Ugro Capital acquires embedded credit platform MyShubhLife for Rs 45 crore

Ugro Capital, a non-banking finance company catering to small and medium businesses, has acquired fintech lending startup MyShubhLife (MSL) for Rs 45 crore.

The equity-and-cash deal enables Ugro Capital to enter the tech enabled embedded finance market. Ugro Capital will initially pay Rs 28 crore to acquire 76% of MSL, while the remaining Rs 17 crore will be paid later to secure full ownership of the company.

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The payment structure involves 30% of the total amount in cash, with the rest in the form of Ugro shares, representing approximately 1.2% of Ugro Capital.

With MSL now operating as a subsidiary of Ugro Capital, the company aims to onboard 200,000 new retailers within the next three years, projecting an incremental asset under management (AUM) of Rs 1,500 crore. It also expects to achieve a profit after tax (PAT) of Rs 100 crore during the same period.

As per the licencing norms of the Reserve Bank of India (RBI), there cannot be two licences within one group entity, hence MSL will surrender its NBFC license as part of the acquisition process.

“Short-term credit is very difficult to do when you go to the open market, because you don’t know the cash flow of the customer. That is why, one big way to do this is embedded financing. We have been thinking about how to get to the embedded financing market and it gives us the ability to transition to a granular target segment,” Shachindra Nath, managing director of Ugro Capital, told ET in an interaction.

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This development comes at a time when there is some degree of consolidation playing out in the Indian fintech lending ecosystem. In 2020, InCred had acquired consumer lending startup Qbera in a similar deal. Overall, the digital lending sector which had faced major challenges during the pandemic is showing some signs of recovery, with players like Indifi and Lendingkart turning profitable over the last two financial years.“In next two years, Ugro Capital will be the largest MSME financing company in the country and it is now entering embedded financing through this unique acquisition, that has the potential to do a disbursement of almost Rs 8,000 to 10,000 crore,” Nath added.

MSL, previously valued at Rs 240 crore, has received investments from various entities, including Omidyar Network India, Gojo, Saama Capital IV, and BEENEXT2. To date, it has raised around Rs 147 crore and has engaged with over 15 million merchants. The platform has integrated with key players such as Pine Labs, Fino, Airtel Payments Bank, Mobikwik, Spice Money, and EasyPay for merchant financing.

“In a lending business, the book size is the most important thing because if you want to create a substantial size, you will require a very large balance sheet. What this partnership does for us is that since we have the tech, and the underwriting model, we now get access to Ugro’s balance sheet. Whereas, Ugro will get immediate access to our embedded tech and to an underwriting model which was built in the last six to seven years,” Monish Anand, founder and CEO of MSL, said.

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Ugro Capital acquires embedded credit platform MyShubhLife for Rs 45 crore

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