Non-banking finance company (NBFC) UGRO Capital expects the share of secured loans and on-book assets to rise in its balance sheet after completing the acquisition of Profectus Capital, founder and MD Shachindra Nath told businessline in an interaction.

“On the portfolio mix side, Profectus has 100 per cent secured business, while UGRO Capital has 70 per cent of secured assets and remaining are business loans. Post acquisition, our secured assets will increase by 5-7 per cent. Our portfolio will get overweight on secured side,” he said.

Nath said that UGRO has a high share of co-lending or off-book loans, which comprise around 40 per cent of overall loans. Post acquiring Profectus, the share of on-book loans will increase by 5 per cent.

“What we have seen in market is that having a high off book loan mix brings high degree of variability in our profitability as during some months co-lending/securitisation can register higher volumes and in some months it may record lower volumes. Further, investors like lower off-balance sheet assets. So that would also improve. From current 60:40 mix (on-book and off-book asset mix), it will change to 65:35 ratio in favour of on-book loans,” he said.

Acquisition benefits

UGRO Capital on Tuesday said it has reached a deal to acquire Profectus Capital in ₹1,400 crore all cash deal. According to Nath, the key benefit of this acquisition lies in its ability to drive absolute profitability and improvement in return on assets (RoA) over the next eight to ten quarters. The NBFC had recently raised ₹1,300 crore to strengthen its capital position, Nath said, and was evaluating the best way to deploy this capital.

“One option was to deploy it organically into loan assets. However, organic growth typically incurs a loan origination cost of 3–4 per cent, which significantly impacts overall efficiency. That’s why we explored synergistic acquisition opportunities that could enhance operating leverage from day one,” he said.

“By acquiring Profectus Capital, we were able to deploy this capital to immediately add approximately ₹3,500 crore of assets. Profectus, though under-leveraged with an ROA of 0.9 per cent and PAT of ₹30 crore, brings a high-quality, secured portfolio. Given the similarities between our business models, we are confident that post-acquisition we can optimise costs and generate approximately ₹115 crore in annual savings,” Nath said.

He said that the proposed acquisition is bottom-line accretive, with an estimated ₹150 crore in additional profitability.

“That would improve our RoA by 0.6–0.7 per cent and contribute positively to our capital base—unlike most acquisitions that erode capital due to premium payouts,” he said.

Profectus brings a strong value in school financing business and UGRO expects this segment alone could add ₹2,000 crore in new assets over the next two years.

Published on June 18, 2025