Why Ugro Capital's CCD Issue Is In The Eye Of An Investor Storm

Ugro Capital, a non-banking finance company, is raising over Rs 1,315 crore through a cumulative convertible debenture (CCD) issue and a rights issue.

Ugro responded that CCDs are neither legally nor structurally linked to the June 2024 warrants and that the additional coupon is not a reimbursement of the 25% warrant subscription amount—which would still be forfeited per SEBI Regulation 169(3) if warrants remain unexercised.

Still, the question remains: if CCDs are unrelated to the warrants, why is the coupon tied to the non-exercise of warrants?

IiAS further pointed out that the total coupon payout could be Rs 228.57 crore (25% of Rs 914.3 crore), exceeding Ugro’s FY25 pre-tax profit of Rs 203.12 crore, thereby impacting profitability.

Ugro countered that the impact on the P&L would only reflect the interest expense (i.e., the difference between actual outflow and present value booked at inception), and would not be significant.

Adding to the puzzle is that Ugro’s NCD issue carries a coupon rate of 10.4% — making this high-cost-high-dilution equity raise all the more perplexing.

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