Capri Global Capital Ltd Q4 FY2024 Concall Summary

Key Takeaways

• AUM crossed ₹15,000 crore, up 50% for the second straight year: the company is tracking toward its ₹30,000 crore FY27 target, with gold loans the standout driver at 3.1x YoY growth.
• Gold loan AUM hit ₹3,490 crore in just 20 months: branch expansion, co-lending partnerships and trained valuation staff built the engine, and management expects 30–35% growth to continue.
• Cost-to-income ratio spiked to 70.5% on deliberate investment: hiring, IPL-linked marketing and a ₹112 crore technology spend compressed near-term earnings, but management promises a significant drop after H1 as tech projects complete.
• Spreads held at 6.4% despite a ~50 bps rise in cost of funds: yield improvement and a growing high-yield gold loan mix offset funding pressure, with spreads guided to 6.8–6.9% as the mix shifts further.
• What to watch next quarter: whether the promised cost-to-income decline actually begins, the pace of gold loan growth after the cash-disbursement clampdown, and any disclosure on the insurance fee income that was deferred again.

Gold Loan: The Growth Engine

• Scale achieved in 20 months: AUM crossed ₹3,000 crore (₹3,490 crore including co-lending), a 3.1x YoY jump, making gold loans the fastest-growing segment and the primary driver of the 50% consolidated AUM growth.
• Branch-led distribution: 750 branches added in 15 months, with 1,600 staff trained and certified by the government's MSME skill development department on gold valuation, creating a physical moat that management argues technology cannot replicate.
• Co-lending unlocks competitive pricing: partner banks allow the company to offer rates it could not offer on its own book, while co-lending AUM rose to 11.7% of total AUM from 5.3% a year ago.
• Cash disbursement risk is unquantified: management declined to disclose what percentage of gold AUM was disbursed in cash before the RBI clampdown, calling it "very difficult to point out," but stated volumes have not dipped post-restriction and promised Q1 results will confirm that.
• Valuation controls are manual by design: each piece of jewellery is valued by two valuers in a maker-checker process, backed by 100 trained audit staff and 35 AI/ML early-warning triggers; management is explicit that gold assessment "cannot be done with any kind of technology."

Rajesh Sharma: "For assessing the gold loan, there cannot be any technology as such because you have to physically touch the gold, use all the various methods of either putting the chemical or cutting it or using some machine to do that. So it has to be done manually."

Cost-Income & The Investment Cycle

• 70.5% cost-to-income ratio is the peak of a deliberate build phase: the jump was driven by three factors: team expansion, marketing initiatives including the Capri car loans partnership with Gujarat Titans during IPL, and a ₹112 crore technology spend in FY24.
• Technology spend is front-loaded and finite: management expects the spend to "drop significantly after first half" as in-house LOS, FLEXCUBE LMS, collection modules and process reengineering initiatives go live, directly lowering the cost-income ratio.
• Housing finance tech rebuild is the second-half catalyst: work over the last 15 months on mortgage technology, an in-house collection model, AI-based automated call selection and field force optimization (with BCG advice) is expected to reflect in H2 productivity and cost-income improvement.
• PPOP declined 16% QoQ but rose 22% YoY: the quarterly compression to ₹109.6 crore was the price of investment; full-year PPOP was up 37% YoY, and net profit rose 27% YoY to ₹82.6 crore despite the opex load.
• Gold loan business is still loss-making: excluding the gold loan business loss, net profit would have been ₹88.5 crore instead of the reported ₹82.6 crore, implying a ~₹6 crore drag in the quarter that management expects to reverse as the book scales.

Rajesh Sharma: "Collectively, we see 2024-25 will be a year which will define us the way we process our entire end-to-end loan processing... I think this is the piece we have cracked, which will put us in a very unique position, and this will result in lower TAT and better productivity, resulting in ultimately the lower cost-to-income ratio."

Spreads & Margin Dynamics

• Spreads stable at 6.4% for two straight quarters: a ~50 bps increase in marginal cost of funds between Q1 and Q4 was more than offset by improvement in yield on advances, helped by the growing mix of higher-yielding gold loans.
• Gold loan mix shift is the spread tailwind: management guided spreads to improve from 6.4% to 6.8–6.9% as the gold loan proportion rises in overall AUM, with gold loan pricing structurally higher than other secured products.
• Cost of funds expected to stabilize: management sees no further hikes from current levels, removing a headwind that compressed spreads over the past year.
• Semi-fixed loan book creates a natural lag on repricing: some loans carry a 3-year rate lock, so the full benefit of rising yields takes time to flow through, while floating-rate loans reset automatically.
• Management deflects on NIM guidance: when asked for NIM guidance for FY25, the response was that "more the leverage will happen, the net interest margin will continue to go down" and that spread is the right indicator, effectively declining to provide a NIM number.

Asset Quality & Portfolio Mix

• GNPA improved 18 bps QoQ to 1.92%: net NPA declined 28 bps QoQ to 1.1%, with a provision coverage ratio of 43.2%, signalling that rapid AUM growth is not coming at the cost of credit quality.
• Construction finance is deliberately capped: management will keep the CF and indirect lending mix at or below 20% of consolidated AUM, focused only on residential projects in affordable housing in Mumbai, Ahmedabad, Pune and Bengaluru, citing intense competition but some return of pricing power.
• Housing finance grew 52.8% YoY to ₹4,070 crore: management expects 30%+ growth to continue for the next 4–5 years, with 20–30 branches added annually; the branch plan for the current year is yet to be frozen and will go to the Board in Q1.
• MSME grew ~15% YoY to ₹5,020 crore: the pace is expected to hold at ~15%, making it a steady but not accelerating contributor.
• Car loans saw a marginal 1% sequential dip: ₹2,760 crore in Q4 vs ₹2,800 crore in Q3, attributed to one month of lower volume and a code-shift to a new entity; management does not view it as a dip and guides ~20% growth in FY25.

New Initiatives & Fee Income

• Used car finance vertical launching in FY25: management expects a 3–6 month ramp-up, with volume beginning in H2, adding a new secured lending stream adjacent to the existing car loan franchise.
• Non-interest income settling above 30% of revenue: changes to car loan distribution commission in Q2 FY24 and co-lending income recognition in Q4 FY24 have now stabilized; new insurance fee income is expected to contribute in FY25, supporting continued strong growth.
• Insurance income segmental numbers deferred again: an analyst noted the numbers were previously promised for Q4; management said "we are yet to publish that, but we will come back to you with this number," leaving a disclosure gap.
• Co-lending acceptance ratio improving: the proportion of loans accepted by partner banks is significantly higher than a year ago, and new technology is being implemented to sustain the momentum; co-lending generates fee income without consuming capital.
• ESG framework being built: policies crafted per ESG guidelines, ratings being obtained from global agencies, internal training underway, and business processes being aligned, with periodic stakeholder updates promised.

Guidance & Commitments

Key Metrics