Capri Global Capital Ltd Q2 FY2025 Concall Summary

Key Takeaways

• AUM up 56% YoY, gold loans the headline engine: Gold loan AUM surged 225% YoY to cross ₹6,500 crores, while housing and construction finance grew 33% and 63% respectively, putting the ₹30,000 crore FY27 target within reach.
• Profitability inflecting as operating leverage arrives: Consolidated net profit rose 49% YoY to ₹97 crores, cost-to-income improved 620 bps from Q4 FY24 to 64.3%, and credit costs normalized sharply after a one-off Q1 write-off.
• New product launches are small today, material tomorrow: Micro LAP, rooftop solar loans and insurance distribution are live and scaling; together they diversify the loan book and add fee income, with insurance alone targeted at ₹40 crores this year.
• Gold loan growth will normalize from here: The 225% surge came off a low base with a large branch network; management expects growth to moderate unless branch count rises significantly again.
• What to watch next quarter: Whether MSME lending resumes growth after a year-long pause, the pace of rooftop solar book build toward the ₹1,000 crore target, and the trajectory of ROE toward the 11% FY25 goal.

Loan Book Growth & Composition

• Gold loans drove the quarter: AUM crossed ₹6,500 crores, supported by 758 branches across 9 states and co-lending partnerships with four banks; branches are scaling to ₹8.7 crore AUM per branch.
• Construction finance rode the real estate cycle: AUM increased 63% YoY, driven by an uptick in the sector, with focus remaining on residential projects in the affordable housing segment and a granular indirect lending book.
• Housing loans delivered steady expansion: The portfolio grew 33% YoY, and management expects the 35-40% growth rate to sustain.
• MSME lending paused but poised to restart: The segment did not grow for the last year, which showed up in delinquency; now branches are being reactivated, the restructured pool has halved to ₹103 crores, and a portion was transferred to an ARC.
• Car loan profitability under pressure: Competition from platforms like CarDekho is driving up commission costs shared with DSAs; profitability this year will be slightly lower than last year, though management expects an all-time high next year as used-car finance is added with the same team.

Sharma: "from current quarter onwards, the base is already in the range of INR6,000 crores. The growth will get normalized unless we open more number of branches significantly."

New Business Lines & Diversification

• Rooftop solar loans are a build-then-sell model: Launched in partnership with fintech Credit Fair, with ticket sizes from ₹50,000 to ₹25 lakh; the current run rate is ₹4-5 crores a month, and management expects to reach ₹50 crores by year-end by building the book and then selling it down to banks at a lower yield.
• Micro LAP targets self-employed customers: The secured small-ticket product is already live in 70 branches with an experienced team and a strong risk framework; management expects to cross ₹60 crores by March and ₹300 crores next year.
• Insurance distribution is now a fee-income stream: Tied up with 18 insurance companies and started accruing fee income; the target is around ₹40 crores in net fee income for FY25, with further growth expected next year.
• Non-interest income share is stable at 25%: Absolute fee income rose from ₹80 crores in Q2 FY24 to ₹103 crores in Q2 FY25, even as car loan income dipped slightly in the seasonally weaker first half.

Sharma: "we build the book, down sell it much lower yield by generating a profit because a lot of banks have this product in demand to build the portfolio."

Asset Quality & Credit Costs

• Credit costs normalized sharply: Credit cost fell 24% YoY and 62% QoQ to ₹17.5 crores, as Q1 FY25 had carried a one-off technical write-off in the construction finance book.
• Stage 3 ratios improved across the board: Gross Stage 3 declined to 1.6% from 2.0% in Q1, and Net Stage 3 to 1.0% from 1.2%; the company also sold about ₹71 crores of GNPA to an ARC at 90% of value.
• Housing finance delinquency is stable: Management expects GNPA and NNPA to remain stable in the price segment where Capri operates.
• MSME delinquency is being addressed structurally: The restructured pool has been reduced from over ₹200 crores to about ₹103 crores, and a portion was transferred to an ARC; combined with renewed branch growth, this is expected to bring the segment back.

Profitability, Efficiency & ROE

• Cost-to-income improved 620 bps from Q4 FY24: The ratio fell to 64.3% from 70.5% as branch expansion shifted focus toward efficiency and productivity; further benefits are expected as operating leverage kicks in.
• ROE is on a guided climb toward mid-teens: Management expects to be in the close vicinity of 11% this year and to achieve a mid-teen ROE by March 2027, with quarter-on-quarter improvement in operating costs and ROE.
• Co-lending is the ROE lever: About 20% plus of the portfolio will remain under co-lending arrangements, which require lower equity capital allocation and are highly ROE accretive; lending partners have separate co-lending lines for gold specifically.
• Technology investment is the efficiency backbone: A team of 125 engineers and 25 data scientists is building in-house LOS, LMS, and AI/ML-driven collection dashboards; a data-science-driven BRE scorecard for underwriting is going live to improve log-in-to-sanction ratios and enable risk-based pricing.

Technology, AI & Compliance

• AI is being deployed across the stack: Launches include Data Genie for real-time insights, the AI-Dost chatbot for multilingual 24/7 customer support, HireRight AI for recruitment, and an AI-driven call centre with in-house voice-to-text conversion for Indian languages.
• A new LOS went live and stabilized: The Loan Origination System launched in April, took three months to stabilize, and was fully business-as-usual in Q2 with no disruption.
• Compliance infrastructure is being fortified: The team was strengthened with senior hires, a Big 4 consulting firm was engaged to build an automated compliance tracking tool, and an outside firm was brought in for compliance improvement, all under a board-mandated "compliance first, business later" policy.

Sharma: "in our Board of Director and the Chairman always want us to follow the compliance first and business later policy."

Guidance & Commitments

Key Metrics