Capri Global Capital Limited — Q4 FY22 earnings call

Call held 23 May 2022

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 · FY2023 · high confidence 25% year-on-year
    We consider 25% year-on-year AUM growth achievable in FY23.

    — Mr. Rajesh Sharma

  • Medium Term CAGR AUM growth · Medium Term · high confidence 22% to 27%

    From 22% to 27% today

    maintaining a 22% to 27% medium term CAGR target.

    — Mr. Rajesh Sharma

  • MSME Co-lending AUM Quarterly Momentum growth · Quarterly · medium confidence Rs1 billion to Rs1.5 billion
    it will be fair to consider Rs1 billion to Rs1.5 billion as base quarterly momentum for the MSME product under core lending.

    — Mr. Rajesh Sharma

  • Gold Loan AUM growth · 2028 · high confidence Rs80 billion
    AUM target of Rs80 billion and an exclusive network of 1,500 branches in the five years to 2028.

    — Mr. Rajesh Sharma

  • Car Loan Origination growth · FY2023 · high confidence upwards of Rs30 billion
    We are confident of doing upwards of Rs30 billion in car loan origination in FY23.

    — Mr. Rajesh Sharma

  • Housing Finance AUM Growth growth · Next year (FY2023) · high confidence 30% plus onwards
    Next year also we will continue with the case of 30% plus onwards in this segment.

    — Mr. Rajesh Sharma

  • Co-lending AUM growth · Next year (FY2023) · medium confidence Rs6 billion minimum
    With that also we were able to achieve in the last quarter Rs1.15 billion in co-lending. And with this pace, we are hopeful to do about Rs6 billion co-lending in the next year minimum.

    — Mr. Rajesh Sharma

operational

  • Gold Loan Branches operational · 2028 · high confidence 1,500 branches
    AUM target of Rs80 billion and an exclusive network of 1,500 branches in the five years to 2028.

    — Mr. Rajesh Sharma

  • Gold Loan Branches operational · H1 FY2023 · high confidence 100 branches
    We aim to open 100 gold loan branches in H1 FY23.

    — Mr. Rajesh Sharma

profitability

  • Car Loan Fee Income profitability · Next year (FY2023) · high confidence almost Rs75 Crores
    almost Rs75 Crores worth of fee income we will be able to generate and it will be a very good profitability contributor.

    — Mr. Rajesh Sharma

  • NIMs Trend profitability · Going ahead · high confidence Stabilize and effect trend reversal
    We expect to stabilize and effect trend reversal on NIMs going ahead.

    — Mr. Rajesh Sharma

  • Cost-to-Income Ratio profitability · FY2023 · high confidence in the range of about 40%

    Previously 40% in FY22 → in the range of about 40%

    I think while we have given a 40% cost to income ratio guidance in FY22, I think we should be able to keep our cost to income ratio in the range of about 40%.

    — Mr. Rajesh Sharma

  • Gold Loan Branches Profitability profitability · 15-18 months from setup · high confidence 15 to 18 months to deliver profit
    gold loan branches will take about 15 to 18 months to deliver profit.

    — Mr. Rajesh Sharma

Risks & concerns

  • Rising interest rates leading to increased borrowing costs.

    medium

  • Elevated credit costs and higher write-offs in Q4 FY22.

    medium

  • Increased operating costs and an inching-up cost-to-income ratio.

    medium

  • Vacancy in the Chief Financial Officer (CFO) position.

    low

  • Change in statutory auditors from Deloitte to MM Nissim & Co.

    low

Q&A highlights

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2 min read 4 chapters

Detailed narrative

Market Outlook

The management expressed overall optimism for growth, citing a strong retail sales team and healthy appetite for wholesale lending. They see robust demand in the affordable housing segment and expect the MSME sector to remain a key contributor. The co-lending model is anticipated to significantly enhance profitability and capital efficiency, while the new car loan distribution vertical will add to non-interest income.

Business Segments

MSME

Key contributor, currently about 50% of AUM. Collection efficiency caught up strongly to 100%. Co-lending mechanism activated.

Outlook: Will continue to be the biggest contributor, though its share may reduce to 35% with gold loan inclusion. Strong growth expected.

Affordable Housing

AUM grew almost 51% during the year. 32 branches added. Funds available from NHB at ~4%.

Outlook: Expects 30%+ growth in the next year. Margins will be better due to low-cost funds and strong demand.

Construction Finance

Growth consciously pegged to retail AUM performance.

Outlook: Share to be kept under 20% of consolidated AUM.

Gold Loan

Gearing up for formal launch of 20 branches in June. Top and middle rank leadership onboarded, lower-level recruitments on fast track.

Outlook: Ambitious plan: 100 branches in H1 FY23, 1,500 branches and Rs80 billion AUM in five years to 2028. High operating cost business requiring deep penetration, but significant scope in North and West India. Expected to become profitable after 15-18 months of setup.

Car Loan Distribution

First full year of operation. Originated Rs17.4 billion in FY22 (Rs7.8 billion in Q4 FY22). Contributed Rs467 million in gross fee income. Profitable since Q3 FY22.

Outlook: Confident of originating upwards of Rs30 billion in FY23, generating almost Rs75 Crores in fee income, making it a significant profitability contributor.

Competitive Position

In the gold loan segment, NBFCs like Capri Global cater to a distinct customer base compared to banks. NBFCs offer faster processing and serve customers who prioritize quick access to funds, even at higher interest rates (15-20% vs. banks' 9%). The management identified significant untapped market potential in North and West India for gold loans, unlike the well-covered South.

Strategic Initiatives

  • **Co-lending Mechanism**: Activated for MSME (Rs1.15 billion AUM in Q4 FY22) and affordable housing (tied up with SBI in March 2022, activated Q1 FY23). Expected to be a 'game changer' by leveraging bank funding (80% by banks, 20% by CGCL, leading to 25x leverage) and retaining foreclosing customers by offering lower interest rates. A technology platform for online processing is expected in 3-4 months. Target of Rs6 billion minimum co-lending AUM in FY23.
  • **Gold Loan Expansion**: Aggressive branch expansion plan with 100 branches in H1 FY23 and a long-term target of 1,500 branches by 2028 to achieve Rs80 billion AUM. Focus on North and West India where market penetration is lower.
  • **Car Loan Distribution Business**: Leveraging existing branch network and banking relationships to generate fee income without requiring capital. Aiming for significant growth in origination and profitability contribution.
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