UGRO Acquires Profectus to Boost MSME Lending and Profits

18 Jun 2025 CW Team

The acquisition enables instant 29 per cent growth in assets under management (AUM) and deepens UGRO’s presence in high-yield emerging markets and embedded finance segments, while adding school financing as a new vertical. School finance alone holds a medium-term growth potential of Rs 20 billion (USD 240 million).

Profectus, with Rs 34.7 billion (USD 417 million) in AUM as of March 2025, operates across seven Indian states through 28 branches and a team of over 800. The company maintains robust asset quality with gross NPAs at 1.6 per cent and net NPAs at 1.1 per cent, and aligns well with UGRO’s data-driven underwriting platform.

This strategic move will strengthen UGRO’s asset mix by increasing exposure to secured products such as loan against property (LAP), machinery finance, and supply chain finance, enhancing geographic reach and operational synergies.

To fund the acquisition, UGRO proposes to add this transaction to the objects of its ongoing preferential issuance of compulsorily convertible debentures, pending necessary board and shareholder approvals along with regulatory clearance from the Reserve Bank of India.

Shachindra Nath, Founder and Managing Director of UGRO Capital, remarked: “This acquisition effectively deploys our capital to achieve rapid scale and profitability, while integrating Profectus’ school finance strengths to unlock Rs 20 billion in new opportunities. It represents a key step towards our vision of becoming India’s largest MSME lender.”

KV Srinivasan, Executive Director and CEO of Profectus Capital, added: “This merger offers strong synergies and complements both businesses, setting the stage for greater efficiency and continued excellence in portfolio quality.”

Until the merger is complete, both entities will maintain existing operations and strategies.

UGRO Capital was advised by InCred Capital, with SNG & Partners as legal counsel. PriceWaterhouseCoopers Services LLP conducted financial due diligence, while Legacy Growth Partners managed tax due diligence.

The acquisition underlines UGRO’s long-term commitment to driving inclusive growth and supporting India’s MSME sector through tailored and technology-enabled financial solutions.

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UGRO Capital Limited, a leading DataTech non-banking financial company (NBFC) focused on MSME financing, has signed an agreement to acquire 100 per cent equity in Profectus Capital Private Limited, a secured lending-focused NBFC, in an all-cash deal funded from UGRO’s recent equity raise. This strategic acquisition makes Profectus a wholly owned subsidiary and is expected to contribute approximately Rs 1.5 billion (USD 18 million) in annualised profit to UGRO, with Rs 1.15 billion in cost savings, thereby enhancing capital adequacy and return on assets by 60–70 basis points post-merger.The acquisition enables instant 29 per cent growth in assets under management (AUM) and deepens UGRO’s presence in high-yield emerging markets and embedded finance segments, while adding school financing as a new vertical. School finance alone holds a medium-term growth potential of Rs 20 billion (USD 240 million).Profectus, with Rs 34.7 billion (USD 417 million) in AUM as of March 2025, operates across seven Indian states through 28 branches and a team of over 800. The company maintains robust asset quality with gross NPAs at 1.6 per cent and net NPAs at 1.1 per cent, and aligns well with UGRO’s data-driven underwriting platform.This strategic move will strengthen UGRO’s asset mix by increasing exposure to secured products such as loan against property (LAP), machinery finance, and supply chain finance, enhancing geographic reach and operational synergies.To fund the acquisition, UGRO proposes to add this transaction to the objects of its ongoing preferential issuance of compulsorily convertible debentures, pending necessary board and shareholder approvals along with regulatory clearance from the Reserve Bank of India.Shachindra Nath, Founder and Managing Director of UGRO Capital, remarked: “This acquisition effectively deploys our capital to achieve rapid scale and profitability, while integrating Profectus’ school finance strengths to unlock Rs 20 billion in new opportunities. It represents a key step towards our vision of becoming India’s largest MSME lender.”KV Srinivasan, Executive Director and CEO of Profectus Capital, added: “This merger offers strong synergies and complements both businesses, setting the stage for greater efficiency and continued excellence in portfolio quality.”Until the merger is complete, both entities will maintain existing operations and strategies.UGRO Capital was advised by InCred Capital, with SNG & Partners as legal counsel. PriceWaterhouseCoopers Services LLP conducted financial due diligence, while Legacy Growth Partners managed tax due diligence.The acquisition underlines UGRO’s long-term commitment to driving inclusive growth and supporting India’s MSME sector through tailored and technology-enabled financial solutions.

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