Ugro Capital: Why Experts Expect 60% Jump in NBFC Stock

Ugro Capital’s stock has been on the rise since the beginning of the 2024-25 financial year. It hit a low of around ₹215 per share in March 2024 but has since climbed to about ₹272 per share, marking a nearly 25% increase from its lowest point in the past 52 weeks. With the announcement of its Q4 results in 2024, leading brokerages foresee a significant potential upside in this NBFC stock. They anticipate Ugro Capital’s share price to reach up to ₹440 per share in the long term, offering around a 60% return to investors.

Factors Driving Ugro Capital’s Growth:

1. Strong Q4 Results: Ugro Capital reported robust Q4FY24 results, with adjusted PAT (Profit After Tax) of ₹396 million, marking a 70% YoY increase and surpassing estimates. The company’s total income grew by 60% YoY to ₹2.0 billion. Notably, the Cost-to-Income (C/I) ratio declined, indicating improved efficiency.
2. Expansion via Acquisitions: The acquisition of ‘MyShubhLife’ (MSL), an embedded finance fintech platform, for an Enterprise Value of ₹450 million, is expected to be beneficial. Through this acquisition, Ugro Capital aims to onboard 200k new retailers and achieve incremental AUM of ₹15 billion within three years.
3. Capital Raise: With a recent capital raise of ₹13.3 billion and the acquisition of MyShubhLife, Ugro Capital is well-capitalized for future growth. The company plans to expand its AUM from ₹90 billion to ₹200 billion, with improved Return on Assets (RoA) and better credit ratings.
4. Strong Growth Story: Ugro Capital exhibited strong financial performance in FY24, with a 49% YoY growth in AUM and doubled ROA and ROE. This performance underscores its potential for delivering consistent returns to shareholders.
5. CRISIL Rating Upgrade: Ugro Capital received a rating upgrade to ‘A’ from CRISIL by the end of FY24, reflecting its improved creditworthiness and financial stability.

Ugro Capital Share Price Target:

Analysts recommend a “Buy” rating on Ugro Capital stock, with a target price of ₹440. Despite slight adjustments in growth estimates for FY25/FY26, analysts remain bullish on Ugro Capital’s prospects, anticipating significant growth in AUM, PPOP, and PAT over FY24-26E. They value UGRO at 2x P/ABV to reach the target price of ₹440, reaffirming their confidence in its long-term potential.