Capri Global Capital Ltd (CGCL) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day and welcome to the Capri Global Capital Limited Q2 FY24 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes.
Moderator: Ladies and gentlemen, good day and welcome to Capri Global Capital Limited Q2 and H1 FY27 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note, this conference is being recorded. I now hand the conference over to Ms. Shweta. Thank you and over to you, ma'am.
Shweta (Capri Global Capital Limited): Thank you. Good evening, everyone, and a warm welcome to Q2 and H1 FY27 earnings conference call for Capri Global Capital Limited. This is Shweta, Senior Vice President, Corporate Finance and Investor Relations. Before we begin, let me read out a brief disclaimer for today's call. The discussion around today's call regarding Capri Global Capital Limited's earnings performance is based on judgments derived from results declared and information on business opportunities available to company at this time. The company's performance is subject to risk, uncertainties and assumptions that could cause results to differ in future. In that context, participants on today's call are advised to consider the same while interpreting the results. The complete disclosure is available on slide 65 of the earnings presentation. Participants are requested to kindly take the note of the same. Format of today's call will be opening remarks by the management team followed by Q&A. Let me now introduce the management team from Cap- Capri Global Capital present on the call today. With us we have Mr. Rajesh Sharma, Managing Director and Promoter, Ms. Divya Sutar, President and Executive Director, Business Strategy, Mr. Kishore Lodha, Chief Financial Officer and Mr. Sanjiv Shrivastava, Chief Risk Officer. I would now request our Managing Director, Mr. Rajesh Sharma
Shweta (Capri Global Capital Limited): present his opening remarks on the results. Over to you, sir.
Rajesh Sharma (Capri Global Capital Limited): Yeah. Thank you. Good evening, everyone. I hope you all are doing well. We announced our financial results for the second quarter of FY '27 on 27th October. I trust you had had the opportunity to go through the earnings presentation, which is also available on our website. Before I move on to the financial and operational highlights, I would like to touch upon the broader operating environment and key developments during the quarter. Global energy shock, aggressive monetary tightening and surging domestic inflation are the critical macroeconomic headwinds that led to overall environment being soft for the quarter. Amid this soft macro environment, Capri Global delivered strong growth and profitability in Q2 FY '27, successfully navigating challenging macros marked by rising funding costs, global monetary tightening and a 25 basis RBI repo rate hike. Yet, I am delighted to share that Capri Global raised $300 million through its GMTN program during H1 FY '27 via a maiden U.S. dollar senior secured bond issue. As part of our liability diversification journey, we further raised INR 500 crore via commercial paper in addition to INR 1,271 crore raised in Q1 FY '27 through a combination of NCD and CP. We continue to diversify our funding structure to capture global growth opportunities, optimize capital efficiency, and hedge against rising domestic interest rates. Moreover, as part of our branch network expansion journey, we added 176 branches for the quarter gone by with continued focus on expanding digital journey, embedding AI into customer and collection operations, and strengthening the platform that supports the lending cycle. Last quarter, we demonstrated our capacity to scale AI. This quarter, the scale has translated into measurable customer adoption and structural cost efficiencies. Besides establishing firmly our footprint in South with two brand campaigns starring acclaimed actor and entrepreneur, Nayanthara, as our brand ambassador helped us in campaign reach 141 million-plus, positive visibility impact of 93.8%, and gold loan search growth of 173% plus. Our ESG rating continues to soar higher as we achieved a CRISIL ESG score of 72, placing it in the leadership category. With this backdrop, I'm pleased to say that Capri Global delivered strong quarterly performance in Q2 FY '27, continuing its growth momentum and maintaining asset quality while delivering highest-ever quarterly profit of INR 418 crore, a 77% increase year-on-year, and H1 FY '27 profit of INR 772 crore, almost double from the last year. The cost-to-income ratio improved to 42.6% from 48.1% in H1 FY '27, reflecting stronger operating leverage. H1 FY '27 ROE stood at 20.4%, reinforcing the company's progress on sustainable profitability. Now coming to our detailed business and earning performance during this quarter. We continued our strong momentum across all our lending businesses in Q2 FY '27. Our consolidated AUM stood at INR 43,878 crores, reflecting a robust 62% year-on-year growth and 9% quarter-on-quarter growth. Gold loan grew an impressive 102% year-on-year, and MSME grew at healthy 25% year-on-year, while housing loan rose 39% year-on-year. Disbursements for the quarter rose 49% year-on-year to INR 13,309 crore on account of growing customer base and widening distribution network. Our growth remains granular, diversified, and retail-led, with our customer base now exceeding 8 lakhs. For our gold loan business, we delivered a strong and well-balanced performance, in line with strategic objective of growth driven by branch expansion while maintaining focus on effective risk management. With a net addition of 176 branches during the quarter, our overall branch network stood at 1,609 branches as of September 20 '26, with 1,154 branches dedicated towards gold loan. While we entrench in southern belt through
