Non-bank lender UGRO Capital plans to reduce its borrowing expenses by 1.25% by FY27, according to founder and managing director Sachindra Nath. As reported by The Economic Times, the company's cost of borrowing is currently at least 1.25% higher than that of its peers. Nath emphasized that reducing these costs is crucial for serving end customers effectively, stating that without this reduction, the company cannot service well.
The company has experienced significant expansion, growing its assets under management from around ₹3,000 crore in 2020 to nearly ₹15,000 crore in 2025. According to The Economic Times, this sharp expansion in recent years necessitated higher liability mobilization, which has impacted borrowing costs. Nath noted that with the base now becoming large and growth expected to moderate, the demand for liabilities will also reduce, giving the company flexibility to negotiate better rates.
The acquisition of Profectus Capital has strengthened UGRO's secured asset base and improved operational efficiency. As reported by The Economic Times, the deal added around ₹3,400 crore of secured assets to the balance sheet, with the integration adding approximately ₹3,400 crore to the secured lending base. More importantly, cost synergies have been realized, with approximately ₹120 crore of cost savings already achieved. Total realignment benefits of about ₹220 crore are expected to enhance cash profitability significantly in FY27.
Despite strategic initiatives, UGRO Capital's stock has faced considerable headwinds, trading near its 52-week low and experiencing significant declines over the past year. The company's market capitalization stands at around ₹1,800-₹1,900 crore, paling in comparison to entities like Bajaj Finance valued at over ₹6 lakh crore. With a Price-to-Earnings ratio of 14.78x, it trades at a significant discount to the financial services sector average of 30.90x and peers like Bajaj Finance (34.98x) and Cholamandalam Investment (29.38x). The company's return on equity stands at approximately 8.26%, a modest figure compared to sector potential.
Recent financial performance has been alarming, with net profit plunging approximately 83% year-over-year in Q3 FY26. Profit before tax even turned negative before accounting for non-operating income, highlighting severe strain on core operations. A primary concern is the extremely low promoter holding at just 1.70%, which can diminish investor confidence. The NBFC sector faces increasing funding costs with borrowing expenses expected to remain elevated in 2025, while the company's elevated operating costs and relatively high borrowing expenses are structural disadvantages compared to larger, more diversified peers.
