Detailed narrative
Market Outlook
The management holds a positive outlook on the growing gold loan market in India. They anticipate continued demand in the MSME and affordable housing segments, driven by their expanding branch network. The overall market dynamics are seen as supportive of the company's growth strategy across its diversified product portfolio.
Business Segments
MSME & Affordable Housing (Urban Retail)
Branch network expanded with 15 new urban retail branches, including a maiden branch in Bihar. Disbursals in absolute terms are increasing, though their percentage share might fluctuate due to the rapid growth of gold loans. The MSME portfolio is up 30% YoY (including assigned portfolio). Average ticket size for home loans is INR 12-13 lakhs, consistent with the affordable housing segment.
Outlook: Expected to remain a key retail growth driver. Aim to bring the cost-to-income ratio for these verticals to 35-36%. MSME portfolio is targeted to grow by 25%+ in FY23. Cross-selling opportunities with other products are anticipated.
Gold Loans
Rapid scale-up, with AUM reaching INR 7,152 million (8.3% of total AUM) from 1.8% in Q2 FY23. Disbursals were INR 7,741 million, constituting 42.8% of total disbursals in Q3 FY23. Exclusive gold loan branches increased significantly from 182 to 449. This aggressive expansion led to a pre-tax loss of INR 975 million in 9M FY23 due to initial operating costs and pre-rollout hiring.
Outlook: Targeting a yield of 19% and an AUM of INR 850 crores by Q4 FY23. Each branch is expected to reach INR 3.5-4 crores AUM within 15 months and break even at INR 3.5 crores AUM. The company plans to have 550-650 gold loan branches in FY23. Expects the cost-to-income ratio for this vertical to be around 45% once stabilized. Exploring co-lending partnerships for gold loans in the next year to enhance efficiency and reach.
Construction Finance
Share in AUM softened by 200bps QoQ to 19.4%, falling below the 20% threshold. This is in line with previous guidance for softer momentum in H2 FY23.
Outlook: Momentum expected to remain softer in H2 FY23, but it remains a part of the long-term AUM mix target (20%).
Car Loan Distribution
Demonstrated strong momentum, with loan originations at INR 16,920 million in Q3 FY23 (up 3.1x YoY and 24% QoQ). Contributed INR 333 million in net fee income in Q3 FY23 (INR 800 million in 9M FY23). Operates with 6 exclusive branches and a feet-on-street sales force across 322 locations in 29 States and Union Territories.
Outlook: Purely fee-income driven, directly contributing to the bottom line. Targeting INR 100 crores in fee income for FY23. Expected to continue as an important structural earnings driver with strong growth runway through intermediation and bank partnerships.
Competitive Position
The company acknowledges the increasing competition in the gold loan sector from larger NBFCs and banks. However, it views the overall market as growing (INR 3,50,000 crores market growing at 10-12%), providing sufficient room for new players. Management emphasizes that building a wide branch network, establishing brand confidence among borrowers, and the ability to absorb initial operating losses serve as entry barriers, allowing Capri Global to compete effectively and build a substantial book.