# 1. Financial Performance ## A. Key Figures * **Consolidated AUM:** **₹15,454 Cr** (Dec-25) (+40% YoY, +26% QoQ) * **Consolidated PAT (Q3 FY26):** **₹46 Cr** (+23% YoY) * **Stand-alone PAT (Q3 FY26):** **₹6 Cr** (vs. ₹43 Cr prior quarter) * Cost of Borrowing: 10.24% (Q3) vs. 10.37% prior quarter * **Cash Balance:** **~₹1,140 Cr** held during quarter; **excess liquidity >₹1,600 Cr** for four months ## B. Revenue & AUM Growth * **Scale Achieved:** UGRO has completed core infrastructure build-out, scaling AUM from ~₹3,000 Cr in FY22 to over ₹15,000 Cr by Dec-25, with stable credit quality and capital adequacy. * **Growth Drivers:** Recent AUM surge largely attributable to **Profectus acquisition**, now central to assessing UGRO’s true operating scale and economics. * **Yield Optimization:** Strategic shift underway to increase exposure to higher-yielding assets, with **67% of current AUM earning a 15% blended yield**. ## C. Profitability & Margins * **Profit Divergence:** Consolidated PAT showed strong YoY growth, while stand-alone profit declined sharply QoQ due to **income recognition shifts to Profectus** and asset seasoning. * **Funding Cost Relief:** Cost of borrowing improved significantly QoQ on easing macro conditions and lower repo rates. * **Elevated Finance Costs:** Recent subordinated debt issuance (**₹400 Cr** at 150–200 bps premium) increased interest burden despite lower base rates. * **One-time Wage Impact:** **₹5 Cr provision** for new labour code increased expenses; PAT would have been higher excluding this item. ## D. Balance Sheet & Capital * **Self-Sustained Growth:** Expansion funded primarily through **internal accruals**, with expectations of healthy capital adequacy and minimal incremental primary capital needs. * **Strategic Positioning:** Management emphasizes balance sheet-led growth, maintaining credit quality while optimizing portfolio yields. ## E. Cash Flow & Liquidity * **Liquidity Management:** High cash balances maintained pre-acquisition to fund **Profectus deal**, resulting in elevated borrowings and negative carry. * **Cost Rationalization:** **INR 220 Cr expense reduction target** is ~50% complete, though P&L impact delayed by **3–5 month notice periods** on people and contracts. --- # 2. Loan Book & Asset Quality ## A. Key Figures * Gross NPAs: 2.2% consolidated (Dec-25) · Net NPAs: 1.4% consolidated (Dec-25) * **Collection Efficiency:** **99%** (Q4) · **Stage 1 Assets:** **94%** of consolidated AUM * **Off-Book AUM:** **36%** consolidated (post-merger) ## B. NPA & Collection Trends * **Stable Asset Quality:** Portfolio remains resilient with near-pristine collection efficiency and high proportion of Stage 1 assets, reflecting robust underwriting standards. * **Credit Risk Framework:** Strong physical presence and data-driven tools like **GRO Score**—powered by bureau, banking, and client data—underpin high-quality credit assessment. * **Provision Release Driver:** ECL reversals at Profectus driven by successful resolution activity, including **DA transactions and asset sales**, signaling effective workout capabilities. ## C. On-Book vs Off-Book AUM * **Strategic Shift to On-Book:** Off-book AUM reduced from 45% to ~35% post-merger, aligning with strategy to de-risk and improve **return on assets** through capital-efficient, on-balance-sheet growth. --- # 3. Segment & Product Performance ## A. Key Figures * **Q3 FY26 Disbursements:** **₹2,217 Cr** total · **₹460 Cr** emerging market LAP · **₹1,065 Cr** embedded finance * **AUM Composition:** **32%** consolidated AUM from emerging market LAP and embedded finance (as of Dec-25) * **Cost Rationalization:** **₹220 Cr** annual run-rate reduction targeted · **~50% achieved** · **>₹120 Cr** post-acquisition synergies identified ## B. Emerging Market LAP * **Strategic Refocus:** Firm pivoting to **annuity-led, direct MSME lending** via branch network, emphasizing **high-yielding secured LAP** and **small-ticket loans**. * **Portfolio Shift:** Non-core segments being run down **organically at 15–20% annually**, enabling capital reallocation to **higher cash-generating assets**. * **Scale & Yield Leverage:** **300 fully built branches** driving small-ticket LAP growth, targeting **200–250 bps higher yield AUM** with sustainable ROEs. ## C. Embedded Merchant Financing * **Structural Growth Engine:** Embedded finance gaining traction due to **digital platform deepening** and **repeat merchant engagement**, supported by **pan-India 300+ branch network**. * **Data-Driven Edge:** Proprietary **GRO Score 3** and integration of **behavioral, bureau, and transaction data** enhance underwriting precision in merchant lending. * **Platform