recommeding a strong 'buy' for the case.

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