UGRO Completes INR 1,400 Cr Acquisition Of Profectus

Listed non-banking finance company (NBFC) UGRO Capital has completed the acquisition of rival lending platform Profectus Capital in an INR 1,400 Cr all-cash deal.

With this, Profectus has become a wholly-owned subsidiary of UGRO Capital. However, UGRO Capital said that it will soon initiate the process for the merger of Profectus into the parent entity.

The proposal will be subject to board and shareholder approvals.

Till formal approval of the merger, both companies will continue operating independently

In a statement, the listed NBFC said that the acquisition will bring Profectus’ assets worth INR 3,468 Cr into its kitty. With this, UGRO expects its consolidated assets under management (AUM) to rise 29% to INR 15,471 Cr. Additionally, the listed company also sees an immediate INR 150 Cr in annualised profit accretion from the transaction.

“The integration unlocks an additional INR 115 Cr in operating synergies, expanding margins and driving a 60–70 bps improvement in RoA (return on assets), thereby accelerating UGRO’s path toward stronger long-term RoE (return on equity)…,” added UGRO Capital.

The listed NBFC also claimed that the acquisition will shift its consolidated secured asset mix to 75%, adding that the deal will also open up a new INR 2,000 Cr medium-term opportunity in school financing.

“… Profectus brings a secured, high-quality book that immediately enhances our profitability profile, but more importantly, it gives us long-run compounding power through a better asset mix, deeper distribution and a more diversified lender base. This transaction is an investment in stability, scalability and value creation, and sets us firmly on the path to delivering consistently higher RoE for our shareholders,” said UGRO Capital founder and MD Shachindra Nath.

This comes six months after the listed NBFC first said that it would acquire Profectus Capital from UK-based private equity (PE) firm Actis for INR 1,400 Cr. It received Reserve Bank of India’s (RBI) approval for the deal in September this year.

Founded in 2017 by former Reliance Home Finance executive KV Srinivasan, with backing from Actis Capital, Profectus Capital offers financing solutions, primarily secured loans, to MSMEs for business expansion and working capital needs.