Capri Global Capital Limited — Q1 FY25 earnings call

Call held 10 May 2024

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 · FY27 · high confidence INR300 billion
    We are well placed to drive growth and achieve the targeted INR300 billion AUM by FY27, as we stated earlier.

    — Mr. Rajesh Sharma - Managing Director

  • Housing Finance AUM Growth Rate growth · Coming years · high confidence 30%+
    Home loans will continue to grow in coming years in the range of about 30%+ growth rate.

    — Mr. Rajesh Sharma - Managing Director

  • Gold Loan AUM Growth Rate growth · Next year · high confidence 30% to 35%
    gold loan will increase in the pace of about 30% to 35%.

    — Mr. Rajesh Sharma - Managing Director

  • MSME AUM Growth Rate growth · Next year · high confidence 15%
    MSME will continue to grow at the pace of about 15%

    — Mr. Rajesh Sharma - Managing Director

  • Car Loan Overall Volume Growth growth · FY25 · high confidence 20%
    In FY25, we should see a growth of about 20% in the overall volume.

    — Mr. Rajesh Sharma - Managing Director

operational

  • Housing Finance Branch Additions operational · Every year · medium confidence 20 to 30 branches
    But on an average, we will keep adding 20 to 30 branches every year.

    — Mr. Rajesh Sharma - Managing Director

  • Gold Loan AUM per branch operational · Next year · high confidence INR85mn
    And next year, we are targeting to close the AUM at about INR85mn per branch.

    — Mr. Sanjeev Srivastava - Chief Risk Officer

profitability

  • Cost-to-income ratio profitability · H2 FY25 · high confidence Significant drop down
    But in the second half of the current year, we will see a significant difference in TAT, resulting in higher productivity and better volumes at a lower cost. The cost-income ratio will start showing improvement in the second half of the current year.

    — Mr. Rajesh Sharma - Managing Director

  • Spreads profitability · Future · high confidence 6.8% to 6.9%

    From 6.4% today

    Currently, our spread is in the range of about 6.4%. As I said, since our gold loan proportion is increasing in the overall AUM, our spread will improve from 6.4% to -- it should improve to -- in the range of about 6.8%, 6.9%.

    — Mr. Rajesh Sharma - Managing Director

financial

  • Cost of Funds financial · Future · high confidence Stabilize at this level
    I think on cost of funds, we gather the impression from various commentaries of the market and Reserve Bank and everything. I think cost of fund should stabilize at this level. I don't see any further hike going forward.

    — Mr. Rajesh Sharma - Managing Director

  • Cost of Funds Reduction financial · Next 6 months · medium confidence Some reduction
    However, we expect if there is a strong performance, in six months or so, we should see some rating upgrades. And if that happens, on back of that, we should see some reduction in the cost of funds.

    — Mr. Rajesh Sharma - Managing Director

Risks & concerns

  • New RBI regulation on cash disbursement for gold loans (in excess of INR20,000)

    medium

  • RBI guidelines on housing finance regarding charging interest between cheque issuance and actual credit to customer account

    medium

  • Elevated cost-to-income ratio (70.5% in Q4 FY24)

    medium

  • Intense competition amongst lenders for quality construction finance projects

    medium

Q&A highlights

0 direct

Asked by Satyaprakash Pandey, Haitong

Asked by Aman, Dolat Capital

Asked by Romil Savaliya, Concept InvestWell

Asked by Akansha, Matsya Capital

Asked by Gaurav Sharma, HSBC

Asked by Professor Ajit Kaushal, GD Goenka University

4 min read 4 chapters

Detailed narrative

Market Outlook

There is a strong outlook for residential real estate, particularly in affordable housing, in key geographies like Mumbai, Ahmedabad, Pune, and Bengaluru, with incremental 90% demand (number-wise) coming from this segment. The new car market is growing at about 10-12% annually, aligning with economic growth. Management believes the cost of funds should stabilize at current levels, with potential for reduction if rating upgrades occur in the next six months.

