In a detailed conversation with ET Now, Nath walked through the math behind the strategy shift, what the one-time exit costs mean for near-term numbers, and why he believes the company should be trading significantly higher than it is today.
Why the old model stopped working
The logic of the pivot is straightforward, and Nath explains it with a simple illustration. If you lend at 15%, absorb a credit cost of 0.5%, carry an operating cost of 4%, and borrow at 10.5%, there is almost nothing left. That was the structural trap UGRO had been operating in — decent credit quality, high volumes, but margins too thin to build meaningful returns on equity.
The deeper problem was that UGRO’s cost of borrowing, currently around 10.2% to 10.3%, reflects its status as an independently owned institution without a large Indian parent backing it. Most peer NBFCs benefit from exactly that parentage advantage — it drives their ratings higher and their borrowing costs lower. UGRO, without that structural tailwind, was fighting a losing battle trying to compete in low-yield segments.
“We are not rightful players to lend at only 15%,” Nath said plainly.
The reset: What was cut and what remains
On February 7, UGRO announced a strategic realignment that involved taking out Rs 220 crore in total costs, approximately Rs 140 to 150 crore of that from the Profectus acquisition, the rest from UGRO’s own operations. Everything tied to the DSA-led business was wound down: people, branch infrastructure, credit teams, and associated technology.
The company had scaled to 319 branches to build this business. That journey is now complete , and so is the business itself.Around Rs 25 crore of one-time exit costs, including notice period payments and technology write-offs, were front-loaded into the current quarter, which explains the near-term pressure on profitability. Nath is clear that these costs will not recur.
The new UGRO: Higher yields, no more dilution
What replaces the old model is a focus on three growth engines: small-ticket LAP lending for MSMEs, merchant lending through embedded partnerships with BharatPe, PhonePe, and Paytm, and a deliberate wind-down of the lower-yielding portfolio at around 20% annually.
The two growth segments are each expected to expand at 25% to 30% annually, resulting in total portfolio growth of around 20% through FY29. More importantly, the portfolio shift is expected to lift the blended yield by 150 to 200 basis points, and because the heavy opex investment is already done, that yield improvement should flow directly to the bottom line.
The ROA target for FY29 is around 3%, roughly triple the current levels.
The second major commitment is structural: after the transition year of FY27, future profits will count fully toward capital adequacy. That means UGRO will no longer need to raise fresh equity to maintain regulatory ratios, ending the cycle of shareholder dilution that has weighed on the stock.
Nath also disclosed that he personally added to his shareholding on March 30, signalling his own confidence in the reset.