Capri Global Capital Ltd Q4 FY2026 Concall Summary

Key Takeaways

• Gold loan engine delivered a breakout quarter: AUM surged 111% YoY to INR16,965 crores, branch productivity rose, and 90% of branches are now above breakeven, establishing gold as the dominant growth driver.
• Asset quality improved sharply across the board: Gross NPA fell 61 bps QoQ to 0.9%, with Stage 2 assets shrinking by INR100 crores, driven by strong collections and a few large construction finance account resolutions.
• Operating leverage is kicking in meaningfully: Cost-to-income compressed to 49.4% from 54.8% a year ago, as AUM grew 60% YoY while headcount rose only 19%, a gap management credits to its proprietary AI and technology stack.
• Co-lending faces a near-term air pocket: New RBI guidelines effective January 2026 will cause a temporary volume slowdown for a couple of quarters, though management expects full resumption from the September quarter.
• What to watch next quarter: Whether co-lending volumes actually resume in September as guided, the pace of gold loan branch additions against the 350-branch target, and any movement on the international bond issuance once hedging costs settle.

Gold Loan: The Growth Engine

• Scale and momentum: Gold loan AUM reached INR16,965 crores, up 33% QoQ and 111% YoY, now 46% of total AUM, with management targeting roughly 50% as more branches come online.
• Branch economics are working: 89 new branches added in high-potential Southern and Eastern regions lifted AUM per branch to INR17 crores, well above the INR5 crore breakeven threshold, while employee productivity more than doubled to INR3.1 crores AUM per employee.
• Yield compression is strategic, not accidental: Gold loan yields dropped 90 bps sequentially because the company deliberately routed more volume through co-lending, accepting lower yields to meet bank partner criteria and open new markets. Management argues the trade is accretive to overall profitability and contribution per branch.
• Gold price risk is managed through LTV discipline: If gold prices fall, customers must either top up cash or pledge additional gold to restore the 75% LTV norm, a mechanism management described as standard practice across the industry.

Rajesh Sharma: "meeting those banks criteria and some of the customers whom we would not otherwise lend, we have decided to lend as part of the co-lending scheme. And overall, it is accretive to our overall profitability and contribution per branch."

Asset Quality: A Clean Quarter

• Headline improvement was broad-based: Gross NPA declined to 0.9% (down 61 bps QoQ) and net Stage 3 to 0.5% (down 35 bps), while Gross Stage 2 improved to 2.8% from 4%, driven by a INR100 crore reduction across MSME, gold and construction finance.
• Construction finance drove the Stage 2 reversal: INR53 crores of the INR100 crore Stage 2 reduction came from construction finance, attributed to strong collection efforts and the rollback of three accounts.
• Impairment costs carried a prudent overlay: Total impairment of INR54 crores included INR16 crores in management overlay for evolving macroeconomic conditions, a Board-guided buffer. Excluding that, provisions came predominantly from the new loan book, not from slippage.
• Collections are now technology-led: Management credited AI-enabled videos, right hiring, right training and customer engagement for the collection efficiency gains that drove the NPA improvement.

Co-lending: Growth Engine with a Near-Term Pause

• Scale is material and growing: Co-lending AUM surged 91% YoY to INR7,783 crores, now 21% of total AUM, with co-lending and direct assignment income at INR97 crores, up 76% YoY.
• New RBI guidelines create a temporary reset: Guidelines effective January 2026 mandate interest accrued on moratorium loans be included in LTV and require mandatory income assessment for loans above INR250,000. Management expects a slowdown for a couple of quarters as existing contracts expire and partners migrate, with full volume resuming from the September quarter.
• Direct assignment is the next lever: The company plans to explore direct assignment alongside co-lending, citing good demand from partner banks given the PSL nature of the loan book and the gold portfolio.
• Co-lending income is expected to stay flat year-on-year, with direct assignment compensating for any co-lending softness.

Technology as Moat

• Architecture claim is ambitious: Management described a real-time event-driven architecture where every customer interaction across sourcing, underwriting, servicing and collection is captured and converted into decision-grade intelligence within an in-house lending ecosystem.
• Proprietary small language model in production: The company built and deployed a domain-trained SSLM for financial services, already live for collection communication across voice and messaging channels.
• Operating leverage is the proof point: AUM grew 60% YoY and disbursements 83% YoY while headcount grew only 19%, compressing cost-to-income from 60% to 49% over the year, a gap management attributes directly to technology and AI replacing linear headcount growth.

Rajesh Sharma: "Capri today operates on real-time event-driven architecture where every customer interaction across sourcing, underwriting, servicing and collection is captured within our in-house lending ecosystem and instantly converted into decision-grade intelligence."

Diversification: Insurance, Capital Markets, and Car Loans

• Insurance distribution is scaling: Non-interest income grew 36% YoY to INR247 crores, with insurance contributing INR65 crores in Q4 and INR153 crores for the full year, aided by the Capri Care digital platform launched in Q3. Growth is expected to track AUM at 25-30%.
• Capital markets vertical targets negative carry: The company decided to start a fixed income vertical to reduce the 2-3% negative carry on treasury holdings in debt mutual funds. A license is expected by end of June, with a net fee income target of INR20-25 crores and an indirect bottom-line contribution of roughly INR25 crores from reducing negative carry on an INR600-800 crore retained book.
• Car loans remain a distribution play: Origination grew 13% YoY to INR11,910 crores through 12-plus partner institutions. The strategy is shifting toward margin improvement over volume, with used car loans being added this year and a profit target of INR20 crores for the car loan entity next year.
• International bond issuance is on hold: The company secured international ratings (Fitch BB-, Moody's Ba3) and intends to access the international bond market, but is waiting for hedging costs to settle down amid the West Asia crisis and macroeconomic environment, hoping to act in the next 2-4 months.

Rajesh Sharma: "we are a little cost conscious in terms of our cost of funds. And currently, because of the macroeconomic environment and West Asia crisis, the hedging cost has substantially gone up. So we are waiting that to settle down and hoping that happens in the next 2 to 3 to 4 months, whenever it happens, we intend to access the market depending upon the underlying situation."

Funding, Margins, and Capital

• Cost of funds is trending down: Cost of funds fell 18-20 bps in the quarter due to a shift in borrowing mix toward debentures and commercial paper. Management expects a further 10-20 bps reduction this year, with a conservative exit cost of funds at 9%.
• Credit rating upgrade is the next catalyst: A rating upgrade expected in the next 6-9 months could reduce cost of funds by another 20 bps.
• Credit costs are guided at 0.7% sustainably, per management, though an analyst's math suggested 0.6% was possible and management did not confirm the lower figure.
• Capital allocation favors asset-light routes: The company will increase direct assignment and co-lending to conserve capital, and will raise Tier 2 capital over 18-24 months if required.
• Second public NCD issuance closed at INR489 crores with an average tenure of 4 years, and 15 new lender relationships were added during the year, taking active relationships to 35-plus.

Guidance & Commitments

Key Metrics