MSME lender Ugro Capital last week announced its strategic business realignment plans, with the company shutting its direct selling agent (DSA)-led lower-yield origination channels and will focus on higher-yield emerging market loans against property (LAP). Shachindra Nath, founder and managing director, tells Anjana Therese Antony that the impact of this transition will start getting reflected in FY27 and FY28. Excerpts:
What is the rationale behind the business realignment plan?
The hypothesis that doing a diversified portfolio creates scale and brings cost of borrowing advantage did not hold true. Our cost of borrowing at 10.2% is higher than that of large-size companies’ 7.7% and independently-owned entities’ 9.1%. This does not generate any economic value for us.
Our profitability has largely been driven by co-lending that requires more capital, which is why we are making this shift. The core challenge with the DSA-led business is that it does not generate too much cash due to the yield being lower.
The small-ticket LAP and merchant lending have huge opportunities. The number of small-ticket LAP branches has grown to over 313 as of December 2025, from 140 in June 2024. As the vintage of branches improves, the monthly volume of disbursement would also start growing.
The transition is expected to cut costs by ₹220 crore on an annual basis, half of which is already taken out and the other half is expected to get realised over one quarter.
Nath on future investment
Will Samena Capital be investing more after the Sebi’s recent diktat?
We won’t need any capital from anyone for the next three years as we are transitioning the portfolio, rather than growing the area per se. The growth of assets under management would be lower in the next two years, but that of the bottom line will be faster. We will continue to raise funds through debt and equity.
Nath on new business structure
Do you think the new business structure will revive the stock price, which has not done well for years?
We think it will start picking up as the portfolio yield shifts and the real profitability improves.