Capri Global Capital Ltd Q1 FY2026 Concall Summary

Key Takeaways

• 42% AUM growth, 30% guidance held: Consolidated AUM surged 42% YoY, but management explicitly declined to raise its 30% growth target for the year, signaling either conservatism or capacity constraints.
• Credit cost spiked on one-offs and MSME stress: Credit cost jumped to INR81 crores (1.6% of loans) from INR18 crores in Q4, driven by a single construction finance NPA, MSME slippages in Madhya Pradesh, and a car loan provision. Management insists gross NPA will stay below 2%.
• Gold loans are the margin engine: Gold loan AUM rose 69% YoY, now 37-40% of the mix, with 737 of 821 branches above breakeven. The high-yield product is pulling up spreads and pulling down the cost-to-income ratio.
• Cost-to-income fell sharply, partly one-off: Reported ratio dropped to 46% from 55% QoQ; adjusted for a INR15 crores perquisite provision reversal, it was 49%. Branch maturation and AI tools drove the underlying improvement.
• What to watch next quarter: Whether the September technology rollout arrests Micro LAP delinquency, the outcome of the credit rating upgrade exercise, and if MSME slippages in Madhya Pradesh stabilize or spread.

Asset Quality: The Spike and the Cushion

• Credit cost breakdown: INR55 crores from higher ECL provisions (Stage 1 up INR24 crores, Stage 2 migration in MSME and housing added INR22 crores), INR8 crores on a single INR16-crore construction finance account slipping to NPA, and INR11 crores one-off on car loan receivables, partly offset by INR7 crores in recoveries.
• MSME stress is localized, not systemic: Management flagged slippages in MSME, particularly from Madhya Pradesh, where disbursements are now being turned down. The portfolio is 100% collateralized with a 55% LTV cushion, unlike unsecured business loans elsewhere.
• Micro LAP delinquency rising, growth throttled: The small-ticket secured business loan book is seeing higher delinquency. The company is going slow until its full technology stack with risk triggers rolls out by end of September. Legal recourse for sub-10-lakh tickets relies on negotiation and Section 138, not SARFAESI.
• Construction finance: one-off, not trend: Out of 280 active projects, one or two slip into NPA each year. The RERA-designated account structure and SARFAESI takeover capability give management confidence in full recovery.
• Seasonality acknowledged: Q1 typically sees a rise in delinquency, and this quarter’s credit cost was the highest in several quarters.

Sharma: "So as a company, we have given the guidance that our gross NPA will never cross 2%. Net NPA will never cross 1.2%. I think we intend to maintain within that range."

Gold Loans: The Growth and Margin Engine

• Scale and breakeven: Gold loan AUM reached INR9,105 crores across 821 specialized branches, with average AUM per branch of INR11.1 crores. 737 branches have crossed the INR5-crore breakeven threshold, meaning the infrastructure cost is already absorbed and incremental AUM drops straight to the bottom line.
• Customer stickiness and digitization: 55% of borrowers are repeat customers. The fully digitized loan journey and AI-enabled security system support both rapid turnaround and asset quality.
• Geographic expansion coming: The company will enter Tamil Nadu, Andhra, Karnataka and Odisha in the second half, with branches rolling out in Q4. This opens a large new addressable market for a product already proven in the existing footprint.
• Mix shift lifts spreads: Gold loan composition is expected to add another 3-4 percentage points to the portfolio mix, and management sees room for spreads to improve slightly from the current 7% as this high-yield product grows.

Operating Leverage and the Cost Story

• Cost-to-income trajectory: The adjusted 49% ratio (versus 55% in Q4 and 65% a year ago) reflects maturing branches, rising productivity from AI-enabled tools, and increasing digital enablement. Management targets ~50% for the full year, or 46-47% excluding the impact of 200 planned branch additions.
• PPOP surge proves the model: Pre-provision operating profit more than doubled YoY to INR312 crores, demonstrating that revenue growth is outrunning cost growth even as the branch network expands.
• Technology spend is permanent, not project-based: INR26 crores was spent last quarter on technology and data science, with active hiring on the generative AI side. Management calls this a permanent futuristic investment aimed at driving productivity and reducing cost-to-income further.
• Branch addition pace: 200-250 branches will be added this year across gold, MSME and home loan segments, with a similar pace next year, targeting 700-800 new branches over three years.

Fee Income and New Businesses

• Non-interest income diversification: Fee income reached INR166 crores (28.5% of net total income), up 53% YoY. Car loan distribution originated INR2,651 crores across 12 partner banks, insurance distribution generated INR28 crores net fee income across 18 insurers, and co-lending income stood at INR73 crores.
• Fee income guidance: Management intends to maintain fee income in the 25-27% range of net total income through the year, with quarterly variation of up to 2%.
• Two new subsidiaries incorporated: One for investment banking and debt capital market activities, another for securities sales and distribution, institutional debt placement, an online bond platform, and exchange trading. The team starts at ~10 people and will grow. Both are expected to be profit-accretive from year one.
• Co-lending AUM target: Co-lending AUM, which grew 64% YoY, is intended to stay in the 18-20% range of total AUM.

Funding, Capital and Return Ratios

• QIP strengthens the balance sheet: The INR2,000 crores QIP, the first in over a decade, drew strong institutional demand and provides capital to accelerate growth across lending and new verticals.
• Cost of funds set to decline: Incremental borrowing costs have already dropped 20-25 bps. Management expects a further 25 bps reduction if the credit rating upgrade materializes by mid-September, plus 30-40 bps benefit from MCLR resets as banks pass through rate cuts. The overall interest rate environment is expected to remain soft.
• Liability strategy shifting: Over the next 12 months, the company will rely more on commercial paper and NCD issuance at lower cost, and may shift some loans to a fixed-rate basis. A public NCD issuance of up to INR1,000 crores has been approved.
• Return ratio guidance: ROAE of 13.5-14% and ROAA not less than 3.5% this year, improving to ~4% ROAA and 16-17% ROAE next year. Medium-term target is 16-18% ROAE and 4-4.5% ROAA.

Sharma: "Your right to win has to be how you use your technology automation and ability to turn around the sanction faster and do a better customer service in terms of how you handle them, how seamless your journey is, how less the paperwork you seek without compromising on the asset quality."

Segment Mix and Medium-Term Architecture

• Portfolio composition target: Gold loans 37-40%, MSME 20-22%, housing 20-22%, construction finance 17-18%. This mix balances high-yield gold with secured MSME and housing, while construction finance adds granular project exposure.
• Housing finance demand resilient: Driven by urbanization, income formalization, housing upgrades, and the Pradhan Mantri Awas Yojana subsidy scheme. The affordable segment remains stable with no asset quality concerns flagged.
• Construction finance granularity: INR4,521 crores across 280 active residential projects, average sanction ticket INR41 crores, focused on mid-sized developers in metro and Tier 1 cities. Demand in affordable mid-income housing remains strong.
• 30% growth for three years: Management is confident of sustaining 30% annual AUM growth to reach INR50,000 crores by FY28, anchored in a fully collateralized portfolio that gives multiple recovery avenues.

Sharma: "I think our confidence of 30% growth comes that we are -- as you rightly said, we are in a collateralized portfolio. So, we have ability to recover by various means, including disposing of the property, which is mortgaged to us."

Guidance & Commitments

Key Metrics