Rajesh Sharma (Capri Global Capital Limited): gold loan in Andhra Pradesh and Telangana markets. The north and central part of Uttar Pradesh, Madhya Pradesh and Rajasthan also saw strengthening of gold loan branch footprint in Q2 FY 27. AUM saw robust growth to Rs. 21,000 crore, a sequential increase of 10% quarter-on-quarter led by steady customer demand and productivity gains. Our aggregate branch productivity continued to remain resilient and now stands at Rs. 18.2 crores per branch versus Rs. 19.2 crore per branch, which is function of rapid network expansion and addition of new branches during the quarter and the natural time lag for new branches to achieve full operational velocity. Alongside increased employee base in gold loan business, the employee productivity from Rs. 1.8 crore a year earlier to now Rs. 3.4 crores. This steady productivity gains and the fact that with over 86% branchy network have already making profits, continue to support Capris's gold loan book expansion. Collateral weight in custody increased from 16 tonnes a year ago to 21 tonnes in Q2 FY 27, an increase of 28% year-on-year and 4% quarter-on-quarter, and number of active customers increased by 44% year-on-year and 8% quarter-on-quarter. Strategic branch expansion that stands supportive volume growth and improving branch productivity at existing locations contribute to sustaining strong book growth momentum despite underlying market volatility. Importantly, LTV on fresh disbursement during the quarter remained disciplined at 73.8% in line with the increased RBI's prescribed limit for small ticket loans and permissible limit for income-generating loans. On the asset quality front, stage two spike remains a blip as our collateral cover remains highly resilient while we vigorously managing overdue account through targeted collection strategies and timely auctions. Capri Global maintain stringent auction policy versus competition to curb loss in the event of acute price volatility. Because the gold loan portfolio is predominantly granular and short-term, Capri's digital-first initiative act as a continuous feedback loop to catch credit deterioration before it turns into bad loans. Driven by data analytics, Capri's gold loan business utilizes automated LTV tracking, real-time LTV breach alerts and rapid recovery mechanisms to minimize actual losses and establish a clear competitive edge. Overall, Q2 marked strong performance for gold loan business, combining growth through capitalizing strong branch expansion alongside maintaining discipline on asset quality amid gold price volatility. Our branch expansion plan for the year is underway, and we expect to close the financial year with approximately 1500 branches, reflecting our commitment to expand our presence. Our MSME AUM grew to Rs. 7016 crores, up 25% year-on-year, and disbursement stood at Rs. 560 crore for Q2 FY 27, up 36% year-on-year, primarily attributable to the new geography foray, namely in Delhi, Uttar Pradesh, Mumbai, and Pune. Moreover, our expansion into new geographies focuses heavily on direct sourcing, which has driven a higher revenue contribution from our internal direct team. Within MSME, our micro LAP business continued to gain traction, with AUM rising to Rs. 929 crore as at end of Q2 FY 27. This vertical enable us to serve emerging self-employed borrowers with smaller ticket-size requirement. In this segment, we have implemented BRE gating criteria to filter out unsuitable customer prospects right from the start. Said that, while exercising caution in sourcing, we are refining our sourcing strategy to target higher-tier profiles and increase the average ticket size, thereby protectively elevating overall input quality. In Q2 FY 27, asset quality remained steady at 3.1%, similar level of Q1, supported by strategy focus on middle and higher-level customer segments across ticket sizes and the tech initiative like the new risk panel. Moving beyond traditional borrower profiles, the platform synthesized location, industry sourcing, and employee performance metrics into a unified risk assessment. Our housing AUM stood at Rs. 8325 crores, delivering a year-on-year growth of 39%, anchored by robust customer retention, disciplined portfolio management, and the progressive scaling of the South India franchise. While focusing on current network productivity, we intend to enhance presence in the southern states, particularly Tamil Nadu and Andhra Pradesh, where we see attractive opportunities for affordable housing finance. From a product and customer
