Capri Global Capital Limited — Q3 FY21 earnings call

Call held 10 Feb 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 · FY21 · medium confidence 6% to 7%
    on an overall basis we should be able to grow our book about 6% to 7% on a year ending basis.

    — Rajesh Sharma, Managing Director

  • AUM Growth growth · FY22 · high confidence 25% to 30%
    Next year our target is to grow the book about 25% to 30%.

    — Rajesh Sharma, Managing Director

operational

  • Branch Expansion operational · Next 2 years · medium confidence 60 to 70 branches
    We intend to go deeper in these markets because we already have our regional team in place…the entire team is there. Regional sales team, regional credit team, operational, collection everybody is there so I think there is enough scope to grow there. So, we can add another 60 to 70 branches in this region in the next about two years’ time.

    — Rajesh Sharma, Managing Director

strategic

  • New Product Plan Readiness strategic · December 2021 · high confidence Ready by December 2021
    I think by December 2021 the entire plan will be ready. Our entire technology as well as the mapping team and then we should roll out in the last quarter of the coming financial year and then that product will be stabilized in 22, 23.

    — Rajesh Sharma, Managing Director

financial

  • Restructured Loan Book financial · March 2021 · medium confidence around 4%
    So, I think we will end up with more or less 4% around book in the restructuring loan. In December end we were around 2-1/2% of our total book where we have received requests for restructuring. We intend to close the implementation by 31st March as per RBI guidelines.

    — Raj Ahuja, CFO

  • Credit Cost / Provisioning financial · Q4FY21 · medium confidence up to 20-25% higher than Q3
    We are expecting a similar level of provisioning maybe a little bit heightened provision in Quarter four. I think as of now we will have to start watching this space because we have just come out of the moratorium window and people have started back. Economy is going back on track now so quarter four looks like we might have some slippages which is higher than quarter three. But I am not saying it is very alarmingly high, mainly because of our profile and the security backups what we have, so the customer obviously like to pay first to the lenders they have their personal securities mortgaged. So, to sum up the answer to your question, I think it will be a little higher than quarter three but not very high. So, like this quarter we have done 11, I don’t think this to go up more than 20%, 25% at an overall level.

    — Raj Ahuja, CFO

profitability

  • Spread profitability · Q4FY21 and going forward · medium confidence around 7.5%

    From 7% today

    our spread will come back in the next quarter around 7-1/2% and going forward this spread can be maintained.

    — Rajesh Sharma, Managing Director

Risks & concerns

  • Economic decline and dislocation across asset classes due to COVID-19.

    high

  • Reduction in high-yielding construction finance book impacting Net Interest Income and profitability.

    medium

  • Customers migrating to banks as their credit profile improves, leading to potential customer loss.

    medium

  • Potential incremental stress and slippages in Q4 FY21, especially after the Supreme Court judgment.

    medium

  • Negative carry on surplus funds due to high liquidity and lower yields from mutual funds.

    low

Q&A highlights

0 direct

Asked by Tarun Somani, Rubics Investments

Asked by Tarun Somani, Rubics Investments

Asked by Ravikanth Bhat, Individual investor

Asked by Ravikanth Bhat, Individual investor

Asked by Renish Bhuva, ICICI Securities

Asked by Renish Bhuva, ICICI Securities

Asked by Nalin Shah, NVS Brokerage

Asked by Nalin Shah, NVS Brokerage

Asked by Preeti Singh, Value Investments

Asked by Preeti Singh, Value Investments

Asked by Radhika Loya, Mirae Asset

Asked by Bunty Chawla, IDBI Capital

Asked by Bunty Chawla, IDBI Capital

Asked by Tarun Somani, Rubics Investments

Asked by Tarun Somani, Rubics Investments

2 min read 4 chapters

Detailed narrative

Market Outlook

The economy is showing signs of recovery, with activity picking up across urban and rural branches since October-November. There is a 'huge segment' of underserved customers, indicating substantial growth potential for companies like Capri Global. The company expects the coming quarter and next year to be 'quite exciting' for AUM growth and profitability.

Business Segments

MSME Loans

Robust growth in disbursement (INR 202 crores in Q3FY21, up 82% QoQ and 46% YoY). Book grew about 5% on a closing basis.

Outlook: Continued focus on growing this segment, which is a key driver of growth.

Affordable Housing Loans

Strong growth in disbursement (INR 102 crores in Q3FY21, up 67% QoQ and 132% YoY). Book grew about 8% on a closing basis.

Outlook: Continued focus on growing this segment, which is a key driver of growth. Customers often qualify for Pradhan Mantri Awas Suvidha subsidy, reducing LTV.

Construction Finance (CF)

Book reduced significantly to INR 770 crores (down 15% QoQ) due to cautious approach and faster repayments/foreclosures. Disbursement was INR 75 crores in Q3FY21.

Outlook: Maintaining a very cautious approach. CF as a percentage of the overall loan book may reduce going forward if other retail verticals grow faster. Focus on small developers building affordable segments.

Indirect Retail Finance

Volatile, not grown post IL&FS crisis. Used opportunistically to park liquidity, often short-term limits against AAA government securities.

Outlook: More of an opportunistic lending and used to park surplus funds, not a central strategy for growth.

Competitive Position

The company targets underserved, self-employed customers in MSME and affordable housing segments who may not have adequate income proof for traditional banks. All products are secured with hard collateral (mortgaged property). They believe this segment offers significant growth opportunities for the next 7-10 years. Strong recovery mechanisms and reduced surface limits (from 50 lakhs to 20 lakhs) are expected to mitigate credit cost impact from NPAs.

Strategic Initiatives

  • Enhancing capabilities on digital analytics for better customer experience and reduced turnaround time.
  • Talent acquisition to strengthen the team.
  • Strengthening the board with appointment of Mr. Desh Raj Dogra as independent director.
  • Implementation of risk control, efficient credit underwriting, and collections with exemplary corporate governance.
  • Exploring entry into newer product segments that fit the core business model and offer cross-sell opportunities.
  • Expanding branch network by 60-70 branches in existing geographies (Maharashtra, Gujarat, MP, Rajasthan, NCR) over the next two years.
  • Geographical expansion to Karnataka, Andhra, Tamil Nadu from FY23 onwards for MSME and affordable housing products.
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