Broker’s call: Ugro Capital (Buy)

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Target: ₹281

CMP: ₹234.80

In Q1-FY25, Ugro Capital reported a 38 per cent growth in its total income on a y-o-y basis, amounting to ₹301.60 crore, driven by a 44 per cent growth in Interest Income. The company’s PPOP grew to ₹76 crore, showcasing a growth of about 44 per cent on a y-o-y basis. PAT increased by 20 per cent to ₹30.40 crore.

The company’s AUM increased to ₹9,200 crore, growing by about 2 per cent on a q-o-q and around 36 per cent on a y-o-y basis, with Off-Book AUM accounting for about 45 per cent of the total.

The co-lending industry is set to hit ₹1 lakh crore in disbursements, offering banks an attractive way to diversify into microfinance. Unlike traditional banking, MFIs bring unique underwriting and distribution channels that give banks access to entirely new customer profiles. Rather than seeing NBFCs as competition, banks view them as growth partners.

We remain confident in Ugro Capital’s ability to continue its robust growth trajectory and achieve its target of Rs 200 Bn in AUM by FY26. We have revised our estimates and maintain a Buy rating on Ugro Capital with a target price of ₹281 (1.25x FY25E BV). The adjustment in our valuation multiple reflects the substantial ₹1,300 crore equity capital raise.