Capri Global Capital Limited — Q1 FY22 earnings call

Call held 3 Aug 2021

What they filed

Q1 FY27: revenue up 61.0%, net profit up 109.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue554 601 732 766 867 +56%943 +57%1,071 +46%1,233 +61%
EBITDA463 528 621 647 744 +61%— — —
Net profit86 108 158 150 212 +147%221 +105%243 +54%314 +109%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Guidance & targets

growth

  • AUM Growth growth · FY2022 · high confidence at least 20% Y-o-Y
    We are targeting at least 20% Y-o-Y growth in AUM in FY22.

    — Mr. Rajesh Sharma – Founder & MD

  • AUM Level growth · Q2 FY2022 · high confidence Rs.50 billion
    Our AUM shall cross Rs.50 billion level in Q2 FY22.

    — Mr. Rajesh Sharma – Founder & MD

  • AUM CAGR (Base Case) growth · FY2022 to FY2027 · high confidence 22%
    We have set ourselves with base case AUM CAGR target of 22% between FY22 to FY27.

    — Mr. Rajesh Sharma – Founder & MD

  • AUM CAGR (Optimistic Scenario) growth · FY2022 to FY2027 · medium confidence up to 27%
    In a more optimistic scenario, we would like to achieve a CAGR of up to 27%.

    — Mr. Rajesh Sharma – Founder & MD

  • Construction Finance Portfolio Growth Rate growth · Medium term · high confidence below headline AUM growth rate
    Although the growth rate shall remain below the headline AUM growth rate.

    — Mr. Rajesh Sharma – Founder & MD

  • MSME AUM Growth growth · FY2022 · high confidence +25%
    MSME will deliver about +25%

    — Mr. Rajesh Sharma – Founder & MD

  • Housing AUM Growth growth · FY2022 · high confidence +22%
    and housing will deliver about +22%.

    — Mr. Rajesh Sharma – Founder & MD

  • Construction Finance AUM Growth growth · FY2022 · high confidence about 10%
    Construction Finance vertical will remain more or less, less than 10% growth

    — Mr. Rajesh Sharma – Founder & MD

  • July Disbursal growth · July 2021 · high confidence close to 150+ crore
    July, disbursement will be much better as compared to June and we hope that we should be able to disburse close to 150+ crore alone in the June and we are targeting that this March we should be able to achieve a growth 20% upward.

    — Mr. Rajesh Sharma – Founder & MD

profitability

  • Spreads profitability · Going forward · high confidence stable
    We expect spreads to stay stable going forward in the similar range.

    — Mr. Raj Ahuja – ED & Group CFO

  • Credit Cost (including write-offs) profitability · FY2022 · medium confidence around 130, 135 bps
    So weighted average for the year will be around 130, 135 bps is our estimate

    — Mr. Raj Ahuja – ED & Group CFO

  • Credit Cost (including write-offs) profitability · FY2023 · medium confidence around 80 to 100 bps
    But on a conservative basis, we should still say that next year also we should be in the range of around 80 to 100 bps cost.

    — Mr. Raj Ahuja – ED & Group CFO

  • Cost to Income Ratio profitability · Going forward · high confidence not go up, slightly keep coming down
    on the conservative side our cost to income ratio will not go up, it will slightly will keep coming down.

    — Mr. Rajesh Sharma – Founder & MD

  • Cost to Income Ratio profitability · Normal quarter · high confidence around 35% to 40% levels
    On a standalone basis in a normal quarter our costs will remain like Mr. Rajesh said around 35% to 40% levels.

    — Mr. Raj Ahuja – ED & Group CFO

operational

  • Branch Expansion operational · Next five years · high confidence another 200 branches
    We intend to add another 200 branches over a period of next five years time

    — Mr. Rajesh Sharma – Founder & MD

financial

  • Restructuring Book Addition (Resolution Framework-2) financial · high confidence below 100 to 200 bps

    Previously 100 to 200 bps → below 100 to 200 bps

    As such we are likely to remain below our initial quarter four FY21 estimates of 100 to 200 bps of addition to restructuring book under the Resolution Framework-2.