Rajesh Sharma (Capri Global Capital Limited): perspective, we will continue to focus on smaller ticket loans and higher-yielding business with increased emphasis on self-employed non-professional customers, which now contributes 76% to our AUM. Sequential asset quality has held steady with GNPA standing at 1.2% in Q2 FY '27, reflecting our consistent adherence to a disciplined credit and risk management framework. Our construction finance AUM saw a healthy growth of 51% year-on-year to Rs. 7,503 crores spread across 304 active projects with an average sanctioned ticket size of 48 crores and outstanding portfolio ticket size of 25 crores. The strong growth for the quarter comes ahead of festive demand and healthy traction in residential sales. Our portfolio remains geographically well-diversified, reflecting a strategic focus on mid-sized, small developers across metro and tier 1 cities. This footprint expanded further in Q2 with our maiden foray into Tamil Nadu metro market. Our construction finance book remains granular, with an emphasis upon disciplined underwriting through rigorous due diligence and escrow-based cash flow management, ensuring a risk-containment approach. Q2 FY '27 saw sharp improvement in asset quality with negligible NPA reported for the quarter, led by recoveries from written-off accounts to the tune of about 8.5 crore, and we further expect recoveries over the next 12 months. Our total branch network expanded to 1,609 locations in Q2 FY '27, with a net addition of 176 branches during the quarter. We are steadily expanding our network and geographical reach to establish a large scale, pan-India retail lending footprint. Now, coming to earning performance. Let me now provide an update. Our blended yields and spreads on net advances increased in the quarter to 17.5% and 8.3% respectively, driven by increasing share of high yield products and leveraging competitive cost of funds. Our net interest income for Q2 FY '27 stood at Rs. 812 crores, up 69% year-on-year, driven by strong loan book expansion. In line with our focus on building diversified and resilient earning profile, we continue to strengthen our non- non-interest income stream in Q2 FY '27, reinforcing our strategy of generating recurring quality fee income. Non-interest income grew 34% year-on-year to Rs. 273 crores, contributing 25% to our net total income for the quarter. This strong increase was largely driven by growth in commission on insurance distribution and treasury gains. In our insurance distribution business, we generated net fee income of Rs. 51 crores during the quarter. On the IRDAI consultation paper, based on our review of the consultation paper, we expect the primary impact to be in the areas of distributor governance, sales monitoring, customer disclosure, audit trails, policy tagging, reporting and compliance oversight, rather than any fundamental change in the insurance distribution model. We have initiated a gap assessment covering sales journey, distribution management system, customer consent capture, policy issuance workflows, training, certification, record management, information system and regulatory reporting. Also, Capri Global leveraged a tech-driven distribution model to maintain efficiency. It's proprietary insurance tech platform utilized a data analytics, AI and digital channels, such as apps and call centers, to structurally lower customer acquisition costs. This advanced technology architecture will ensure seamless operation transition across products and channels, fully aligning with the proposed regulation. Moreover, compared to peer NBFCs that rely heavily on insurance cross-selling for pre-tax profit, Capri Global's core earnings remain highly anchored to retail loan book like gold loan, housing finance, MSME, co-lending. Therefore, if implemented, the new draft guidelines, while FY '27 may not likely see much impact, we expect return on average equity for FY '28 and '29 to decline by about 1% for consolidated level. Also, the consultation paper puts forth a framework that could allow higher remuneration for distribution in the underserved market, including rural areas, smaller towns and smaller cities, thereby incentivizing distributors where customer access is limited. Capri Global could be a potential beneficiary here. Our co-lending AUM surged 60% year-on-year and 12% quarter-on-quarter to Rs. 9,083 crores rupees, now accounting for 21% of total AUM, reflecting our strategy of capital efficient growth. As you would be aware, new co-lending guidelines have come into effect from 1st Jan 2026, and as per that, industry will start already started moving to the new CLA guidelines. We've
