UGRO Capital Oct. 24 NCD Issue review - (May apply)

•    This is the 5th debt offer from UCL since November 2021.
•    The last debt issue was in February 2024.
•    The company has posted growth in its top and bottom lines for the reported periods.
•    For this debt offer company has changed the lead manager.
•    Considering lucrative coupon rate and A rating, investors may consider parking of moderate funds for medium to long term.

ABOUT COMPANY:
UGro Capital Ltd. (UCL) a middle layer NBFC under Scale Based Regulation framework registered with the RBI.  It is currently engaged in the business of lending and primarily deals in financing SME and MSME sector with focus on Healthcare, Education, Chemicals, Food Processing/FMCG, Hospitality, Electrical Equipment & Components, Auto Components and Light Engineering segments and Micro Enterprises
segments.

It is a data-tech empowering small business lending institution primarily engaged in the business of lending to MSME sector. Company's sector focus approach on light engineering, food processing, auto components, hospitality, healthcare, chemicals, education, electrical equipment & components and micro enterprises segments & nature of the underlying MSMEs helps create impact at multiple levels. The MSME sector is underpenetrated by NBFCs and there is a huge unmet credit demand in the sector, primarily due to lack of documentation and credit history required to access to financing from formal banking channels. There is also a significant gap between the original credit requirement and the actual credit exposure of formal channels to MSMEs, which provides a huge opportunity in MSME lending. (Source: CareEdge Report). 

Currently, as of June 30, 2024, its network of 164 branches is segregated into two verticals - Prime branches, located in metro, tier 1, and tier 2 cities with customer turnovers ranging from Rs. 1 crore to Rs. 15 crores, and Micro branches, based in tier 3 to tier 6 cities with customer turnovers of less than Rs. 1 crore. This structure ensures a PAN India presence for the Company.

ISSUE DETAILS:
The company is coming out with its 5th debt issue of 2000000 secured, rated, redeemable non-i.e. 1 NCD) thereon, thereafter. Post allotment, NCDs will be listed on BSE and NSE. 

The issue opens for subscription on October 10, 2024, and will close on or before October 23, 2024. UCL is spending Rs. 6.01 cr. for this debt issue. From the net proceeds, it will utilize at least 75% for onward lending, repayment/prepayment of existing debts and not exceeding 25% for general corporate purposes. 

As of June 30, 2024, its AUM stands at Rs. 9217.73 cr. As of the said date, the Company is in collaboration with 15 co-lending partners, 55+ lenders, 45+ fintechs, 65+ Anchors, 70+ OEMs and 650+ GRO partners to provide data backed customized finance solutions to over 83,000 MSMEs across India.

This issue is solely lead managed by Tipsons Consultancy Services Pvt. Ltd., and Link Intime India Pvt. Ltd. is the registrar to the issue. MITCON Credentia Trusteeship Services Ltd. is the Debenture Trustee to the issue. 

This debt offer has tenors of 18 months, 24 months and 30 months. It offers coupon rates ranging from 10.15% to 10.40% with Monthly payment of interests, as per the series the investors. There is no Put and Call options for this debt issue. The company has allocated 25% for Institutional portion, 25% for Non-Institutional portion, 25% for HNIs and 25% for Retail investors. 

Surprisingly, for this debt offer the company has changed lead manager and thus we find another afresh move for change in its lead manager.

CREDIT RATING:
The issue is rated IND A+/Stable by India Ratings and Research Pvt. Ltd. Securities with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations. Such securities carry low credit risk. The ratings provided by India Ratings & Research Private Limited may be suspended, withdrawn or revised at any time on the basis of factors such as new information by the assigning rating agency and should be evaluated independently of any other rating. These ratings are not a recommendation to buy, sell or hold securities and Investors should take their own decisions. In case of any change in credit ratings till the listing of NCDs, the Company will inform the investors through public notices/ advertisements in all those newspapers in which pre issue advertisement has been given. 

FINANCIAL PERFORMANCE: 
For the last three fiscals, it has posted total income/net profits of Rs. 153.34 cr. / Rs. 28.73 cr. (FY21, Rs. 313.42 cr. / Rs. 14.55 cr. (FY22), and Rs. 683.76 cr. / Rs. 39.78 cr. (FY23), and Rs. 1081.68 cr. / Rs. 119.35 cr. (FY24). For Q1 of FY25 ended on June 30, 2024, it earned a net profit of Rs. 30.36 cr. on a total income of Rs. 301.58 cr. 

Its net NPAs were in the range of 1.31% to 1.70% for the reported periods.  UCL's debt equity ratio of 2.36 as of June 30, 2024, will stand enhanced to 2.47 post this debt issue.