Ugro Capital Ltd, a non-banking financial company (NBFC), continues to attract interest from brokerage firms. The analysts see up to 60 per cent upside in the stock after the company's quarterly earnings, recent fund raising and recent acquisition of a fintech lender earlier this month.
Ugro Capital reported a 132.83 per cent rise in the net profit on a year-on-year (YoY) basis to Rs 32.69 crore in the March 2024 quarter, compared to a net profit of Rs 14.04 crore in the year ago period. Its interest income grew 36 per cent YoY to Rs 191.77 crore in the given quarter compared to Rs 141.11 crore in the year ago period.
Ugro's asset under management (AUM) jumped 48 per cent to Rs 9,000 crore in Q4 FY24 as compared with Rs 6,081 crore in Q4 FY23. For the entire financial year 2023-24, the NBFC reported a 200 per cent rise in the net profit at Rs 119.34 crore, while its interest income rose 46.60 per cent to Rs 707.94 crore in the FY24.
Ugro Capital is an MSME lending fintech platform. It uses the emerging data tripod of GST, banking and bureau coupled with its sectoral analysis to solve the problem of credit for small businesses. The company recorded a net disbursement of Rs 5,867 crore in FY24, up 26 per cent YoY. Its overall debt-to-equity ratio was 3.2 times for the period under review.
Earlier this month, Ugro Capital raised fresh capital of Rs 1,322 crore from a mix of new and existing investors and family offices through compulsory convertible debentures and warrants. Samena Capital led the round injecting Rs 500 crore, while InCred Capital was the investment banker for the deal.
Shares of Ugro Capital were trading marginally down, about a per cent, to Rs 282 on Thursday, commanding a total market capitalization of more than 2,600 crore. The scrip had settled at Rs 284.15 in the previous trading session.
Ugro capital reported results better than estimates due to higher than expected other income on derecognition of financial instruments, said Centrum Broking. Reset of interest yields on existing books, increase in share of co-lending and direct assignment and some one-offs resulted in higher upfront income in Q4FY24,. it said.
The capital raise will result in 54.7 per cent dilution on current shares outstanding. Management stated that it can grow AUM at 30-35 per cent every year with focus on profitability and an aim to achieve 4 per cent RoA in 8 quarters. We roll over to FY26 and value UGRO at 2times P/ABV to arrive at our target price of Rs 440, Centrum added with a 'buy' rating on the stock.
In another development, the company said it acquired fintech lending startup MyShubhLife (MSL) for Rs 45 crore in a stock-and-cash deal. The deal with MSL enables Ugro Capital to enter the tech-enabled embedded finance market.
Ugro Capital is witnessing buying at lower after strong quarterly results, fund raising of Rs 1,333 crores and acquisition of MyShubhLife in embedded finance. The recent developments highlight its business goals and promise financial performance in future years, said Anshul Jain, Head of Research, Lakshmishree Investments and Securities, who has a target of Rs 350-380 in it.
Ugro Capital ended Q4FY24 on a strong note with a growth of 52 per cent in total income on a YoY basis driven by income on co-lending which nearly doubled, propelled by increase of co-lending in overall AUM and rate resets done by the company, said Keynote Capital.
"We expect Ugro to continue its high growth trajectory and achieve its target of Rs 20,000 crore AUM. We have revised our estimates and maintain a 'buy' rating on Ugro Capital with a target price of Rs 319, valuing the stock at 1.7 times FY25E BV," it said.