10.4% UGRO Capital NCD – Oct-2024 – Issue Details and Review

UGRO Capital Secured NCD Bonds would open for subscription on October 10, 2024. Company is a non-deposit-taking, systemically important NBFC firm registered with the RBI. It offers interest rates up to 10.4%. These NCD’s are issued in 3 different series for 18, 24 and 30 months tenure. Interest is paid monthly. Should you invest in UGRO Capital NCD Oct-2024 issue? What are the risk factors one should consider before investing in such high risk NCDs?
About UGRO Capital Limited
UGRO Capital Limited is a non-deposit-taking, systemically important NBFC firm registered with the RBI. It is engaged in the lending business and focuses on the MSME sector in India. Company provides loans to SMEs and MSMEs focusing on the healthcare, education, chemicals, food processing/FMCG, hospitality, electrical appliances and components, automotive accessories and light engineering segments, and micro-enterprises segments.

Company has a 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 ?1 crore to ?15 crores, and Micro branches, based in tier 3 to tier 6 cities with customer turnovers of less than Rs 1 crore. This helps the company’s presence in PAN India.

UGRO Capital NCD – Oct-2024 Issue Details

Issue Open
10-Oct-24

Issue Closes
23-Oct-24

Issuing Security Name
UGRO Capital Limited

Security Type
Secured, Redeemable and Non-Convertible NCDs

Issue Size (Base)
Rs 100 Crores

Issue Size (Option to retain over subscription)
Rs 100 Crores

Total issue size
Rs 200 Crores

Issue price
Rs 1,000 per bond

Face value
Rs 1,000 per bond

Series
I to III

Minimum Lot size
10 bonds and 1 bond there after

Tenure
18, 24 and 30 months

Interest Payment frequency
Monthly

Listing on
Within 6 working days on BSE/NSE

Lead Manager
Tipsons Consultancy Services Private Limited

Debenture Trustee/s
Mitcon Credentia Trusteeship Services Limited

What are UGRO Capital NCD Interest Rates?

Series
Series 1
Series 2
Series 3

Frequency of Interest Payment
Monthly
Monthly
Monthly

Tenure (months)
18
24
30

Coupon (% per Annum)
10.15%
10.25%
10.40%

Effective Yield (% per Annum)
10.64%
10.75%
10.91%

Amount on Maturity (In Rs.)
1,000
1,000
1,000

What are the UGRO Capital NCD ratings?
These secured NCD’s are rated as IND A+/Stable by India Ratings & Research Private Limited which indicate that such securities with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations. Such securities carry low credit risk.
Company Financials

Period Ended
31-Mar-22
31-Mar-23
31-Mar-24

Assets
2,854.23
4,305.59
6,279.98

Revenue
313.42
683.76
1,081.68

Profit After Tax
14.55
39.78
119.34

Why to invest in UGRO Capital NCD?

These NCDs offer high interest rates, which range between 10.15% to 10.4% and yield between 10.64% to 10.91%.
These are secured NCDs. If the company gets shut down or get into financial crisis for some reason, NCD investors would get preference in repayment of capital along with interest as those backed up by assets of the company. Hence, it is safe to invest in secured NCDs. However the risk is not 100% eliminated.
Company margins are improving year on year in the last few years.

Why not to invest in UGRO Capital NCD?
Here are the risk factors of investing in these non-convertible debenture bonds.

While these are secured NCD, in case company wind-up for some reason, there is no guarantee that NCD investors would get 100% of their principal amount and interest. As an example, earlier DHFL came with secured NCDs. They went bankrupt and NCD investors yet to receive their full principal amount. Investment in NBFC NCDs is riskier.
High levels of customer defaults or delays in repayment of loans could adversely affect its business.
Company may not be able to recover, on a timely basis or at all, the full value of collateral or amounts which are sufficient to cover the outstanding amounts due under defaulted loans or the value of collateral may decrease, which could adversely affect the results of operations, cash flows and financial condition.
Its AUM comprises of unsecured loans. Company’s inability to recover the amounts due from customers in connection with such loans in a timely manner could adversely affect the business and profits.
Company financial performance is particularly vulnerable to interest rate volatility.
Its business operations involve transactions with borrowers with limited access to credit whose risk profile is relatively high risk. Any default from such customers could adversely affect its business.
The business requires substantial capital, and any disruption in funding sources would have a material adverse effect on company liquidity and financial condition.
Refer to the UGRO Capital NCD Oct-24 Prospectus for complete risk factors.

Should you invest in UGRO Capital NCD – Oct-2024 issue?

UGRO Capital offers secured NCD now. These NCDs offer high interest rate up to 10.4%. These NCDs have good credit rating of IND A+/Stable by India Ratings & Research Private Limited.
On the other side, one should understand the risks involved in investing in NCD bonds of NBFC companies. In the past, NBFC companies has been delaying/defaulted the payment of interest and repayment of capital.

High-risk investors can invest in these NCD bonds after understanding all these risk factors.

Suresh KP is the Founder of Myinvestmentideas. He is NISM Certified – Investment Adviser and NISM Certified – Research Analyst. He has been analyzing financial markets in the last 20 years.He can be reached at suresh@myinvestmentideas.com Latest posts by Suresh KP (see all)