Capri Global Capital Ltd Q2 FY2026 Concall Summary

Key Takeaways

• Growth guidance raised to 35% CAGR: AUM grew 40% in H1, prompting management to lift its annual growth target from 30% to 35% and set a FY26 AUM target of ~₹32,000 crores.
• Gold loan AUM crossed ₹10,000 crores: The segment grew 58% YoY, driven by 21 new branches, 55% repeat customers, and a fully digitized journey with sub-30-minute TAT.
• Asset quality improved sharply: Gross Stage 3 fell 39 bps QoQ to 1.3%, helped by a ₹79 crore MSME portfolio sale to an ARC, while impairment costs dropped to ₹31 crores.
• Return ratios are scaling: ROAE reached 14.4% and ROAA hit 4% this quarter, with management targeting 16–18% ROE and 4–4.5% ROA by FY28.
• What to watch next quarter: Whether the 35% growth pace sustains, the trajectory of cost of funds as MCLR resets flow through, and any early signals from the new Micro LAP geographies in Tamil Nadu and Karnataka.

Growth Engine & Segment Mix

• Gold loan is the lead horse: AUM crossed ₹10,000 crores with 58% YoY growth, supported by 21 new branches in MP, Gujarat, UP and a new entry into Bihar; branch productivity rose to ₹12.4 crores average AUM per branch and employee productivity improved from ₹1.4 crores to ₹2.1 crores YoY.
• Repeat behavior anchors the book: 55% of gold loan customers are repeat borrowers, up from 50%, and top-up loans are a regular feature; customers typically borrow small amounts for 3–6 months for seasonal needs where absolute interest cost is low relative to returns.
• Housing and construction finance are scaling fast: Housing AUM grew 37% YoY to ₹5,972 crores on resilient affordable demand, while construction finance grew 48% YoY to ₹4,969 crores across 286 active residential projects with an average outstanding ticket of just ₹17 crores.
• MSME is the deliberate build: AUM grew 18% YoY to ₹5,602 crores with 13 new branches in UP and Micro LAP now at ₹543 crores across 137 locations; new entries into Tamil Nadu and Karnataka are underway but the immediate focus is on sales productivity and operational efficiency before further expansion.
• Segment mix is now planned: Next year’s plan targets 40% gold loans, with MSME, affordable housing and construction finance at ~20% each, with 2–3% variance possible.

Sharma: "Most of the people borrow for 3 months to 4 months. So they do not calculate the rate of interest. It is the availability of money without going through a complex credit sanction requirement, within 30 minutes, that makes them avail this loan."

Profitability & Margins

• NII surged on volume and pricing: NII reached ₹480 crores, up 57% YoY and 15% QoQ, supported by loan book expansion, improved pricing and enhanced margin efficiency.
• Yield and spreads improved: Yield on advances rose to 16.5% and spreads to 6.9%, a 50 bps YoY improvement that was broad-based across MSME, gold loans and affordable housing.
• Non-interest income nearly doubled: Fee income grew 97% YoY to ₹203 crores, now 29.8% of net total income, driven by insurance distribution commissions and co-lending fee income of ₹81 crores.
• Cost-to-income improved sharply: The ratio fell to 49% from 64% YoY, driven by a maturing branch network, rising productivity and strong operating leverage; the ratio was stable QoQ when adjusted for a ₹15 crore one-off benefit in Q1.
• Opex rose on people investment: Operating expenses grew 29% YoY and 25% QoQ, with the sequential rise driven by salary increments, bonuses, incentive payouts and the absence of the prior quarter’s one-off benefit; adjusted QoQ increase was ~18%.
• Spread expansion is expected to continue: Management expects spreads to improve QoQ to ~7.2% due to cost of fund reduction and operational efficiency, with yield on advances improving ~25 bps from gold loans, Micro LAP and affordable housing.

Asset Quality & Credit Cost

• Stage 3 declined materially: Gross Stage 3 fell 39 bps QoQ to 1.3% and Net Stage 3 fell 26 bps to 0.7%, while Stage 2 was flat QoQ; impairment cost dropped to ₹31 crores from ₹81 crores in Q1.
• ARC sale cleaned the MSME book: The reduction was largely due to a ₹79 crore MSME portfolio sale to an ARC, targeting loans where property value was below ₹20 lakhs and SARFAESI benefits did not apply; MSME gross NPA fell from 4.3% to 3.1% QoQ.
• Credit cost guidance revised upward on conservatism: Management now projects credit costs of 80–90 bps for planning purposes, up from 70 bps, attributing the change purely to conservatism and Micro LAP portfolio growth rather than any ground-level deterioration.
• Construction finance remains stable: The book’s granularity, small ticket sizes, escrow-based cash flow management and focus on residential projects with construction-linked disbursement underpin its stability.

Sharma: "I do not think that our credit cost will go up more than 1% ever."

Funding, Liquidity & Capital

• Capital position is fortress-grade: Post the ₹2,000 crore equity infusion in Q1, CAR stands at 32.9% for CGCL and 26.1% for CGHFL, with leverage at just 2.5x and liquidity over ₹3,200 crores.
• Cost of funds is on a downward path: Current cost of funds is ~9.6%; management expects a 30–40 bps decline gradually over the next 2–3 quarters, driven by MCLR reductions on annual resets, diversification and commercial paper mix, not by expected further RBI rate cuts.
• Maiden public NCD was oversubscribed: The ₹400 crore issuance carried a coupon up to 9.7% with tenure up to 4 years and paves the way for larger issuances and further borrowing diversification.
• Co-lending is a capital-efficient tool: Co-lending income reached ₹81 crores; management intends to keep the co-lending mix at ~20%, plus or minus 2–3%, and expects no impact from the shift to new common CLM guidelines.

Sharma: "Regardless the spread, co-lending remains the same. It is just a tool to use your treasury in a manner that you need not to provide any capital and credit line. ... So while we get the spread on the entire 100%, capital is required only for 20%. So it is a very capital-efficient model without compromising any margins or the spread."

Distribution & Technology

• Branch network is expanding with discipline: 86 branches were added this quarter; ~200 more are planned across Micro LAP, housing and gold loan over the next two quarters, with gold loan branches targeted at 995 by March FY26.
• New geographies are being seeded: Gold loan entered Bihar, Micro LAP entered Tamil Nadu and Karnataka, and housing finance entered Telangana with 4 branches, positioning Capri as a national player.
• Technology spend is focused on AI and efficiency: ₹29 crores was invested in AI-driven initiatives including a digital auction platform for higher realization on repossessed properties, AI-based bureau analytics for credit decisions, real-time portfolio monitoring, and the Capri Communication Portal omnichannel platform.
• Insurance distribution is a new fee engine: Net fee income from insurance was ₹28 crores; new products include Capri Jewel (jewelry insurance) and group personal accident cover, distributed through the newly launched Capri Care digital platform.

Guidance & Commitments

Key Metrics