Metrics raised 1
- Prime intermediated portfolio run-off pace now expected at ~25% (from ~20% previously guided)
Event Participants
Executives
4 Anuj Pandey, Sachindra Nath, Shilpa Bhatter, Siddharth Rajan
Analysts
4 Amit Mahendale, Kamal, Neel Advani, Rishit Kandewal
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Total AUM | ₹15,013 crores | Sequentially flat as prime intermediated portfolio run-off (~25% vs 20% guided) offset growth in focus verticals |
| Net Disbursements | ₹2,551 crores | +59% YoY; driven by GrowX (₹1,853 crores) and EM LAP (₹592 crores) |
| Emerging Market LAP AUM | ₹3,892 crores | +9% QoQ; 317 branches across 13 states; portfolio yield 18.5%; GNPA 2.1% |
| GrowX AUM | ₹3,003 crores | +32% QoQ; ~4x in last 5 quarters; yield ~26%; GNPA 2.1%; 3.4 lakh active customers |
| GNPA | 2.6% | vs 2.5% in Mar-26; largely denominator effect from run-off; focused book at 2.1%; NNPA 1.9% |
| Credit Cost | ₹66 crores | 1.7% of average AUM; within guided range; collection efficiency 98% |
| Interest Income | ₹363 crores | +19% YoY, -13% QoQ; sequential decline from on-book run-off and higher foreclosure-driven DSA cost |
| Total Income | ₹535 crores | +27% YoY; co-lending/DA income at ₹75 crores, down from ₹155 crores in Q4 (14% of total income vs 24%) |
| Portfolio Yield | 18.1% | +63 bps QoQ on mix shift to high-yield EM and GrowX portfolios |
| Cost of Borrowing | 10.14% | -41 bps YoY; 7th consecutive quarterly improvement; incremental long-term borrowings at 9.8%; 66% of borrowings >3 years tenor |
| Pre-tax ROA | 2.6% | Reported PAT ROA 2.8% reflects one-time deferred tax reversal from new tax regime migration; normalized ROA ~2.1% |
| ROE | 9.2% | Underpinned by opex reset; expected to improve as recurring income scales |
| Capital Adequacy | 21% (standalone) | ~23-24% on merged basis post-Profectus merger; no equity raise planned through FY29 |
| Net Worth | ₹2,976 crores | Leverage 3.6x; liquidity of ₹1,864 crores; total debt ₹10,793 crores |
| Operating Expenses | ₹119 crores (quarterly) | -42% QoQ (from ₹217 crores); annualized run-rate near FY27 guidance of ~₹490 crores |
Geographic & Segment Commentary
Emerging Market LAP: AUM of ₹3,892 crores, up 9% QoQ, with disbursements of ₹592 crores in Q1. Blended monthly branch productivity improved from ₹48 lakhs (FY26) to ₹62 lakhs; mature branches (>12 months, now 96 in count) produce ~₹81 lakhs per month, within the ₹80-85 lakhs target. 145 branches are less than 6 months old and still ramping; branch build-out is complete and focus has shifted to productivity, throughput, and operating leverage as the network's vintage matures.
GrowX (Embedded Merchant Finance): AUM of ₹3,003 crores, +32% QoQ and ~4x in five quarters, disbursing ₹1,853 crores with 60,000+ loans per month. The platform combines UGRO's GroScore underwriting architecture with GrowX's technology-embedded customer journeys and partner integrations. Strategy focuses on deepening share within existing partner ecosystems, repeat conversions, and adding new commerce/distribution platforms with transaction data; priorities include fraud control, early warning systems, and partner-specific risk models as scale grows.
Prime Intermediated Business (Run-off): Deliberately being wound down post the February realignment; exits from flash disbursement and lower-yield intermediated prime segments have accelerated run-off to ~25% (vs 20% guided). Co-lending/DA income declined to ₹75 crores from ₹155 crores in Q4 FY26, now 14% of total income (vs 24%) with a target of 4% within 11 quarters; foreclosure-driven income reversals on the off-book spread asset remain an earnings drag in the transition.
Company-Specific & Strategic Commentary
Strategic Portfolio Realignment: Announced Feb 7, 2026; consolidates UGRO from three engines to two focus verticals (EM LAP and GrowX), which now comprise 46% of AUM (from 32% in Dec-25) targeting 85% by FY29. July 2026 marked the first-ever ₹1,000 crores monthly disbursement, validating the two-engine model; growth to FY29 is planned without incremental equity.
