UGRO Capital recently announced the acquisition of Profectus Capital Private Ltd in a significant Rs 1,400 crore all-cash deal. This move is aimed at enhancing the mid-sized non-banking finance company's presence in the MSME lending sector.

The acquisition was made through a share-purchase agreement with global private equity investors Actis PC Investment and Actis PC (Mauritius). Profectus Capital, which manages assets worth Rs 3,468 crore and operates in seven states with 28 branches and over 800 employees, will now become a wholly owned subsidiary of UGRO Capital.

By integrating Profectus Capital, UGRO Capital aims to expand its footprint in high-yield emerging markets, embedded finance, and school financing. This strategic move is expected to unlock an incremental Rs 2,000 crore worth of loan growth potential for the company.

The transaction, concluded at 1.07 times Profectus' projected FY26 net worth, is funded through proceeds from UGRO's recent equity raise and internal accruals. The deal, subject to RBI and shareholder approvals, is anticipated to close within two to three months, allowing both entities to maintain independent operations during the integration phase.

Post-consolidation, UGRO Capital is projected to benefit from operational efficiencies amounting to Rs 115 crore annually and boost net profit by Rs 150 crore. The company's return on assets (RoA) is expected to increase by 0.6-0.7 percentage points, with RoA reaching 3.5 percent in FY26 and 4.5 percent in FY27.

UGRO Capital, which has raised over Rs 2,500 crore in equity funding since 2018, has plans to capture a 1 percent market share in the MSME segment. To facilitate the acquisition, the company is seeking approval from the board and shareholders to add acquisition to the object of the existing preferential issuance of CCDs.