Rajesh Sharma (Capri Global Capital Limited): existing contract expired, over half of the number of partner bank have already transitioned to the new CLA guidelines, while such a transition may cause a temporary softness in disbursement in the co-lending mode. Advanced technology integration and stronger bank partnership have ensured that we are able to maintain our 21% share despite these changes. Also, the near-term impact is expected to be offset by rising direct assignment arrangement, with the latter now contributing 28% to our co-lending AUM. Partner banks continue to show strong demand for these arrangements, attracted by their priority sector lending compliance over loan book and gold portfolio. Our co-lending and DA income for the quarter stood at ₹72 crore, up 11% quarter-on-quarter, driven by deeper engagement with partner banks. Our car loan distribution business maintained steady momentum, with originations of ₹3,601 crore in Q2 FY '27, up 27% year-on-year. With a growing footprint and deep relationship across 13 partner banks and financial institutions, we have built a scalable platform with pan-India presence of 821 locations with potential to monetize further distributor and other products. On the expenses front, our operating expenses increased 7% quarter-on-quarter. This was mainly driven by net addition of 1,477 on account of higher branch additions and strategic network expansion during the quarter. Yet the cost-to-income ratio improved to 41% in Q2 FY '27 from 44% in Q1 FY '27 and 49% in Q2 FY '26, reflecting our continued focus on operating efficiency. This sharp improvement signifies the benefit of investment in technology, a maturing branch network, rising productivity and improving operating leverage across our business. As a result of margin expansion, operational efficiency improvement, and strong traction in fee income, our pre-provision operating profit surged 84% year-on-year to ₹636 crore for the quarter. Further, we continued our strong profitability momentum in Q2 FY '27, delivering a robust profit after tax of ₹418 crore, up 77% year-on-year. Our return ratio considerably improved during Q1 FY '27, with return on average equity at 21.6% versus 14.4% for the previous year and return on average assets at 4.4% for the year versus 4% for the previous year. Now coming to asset quality, we saw improvement in asset quality across each of our business segments, except gold loan. Our gross Stage 2 assets spiked by ₹1,266 crore, which is entirely attributable to gold loan Stage 2 spiked by similar level, and are temporary in nature, also given the high collateralized value of the underlying assets and focus on proactive collection. Following the RBI's revised gold loan guidelines with effect from April 2026, which require accrued interest to be factored into LTV ceiling for bullet loans, most major gold loan lenders moved towards shorter tenor products. We similarly introduced monthly and bi-monthly repayment frequency loans in Q1 FY '27. These shorter cycle led to technical delinquencies driven by repayment convenience rather than borrower ability or willingness to pay. Shorter loans simply tripped overdue thresholds sooner. This was a widely reported industry experience. We have already discontinued these schemes and reverted to standard longer tenor structures. The increase in reported GNPA in gold loan particularly reflects product-level repayment dynamics and our calibrated approach to collateral enforcement rather than a corresponding increase in expected credit losses. Importantly, the underlying collateral coverage and historically demonstrated recovery performance continued to provide substantial protection against principal loss. As part of our transition to the revised regulatory framework, we introduced certain shorter tenor repayment structures during Q1 FY '27. While these products were designed to facilitate more frequent repayment disciplines, the change in repaying frequency created some friction for customers accustomed to conventional bullet repayment structures resulting in high technical delinquencies. On gross Stage 3 assets spiked by ₹95 crore quarter-on-quarter, mainly on account of ₹126 crore increase in gold finance segment. However, ₹45 crore were
Rajesh Sharma (Capri Global Capital Limited): on account of construction finance, slippage of Q1 wherein we recovered ₹9 crore during the quarter and expects further recoveries over next 12 months. Our consolidated gross stage three ratio spiked by 22 basis quarter on quarter to 1.2% due to spike in gold loan at around similar level. Housing loan stage three remained steady at 1.2% and construction finance stage three improved significantly dropping to 0.02% level on account of write off and recoveries as mentioned earlier. The net stage three ratio stood at about 0.8% of 22 basis sequentially is still standing amongst the top quartile in the industry. Our impairment cost for the quarter is to date ₹79 crore. This is largely attributed to the return of accounts on construction finance book and prudent management overlay and provision to account for evolving macroeconomic conditions. Our credit cost for the quarter stood at 0.8% and we expect to maintain credit cost in the range of 0.6 to 0.9% level on a sustainable basis going forward. At consolidated level our provision coverage ratio on stage three assets