Profectus Capital Merger: Scheme filed with NCLT after stock exchange approvals; expected completion by Feb-27 (possible Q3 FY27). The scheme provides for set-off of acquisition goodwill and reassessment of the co-lending/DA spread asset based on behavioral tenor against reserves; net worth reduction will be non-cash and will not impact regulatory capital, while aligning spread asset with behavioral repayment should reduce future income reversals and support higher ROE.
Opex & Cost Reset: Annualized opex reduction of ~₹220 crores substantially completed; Q1 opex at ₹119 crores (from ₹217 crores in Q4 FY26) is near the FY27 guidance run-rate. 66% of borrowings now have >3-year tenor; incremental long-term funding at 9.8% continues to drive borrowing cost lower, supporting margin expansion.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| FY27 AUM | Roughly flat | Prime intermediated run-off (faster than planned at ~25%) offsets focus vertical growth; on-book assets expected to grow modestly from current levels |
| FY29 AUM Composition | EM + EMF at ~85% of AUM | EM LAP guided at 25% CAGR (currently growing faster), GrowX at 25% CAGR (currently ~32% QoQ), prime run-down at 20% (currently ~25%); implied ~15% total AUM CAGR to FY29 |
| FY27 Operating Expenses | ~₹490 crores annualized | Q1 run-rate at ~₹476 crores; opex actions fully played out; only inflation-linked increases expected |
| Co-lending/DA Income | Reduce to ~4% of total income over next 11 quarters | From 14% in Q1 FY27 and 24% in Q4 FY26; subject to foreclosure pace on off-book portfolio |
| Credit Cost | 1.5-2% of average AUM (EM LAP) | Maintained despite GNPA drift; secured collateral supports recoveries; peak EM LAP GNPA projected at 3-3.5% at 18+ months on books; GrowX peak ~3% |
| Capital Adequacy | ~23-24% on merged basis post-merger | Non-cash net worth adjustment will not impact regulatory capital; supports planned growth without external equity through FY29 |
Risks & Constraints
| Risk | Context |
|---|---|
| Prime Portfolio Run-off Pace | Run-off running at ~25% vs 20% guided; large lenders are targeting UGRO's quality prime book, accelerating foreclosures and income reversals on the off-book spread asset. Management is countering via rate reductions and customer retention, but faster run-off pressures near-term P&L and requires compensating disbursement acceleration. |
| Branch Productivity Execution | 145 branches (<6 months old) must achieve ₹75-80 lakhs monthly disbursement at the 12-month milestone to offset prime run-off and sustain portfolio rebalance. Mature branch cohort (96 branches) is performing, but delivery across the young cohort is the key execution dependency. |
| Credit Risk from Product Extension | GrowX is expanding from small-ticket, short-tenor loans to larger tickets and longer tenors (e.g., marketplace ecosystems); this carries higher credit risk and requires disciplined underwriting. Management monitors early warning signals (e.g., daily revenue tracking for F&B merchants post Middle-East war) but acknowledged elevated risk in this transition. |
| Focus Book GNPA Creep | EM LAP GNPA moved from 1.2% to 2.1% and GrowX from 1.7% to 2.1% (Mar-Jun); management states this is consistent with vintage seasoning, with peak EM GNPA of 3-3.5% expected at 18+ months (currently ~15 months). Secured collateral and recovery economics are expected to keep credit cost within 1.5-2%. |
| Merger Accounting | Goodwill set-off and spread asset reassessment will reduce reported net worth (non-cash); while CRAR is unaffected, reported book value will decline, potentially impacting valuation multiples and investor perception until earnings quality improvement is demonstrated. |
Q&A Highlights
AUM Outlook & No-Equity Growth Plan
- Question: What closing AUM for FY27 and FY28? ROE expectations? (Amit Mahendale, Robo Capital)
- Answer: FY27 AUM expected to remain broadly flat; run-off is largely off-balance-sheet and doesn't impact financials (NPV already recognized), while on-book assets grow. FY28-29 trajectory based on slide 8 guidance: EM LAP 25% CAGR (growing faster), GrowX 25% CAGR (growing faster), prime run-down 20% (running at 25%) - implies roughly 15% AUM growth to FY29. No equity raise required to fund this. (Sachindra Nath)
Interest Income Decline & Co-lending Run Rate
- Question: How much of the sequential interest income decline is reversal on old book vs timing of disbursements? When does interest income trough and turn positive? (Neel Advani, Pico Capital)