    — Mr. Raj Ahuja – ED & Group CFO

Risks & concerns

  • Impact of COVID-19 Second Wave

    high

  • Possibility of a Third COVID-19 Wave

    medium

  • Elevated Credit Costs

    medium

  • Competition from FinTech and Banks

    low

Q&A highlights

0 direct

Asked by Shanaya Nair, Excel Investments

Asked by Shanaya Nair, Excel Investments

Asked by Shripal Doshi, Equirus Securities

Asked by Shripal Doshi, Equirus Securities

Asked by Preethi Singh, Value Investments

Asked by Preethi Singh, Value Investments

3 min read 4 chapters

Detailed narrative

Market Outlook

The SIDBI MSME policy report indicates improving growth trends in the MSME segment, with the micro sub-segment (Rs.10-15 lakh) showing the healthiest growth of 7%. Other lag indicators like credit enquiry volumes and regional credit activity show a pickup from April 2021 lows. This is seen as favorable for CGCL's key product segments. The company expects a slow but steady return to normalcy in most operating states, with Maharashtra being an exception.

Business Segments

MSME

AUM increased 24% year-on-year. Contributed Rs.1,952 million to restructuring book. Stage-1 portfolio at Rs.1,908 crore (75%), Stage-2 at Rs.298 crore (11.7%), Stage-3 at Rs.144 crore (5.7%).

Outlook: Expected to deliver about +25% growth. Favorable pointers from SIDBI MSME policy report showing 7% growth in Rs.10-15 lakh segment where CGCL operates.

Housing Finance

AUM increased 33% year-on-year. Contributed Rs.86 million to restructuring book. Collection efficiency improved to 95% in Q1 FY22 (from 76% in June'20 and 93% in March'21).

Outlook: Expected to deliver about +22% growth. Good demand seen from June onwards in Tier-3, Tier-4 towns. Leveraging cheaper funds from NHB for salaried class formal segment. No longer funds under-construction projects.

Construction Finance

AUM showed a decline of 10% year-on-year. No restructured accounts in this book.

Outlook: Growth rate shall remain below the headline AUM growth rate, around 10%. Will continue to cater to small developers (average ticket size less than Rs.8 crore) in Tier-3, Tier-4 towns.

Indirect Retail

AUM of 3.2 billion, largely flat quarter-on-quarter, but up three times year-on-year. Inflated due to exposure in loans against securities of 2.6 billion.

Outlook: Loans against securities are short-term deployment and shall run off in H1 FY22.

Third-Party Products (Car Loans)

Initiated distribution in Q4 FY21. Tied up with three leading commercial banks. Achieved disbursal of Rs.100+ crore as of June 2021.

Outlook: Continued to build strong momentum in sourcing. Will utilize branch network and people for distribution.

Competitive Position

CGCL has carved a niche in serving self-employed non-professional customers (small kirana stores, tailoring shops, women-led groups) in Tier-3, Tier-4 towns, who lack formal income proof and are not catered to by FinTechs or traditional banks. Their underwriting relies on a 'touch and technology mix'. The portfolio is secured by collateral (LTV ~50% in MSME, ~57% in Housing Finance), ensuring recovery even in stress scenarios.

Strategic Initiatives

  • Employee wellbeing and morale: ensured timely financial and non-financial help, tied up with private healthcare providers for vaccination (over 50% employees vaccinated with first dose).
  • Resumption of operations: quick resumption of disbursals in June after April/May halt.
  • Market positioning: avoiding micro sub-segments (hospitality, travel, tourism) and focusing on essential services segments.
  • Branch expansion: opened four new branches in Q1 FY22 (total 89), further increased to 92. Plan to add another 200 branches over the next five years.
  • Headcount increase: total headcount increased from 1,945 in Q4 FY21 to 1,966 in Q1 FY22, deploying fresh resources.
  • Liquidity management: continued to prepay costlier borrowing in Q1 FY22, short-term deployment of surplus funds, reliance on medium-term borrowings (term loans) and entities, avoiding money market instruments.
  • Technology enhancement: using loan management/origination systems, in-house data analytics team, recently hired a CTO, using consultants (KPMG, BCG) to improve processes and technology stack (e.g., video KYC, e-receipts, collection app).
  • Product diversification: initiated distribution of third-party car loan products, evaluating couple of new products with BCG consultation, maintaining focus on underserved segments.
    • This is an AI-generated summary of a publicly available earnings call transcript.
    View original transcript

    More Financial Services earnings calls