UGRO to cut lower-yield book to Rs 2,500 cr in 3 years

The lower-yield book stood at around Rs 8,000 crore at the end of June, while the two focused businesses together accounted for around Rs 7,000 crore.

“We had projected that our book would run down annually by around 20%. Right now, it is roughly around 24-25% on an annual run,” Founder and Managing Director Shachindra Nath told FE. Nath said the rundown would be largely natural, with loans being repaid over their tenure or prepaid as borrowers refinance with other lenders. “Over a period of next three years, this book would run down to around Rs 2,500 crore,” he said.

UGRO Capital’s consolidated net profit rose 33% sequentially to Rs 67.9 crore for the quarter ended June. Assets under management (AUM) stood at Rs 15,013 crore, up 24% year-on-year. Total income, however, declined sequentially to Rs 534.6 crore from Rs 631.7 crore, while profit before tax fell to Rs 61.5 crore from Rs 71.2 crore. The company reported a tax benefit of Rs 6.3 crore during the quarter.

GROx, the company’s embedded merchant lending platform, had AUM of around Rs 3,000 crore at the end of June.

“This month, if we have onboarded 85,000 plus customers, around 3,000 are in the emerging market branch network and 82,000 plus are in embedded lending,” Nath said.

He expects credit costs to remain broadly at current levels over the coming year. However, as the portfolio shifts towards higher-yield businesses, credit costs and gross non-performing assets could rise over the longer term. “I think it will increase by another 50-75 basis point over a period of time, but will get absorbed by the increase in profitability,” he said.

Operating expenses fell 42% sequentially to Rs 118.5 crore, while return on assets improved to 2.8% from 2.1% a quarter ago. Nath said the company’s focus over the next three years would be to grow the two focused businesses, improve profitability and broaden its public-market investor base.