- Answer: ~₹30 crores of the reduction is from reduced on-book AUM; this quarter is the base and interest income should grow QoQ from here as on-book assets rise. Co-lending/DA income of ₹75 crores is broadly the run-rate for the year, with slight variation depending on foreclosures. (Sachindra Nath)
ROA Normalization Path
- Question: Normalizing for the one-time deferred tax reversal gives ~2.1% ROA - is the 3-3.5% ROA guidance from this base? (Neel Advani, Pico Capital)
- Answer: Yes, 2.1% is the correct normalized base and the path to 3-3.5% is from here, driven by flat opex, growing interest income, stable co-lending income, and improving borrowing costs. (Sachindra Nath)
Focused Book GNPA Trajectory
- Question: EM LAP GNPA moved 1.2%→2.1% and embedded 1.7%→2.1% (Mar-Jun). Is this running ahead of internal models? (Neel Advani, Pico Capital)
- Answer: In line with projections - EM LAP peak GNPA of ~3-3.5% occurs when average months-on-book crosses 18 months (currently ~15 months); older cohorts (18-20 months) show peak delinquency of ~3%. GrowX should not exceed 3% given full lifecycle data (12-13 month tenor). Secured nature (avg. ticket ₹17 lakhs) keeps credit cost at 1.5-2% even at higher GNPA; 18-month lag effect on recovery. (Sachindra Nath)
Profectus Merger Timeline & Post-Merger Capital
- Question: What is the NCLT timeline and will CRAR revert to ~27-28% post-merger? (Neel Advani, Pico Capital)
- Answer: Merger completion expected by Feb-27 at the latest, possibly Q3 FY27. Post-merger CRAR will be ~23-24% (not 27-28%) on a merged basis vs 21% standalone. Net worth accretion from cash profitability, off-balance-sheet structures, and co-lending partnerships (SIDBI on GrowX, additional banks entering) provide additional capacity for growth without equity raise. (Sachindra Nath)
Top Risks Management is Monitoring
- Question: What are the top three major risks? (Rishit, retail investor)
- Answer: (1) Credit risk on small-ticket MSME customers - mitigated via early warning signals (e.g., daily revenue monitoring of F&B merchants on GrowX post Middle-East war); no large systemic trend expected but concentration in sectors/geographies monitored. (2) Cost of borrowing - premise is scale/profitability improvement reflects in funding costs. (3) Market/valuation pressure - acknowledged but management focused on execution. (Sachindra Nath)
Execution Risks to Self-Funding Thesis
- Question: What execution risks could break the self-funding thesis - keeping GNPA below 2%, opex rationalization, and sufficient net profit? (Kamal, retail investor)
- Answer: Two key execution risks: (1) Emerging market branch productivity - the 145 young branches must reach ~₹75-80 lakhs/month disbursement at 12 months to offset prime run-off; July data suggests this is on track. (2) GrowX expansion to higher tenor/ticket marketplaces carries increased credit risk needing tight underwriting. Third risk is prime run-off speed - competitive intensity from large lenders targeting the quality book forces faster foreclosures and higher income reversals; actions taken include rate reductions and customer retention, but run-off must be carefully calibrated against disbursement acceleration. (Sachindra Nath)
Key Takeaway
Ugro Capital's Q1 FY27 delivered a flat AUM of ₹15,013 crores, as faster-than-guided prime run-off (~25%) offset strong growth in focus engines; EM LAP AUM rose 9% QoQ to ₹3,892 crores (62 lakhs/branch monthly productivity) and GrowX scaled 32% QoQ to ₹3,003 crores with 60,000+ monthly loans. Portfolio yield improved 63 bps to 18.1%, borrowing cost fell for the seventh straight quarter to 10.14%, and quarterly opex reset to ₹119 crores (from ₹217 crores in Q4 FY26), positioning pre-tax ROA at 2.6% and ROE at 9.2%. July 2026 crossed ₹1,000 crores in monthly disbursements for the first time; focus verticals rose to 46% of AUM (from 32% in Dec-25), targeting 85% by FY29. The Profectus merger, now before NCLT with expected completion by Feb-27, carries a non-cash net worth adjustment but strengthens earnings predictability and leaves merged CRAR at ~23-24%, supporting the no-incremental-equity growth plan through FY29. Watch points include prime run-off pace, productivity ramp of 145 young branches, and GNPA seasoning in the high-yield focus books as they approach peak delinquency vintages.