Business Segments

Gold Loan

AUM increased 3.1x YoY to INR34.9 billion (including co-lending AUM) in March '24, achieving the target in just 20 months. Share of gold loan AUM was 37% and share in disbursal was approximately 50% in Q4 and FY24. Operates 750 exclusive gold loan branches as of March 2024. Volumes have not dipped despite new RBI cash disbursement regulations.

Outlook: Targeting AUM of INR85 million per branch by next year. Expected to grow at 30-35% pace. Increasing proportion of gold loans will improve overall spreads from 6.4% to 6.8-6.9%. Co-lending will continue to help offer competitive interest rates and generate fee income.

MSME

AUM grew to INR50.2 billion, a 15% YoY growth.

Outlook: Expected to continue to grow at a pace of about 15%.

Construction Finance (CF)

Disbursals remained range bound in Q4 FY24. AUM share of both CF and Indirect Lending together was ~20%.

Outlook: Business continues to be supported by a strong outlook for residential real estate in key geographies (Mumbai, Ahmedabad, Pune, Bengaluru). Will remain guided by cautious risk management strategy to keep its mix at/or below 20% of consolidated AUM and focused only on residential projects in the affordable housing space. Noted intense competition but also a return of some pricing power.

Co-lending

AUM continued to rise during Q4 FY24, increasing to 11.7% of AUM compared to 8.9% in Q3 FY24 and 5.3% in Q4 FY23. Acceptance ratio of loans with partner banks is significantly higher.

Outlook: Momentum in co-lending is expected to continue with new technology, helping to get adequate lines and offer competitive interest rates, contributing good fee income without capital deployment.

Housing Finance

Book grew 52.8% YoY, from INR26.7 billion to INR40.7 billion.

Outlook: Home loans will continue to grow in coming years in the range of about 30%+ growth rate. Strong traction is observed. Plans to add 20 to 30 branches every year, potentially in new micro markets like UP and Uttarakhand. Significant work on mortgage tech and in-house collection model is expected to improve productivity and cost-to-income ratio.

Car Loan Distribution

Disbursals were INR27.6 billion in Q4, similar to INR28 billion in Q3, with a slight dip attributed to the process of shifting codes to a new entity.

Outlook: Anticipates a growth of about 20% in overall volume for FY25. A new business vertical, 'used car finance', will be added, expected to step up in 3-6 months and contribute volume from H2 FY25. The business has been shifted to a subsidiary, Capri Loans Car Platform Private Limited, with significant technology initiatives. The company holds a dominant position (#1 pan-India) among corporate DSAs (non-dealers).

Competitive Position

The company faces intense competition in construction finance, though it notes a return of some pricing power. In the car loan distribution business, it holds a dominant position as the #1 pan-India corporate DSA (non-dealer). For gold loans, the company emphasizes its experienced valuers (5+ years from competition) and robust internal controls and training.

Strategic Initiatives

  • Appointed Shri L. V. Prabhakar, Independent Director and former MD and CEO of Canara Bank, as Chairman of the Board of Directors.
  • Approved dividend at the rate of 15% per share on the face value of INR1 for FY24, payable on enhanced equity base after split and bonus issue.
  • Significant investment in technology (INR1.12 billion in FY24) including in-house developed LOS, FLEXCUBE LMS (Oracle), collection module, process reengineering, and analytical decision-making. These are expected to improve TAT, sales productivity, optimize cost, and enable better pricing.
  • Establishing systematic ESG practice internally, crafting policies, and in the process of obtaining ratings from global agencies. Conducting training for internal teams and aligning business processes with ESG requirements.
  • Continued branch expansion, with 750 exclusive gold loan branches opened in 15 months and plans to add 20-30 housing finance branches annually.
  • Launching a new business vertical for used car finance, expected to contribute from H2 FY25, under the subsidiary Capri Loans Car Platform Private Limited.
  • Implemented AI/ML triggers (35-odd triggers) in gold loan valuation for early warning signals and cross-audit/price audit systems, along with training 1,600 staff on gold valuation through government's MSME skill development department.
    • This is an AI-generated summary of a publicly available earnings call transcript.
    View original transcript

    More Financial Services earnings calls