Faster cost growth cuts Ugro Capital's operating margin by 2.07 points
Consolidated net profit fell -25.24% QoQ as expenses outpaced revenue and the tax rate swung higher.
Filed 05 Nov 2026, 19:37 IST · after market close · Ugro Capital Ltd (UGROCAP)
Key takeaways
- Expenses grew +16.11% QoQ against revenue growth of +9.53%, narrowing operating margin by 2.07 percentage points.
- Net profit fell -25.24% QoQ as the tax rate rose 35.95 percentage points from a negative base.
- Other income contributed 49.89% of pre-tax profit, reducing the purity of reported earnings.
Price around the results
Revenue growth did not keep pace with operating costs
On a consolidated basis, revenue grew +9.53% QoQ, but expenses rose faster at +16.11%; operating profit consequently grew only +6.09%. Operating margin narrowed by 2.07 percentage points to 63.57%, marking a sequential deterioration from 65.64% in Q1FY27. The margin remained 7.78 percentage points above the 55.79% median for the 100 Financial Services peers that had reported.
Tax and other income distorted the profit movement
Pre-tax profit grew +10.90% QoQ, but net profit fell -25.24% because the tax rate moved from -10.29% to 25.66%, a 35.95-percentage-point swing. Other income accounted for 49.89% of pre-tax profit, so the quarter's earnings were materially supported by non-operating income. Management also said foreclosures ran ahead of contractual-tenure assumptions, leading to a reversal of unearned EIS through the profit and loss account.
Focused products and newer branches are central to the growth plan
Management said focused products increased to 53% of AUM in September 2026 from 32% in December 2025, while mature branches reached monthly disbursements of Rs 0.86 cr in September. The company said 138 branches less than six months old are positioned to support the next phase of growth. Management guided for FY27 operating expenses of at least Rs 490 cr and cited annual growth ranges of 20%-30% for EM LAP and 35%-40% for GROx.
The filing came after market close
The results were filed after market close, so there is no market reaction to assess yet. The available quarter-on-quarter trend shows operating margin moving down from 65.64% to 63.57%, while net profit reversed from Rs 67.87 cr to Rs 50.74 cr.
Q2FY27 at a glance
Consolidated figures as filed with NSE — filed ahead of third-party databases, not yet independently cross-checked.
| Line item | Q2FY27 | Q1FY27 | QoQ |
|---|---|---|---|
| Revenue | ₹544 cr | ₹497 cr | +9.53% |
| Other income | ₹34 cr | ₹38 cr | -9.66% |
| Expenses | ₹198 cr | ₹171 cr | +16.11% |
| Operating profit | ₹346 cr | ₹326 cr | +6.09% |
| Operating margin (%) | 63.57% | 65.64% | — |
| Interest | ₹296 cr | ₹289 cr | +2.42% |
| Depreciation | ₹16 cr | ₹13 cr | +18.80% |
| Profit before tax | ₹68 cr | ₹62 cr | +10.90% |
| Tax | ₹18 cr | ₹-6 cr | — |
| Net profit | ₹51 cr | ₹68 cr | -25.24% |
| EPS (₹) | ₹3.32 | ₹4.44 | -25.23% |
Operating margin of 63.57% compares with a Financial Services sector median of 55.79% across 100 peers that have reported Q2FY27.
What management said
From the company’s own investor presentation. Each point is checked against the source document before it appears here.
This quarter
- Focused products increased from 32% of AUM in December 2025 to 53% in September 2026.
- Mature branches reached monthly disbursement of INR 0.86 crore in September 2026.
Guidance & outlook
- The company expects FY27 operating expenses to be at least INR 490 crore.
- The company guides for annual EM LAP growth of 20-30% and GROx growth of 35-40%.
- The forward growth plan targets annual EM LAP growth of 20-30% and GROx growth of 35-40%.
- Management targets blended branch productivity of INR 0.80-0.85 crore per month over the next 12 months.
Expansion
- The company has 138 branches under six months old that are expected to support the next leg of growth.
Problems & risks
- Loan foreclosures ran ahead of contractual-tenure assumptions, causing reversal of unearned EIS through the P&L.
- The de-focused portfolio rundown was driven by elevated foreclosures.
What to watch
- Whether operating margin holds above 63.57% in the next quarter.
- Whether expense growth slows from +16.11% QoQ.
- Whether focused products' share of AUM rises from 53%.