Synergy:** Acquisition of **MyShubhLife** enables deep ecosystem integration, accelerating disbursement scale and **platform-led origination**. ## D. Run-Off Portfolios * **Exit from Low-Value Segments:** Discontinued **DSA-led and intermediated lending** (e.g., high-ticket LAP, machinery loans) due to poor operating leverage and **negative P&L contribution**. * **Self-Sustaining Franchise Goal:** Portfolio pruning aligns with strategy to operate **without incremental capital**, focusing only on **positive net worth-creating businesses**. --- # 4. Branch & Distribution Network ## A. Key Figures * **Branch Network:** **300+** locations pan-India (up from 25 in 2020) * **Disbursements:** **₹600 Cr+** in the quarter, branch-led ## B. 300-Branch Expansion * **Rapid Scaling:** Established a fully dedicated, pan-India footprint of 300+ branches in five years, targeting micro-business lending with localized underwriting and collections. * **Strategic Focus:** Network built exclusively to serve small-ticket loan against property (LAP) segment, enabling deep penetration in emerging markets. ## C. Branch-Led Lending Focus * **High-Yield Shift:** Disbursements exceeded ₹600 Cr this quarter, reflecting accelerating traction in higher-yielding, branch-originated LAP book. * **Growth Trajectory:** Strong quarterly disbursement run-rate signals sustainable momentum in branch-led lending expansion. --- # 5. Income Quality & Capital Accretion ## A. Key Figures * **Co-Lending/Assignment Contribution:** Expected to decline from **50–60%** to **<25%** of income ## B. Shift to Recurring Income * **Strategic Realignment:** Firm shifting from transaction-dependent models to **annuity-led interest income**, enhancing earnings quality and predictability. * **Earnings Quality Focus:** Reduced reliance on co-lending and direct assignment to build a **higher-yield, secured loan portfolio** with durable, recurring income. * **Post-Acquisition Integration:** Profectus consolidation enables **operating and cost synergies**, supporting shift to embedded finance and emerging market LAP. * **Management Incentive Alignment:** ROA improvement expected in both **absolute and qualitative terms**, driven by sustainable income rather than one-time gains. ## C. Co-Lending & Derecognition Impact * **Portfolio Mix Evolution:** Growth now driven by **operating leverage** and platform optimization, not balance sheet expansion. * **Capital Accretion Challenge:** Co-lending historically **not capital accretive short-term** due to RBI norms, reinforcing shift to retained, interest-earning assets. * **Near-Term P&L Impact:** Decline in one-time gains offset by **rising interest income and cost reductions**, paving way for sustainable profitability. --- # 6. Risks & Regulatory Factors ## A. Regulatory Constraints * **Non-Recognition of Unrealized Gains:** Under **RBI rules**, co-lending and direct assignment gains are excluded from capital adequacy and net worth calculations until fully realized. ## B. Credit Gap Challenges * **Persistent MSME Financing Gap:** Small-ticket lending faces a meaningful credit gap despite being secured, driven by operational inefficiencies and absence of scalable underwriting models. * **Strategic Focus on Inclusion:** Company is committed to bridging India’s MSME credit gap through **data-driven lending**, **technology integration**, and **disciplined risk frameworks** to build a sustainable, trusted institution. --- # 7. Guidance & Outlook ## A. Key Figures * **AUM Growth:** **20% to 25%** emerging market LAP & merchant lending · **~15% run-down** in lower-yielding portfolios * **AUM Target Revision:** **~₹16,000 Cr** revised outlook (from ₹20,000 Cr) ## B. AUM Growth Projections * **Strategic Realignment Driving Growth:** AUM expansion focused on high-yield segments with strong double-digit growth momentum, while non-core portfolios are being actively wound down. * **Multi-Year Growth Horizon:** Revised guidance emphasizes **north of 20% to 25% AUM growth over two years**, reflecting a more sustainable scaling approach despite lower absolute target. ## C. ROA & Profitability Path * **Profitability Transition Underway:** Shift toward **annuity-based income** and reduced asset downselling supports a healthier, more durable ROA despite near-term moderation from 4% target. * **Cost Tailwinds Ahead:** Bottom-line improvement expected from **Q4 FY26** onward, driven by Profectus integration synergies and reversal of elevated finance costs starting **Q1 FY27**. * **ROA to Align with Peers:** Management asserts comparability with peer ROAs in key segments post-transition, adjusting for capital structure differences.