Actis received guidance from Cyril Amarchand Mangaldas on the sale of Profectus Capital.
In a significant move bolstering the micro, small, and medium enterprises (MSME) sector in India, UGRO Capital has announced the acquisition of Profectus Capital for approximately ₹1,400 crore (GBP 133.33 million). Here's a breakdown of the key highlights, strategic advantages, and financial implications of this landmark deal.
**Key Highlights of the Acquisition:**
The acquisition marks UGRO Capital's entry into the school financing, supply chain finance, and loans against property segments by acquiring the entire stake in Profectus Capital, which currently manages assets worth ₹3,468 crore (AUM as of March 2025) and operates across seven Indian states via 28 branches. The transaction is an all-cash deal, funded through UGRO’s recent equity raise and internal accruals, subject to shareholder and regulatory approvals, including the Reserve Bank of India’s nod.
Post-acquisition, Profectus will be merged into UGRO Capital, with independent operations continuing until the integration completes, expected around April 2025.
**Impact on MSME Lending:**
The deal immediately scales UGRO’s assets under management by roughly 29%, boosting consolidated AUM to about ₹15,471 crore, substantially enlarging its footprint in the secured MSME lending sector. Profectus’ focus on secured lending products complements UGRO’s lending portfolio, diversifying and deepening its market presence.
**Financial Growth and Profitability:**
The acquisition is expected to generate ₹150 crore in annual incremental profitability, driving an improvement in UGRO’s return on assets (RoA) by 0.6 to 0.7 percentage points. Cost synergies amounting to ₹115 crore in savings are anticipated from combining operations. UGRO’s FY25 estimated revenue stands at ₹420 crore prior to acquisition, which is projected to grow substantially with the inclusion of Profectus’ business.
**Strategic Advantages:**
The acquisition strengthens UGRO’s secured asset mix and expands lender relationships, including access to Profectus’ network with private and small finance banks, enhancing UGRO’s financing capabilities. The transaction positions UGRO Capital to become one of India’s largest MSME lenders, accelerating its pan-India presence from Tier-I to Tier-IV cities.
**Overall Implication:**
This acquisition significantly bolsters UGRO Capital’s capacity to serve MSMEs, an essential segment for India's economic growth. By enhancing scale, diversifying financing segments (notably school financing), and improving profitability and asset quality, the deal is expected to contribute positively to the broader ecosystem of MSME credit availability in India, fostering financial inclusion and supporting business growth in underserved markets.
The acquisition is expected to enhance Emerging Markets and Embedded Finance capabilities for URGO Capital. Cyril Amarchand Mangaldas served as the legal advisor for Actis PC Investment Limited, Actis PC Limited, and Profectus Capital Private Limited in the acquisition.
In summary, the full acquisition of Profectus Capital by UGRO Capital is expected to:
- Expand and diversify MSME lending portfolios - Improve profitability and asset quality metrics - Accelerate UGRO’s growth as a major MSME financier nationwide - Unlock new growth opportunities in secured lending segments like school finance
These factors collectively strengthen MSME credit infrastructure and contribute to financial growth in India’s expanding economy.
By acquiring Profectus Capital, UGRO Capital has expanded its business to include school financing, supply chain finance, and loans against property, thereby increasing its presence in the secure MSME lending sector. This investment also promises a financial growth of over ₹150 crore in annual profitability for UGRO Capital, making them one of India's larger MSME lenders.