stand at 33.3% and our segment wise PCR also remains healthy and amongst the best in our peer group. Now coming to capital liquidity position and borrowings let me now talk about liquidity side. Our borrowing increased by 82% year on year and incremental borrowings sanctioned limits was around ₹4,428 crore. We now have 40 plus lender relationship. We also continue to diversify our borrowing mix by raising funds through other instruments such as non-convertible debentures and commercial paper. Just after the close H1 FY27, we raised ₹160 crore from non-convertible debentures besides the ₹1,271 crore raised in Q1 FY27. As a result of liability diversification and our active efforts on repricing existing borrowing, our cost of borrowing have increased only marginally quarter on quarter to 9.2%. Our balance sheet remains robust with low leverage ratio of 3.8 providing ample headroom to support growth across business segment. Our standalone capital adequacy ratio for Capri Global Capital is 22.7%. And 27.8% for Capri Global Housing Finance. Our liquidity remains comfortable with over ₹6,057 crore in cash and bank balances, investment and un-drawn credit line for the consolidated entity. On the technology front, over the years, technology at Capri has evolved from an operational enabler into a strategic differentiator. Our proprietary platform, artificial intelligence, and digital infrastructure are translating into measurable gains in productivity, credit discipline, customer engagement, and operating leverage. With our technology ecosystem predominantly developed in-house, we have the ability to continuously refine platform, recalibrate decision model, and respond rapidly to evolving portfolio behavior and business requirements. This enables us to embedded intelligence directly into operating architecture, strengthening execution efficiency, consistency, and control as we scale. During Q2 FY27, this progress was evident across digital adoption, underwriting, collections, and AI-led productivity. Digital penetration across our MSME and housing businesses continues to demonstrate sustained momentum. with 91.2% of the inbound payment received digitally in September compared to 90.7% in June. Our Capilone application facilitated over 17 lakh transaction aggregating approximately ₹594 crore during Q2, registering 47% quarter-on-quarter growth in transaction value. Monthly transaction value increased consistently to ₹219 crore in September, more than doubling ₹106 crore in January. With over 3 lakh transacting customer, the application is progressively evolving into a high engagement self-servicing transaction ecosystem. Our propriety underwriting intelligence platforms, Sentinel, continues to mature into an integrated credit decisioning ecosystem, combining rule-based automation, behavioral analytics, and portfolio informed risk intelligence. Our evolving underwriting architecture brings together decision AI, vision AI, generative AI, and emerging agentic AI capabilities to interpret financial information, validate documentation, assess borrower behavior, and identify risk exceptions. These interconnected intelligence layers progressively equipped credit managers with real-time insights, contextual risk assessment, and actionable recommendations, enabling faster, more consistent, and better informed credit decisions. During Q2, our bureau rule engine evaluated over 1.08 lakh applications registering 34% quarter-on-quarter growth with automated policy
Rajesh Sharma (Capri Global Capital Limited): decision origination. In parallel over 21,000 bank statement assessments were processed through intelligent analytical work flows. The larger transformation is from fragmented, manually intensive credit assessment towards as integrated AI-assisted decisioning architecture where human judgment is augmented by real-time intelligence. As these capabilities mature, we expect to improve underwriting productivity, accelerate decision turnarounds, strengthen portfolio selection and create a structurally more efficient credit operating model supporting disciplined credit cost and sustainable risk-adjusted returns. Our collections transformation is underpinned by Pegasus, our proprietary collections execution platform operating in conjunction with Cronos, our collection intelligence model. The integration of these capabilities is progressively transitioning our collections architecture from conventional activity-led recovery pro processes towards predictive, behaviorally segmented and intelligent orchestrated interventions. Technology enabled collections across MSME and housing increased to 34% in September compared with 32% in June. Our speech AI and conversational intelligence capabilities have already achieved meaningful productive, production scale. We are progressively extending these capabilities across our gold loan portfolio of approx approximately 8 lakh customers initially focusing on delinquency management, repayment reminders and collections. Speech intelligence interprets customer interaction, document intelligence and structures unorganized information and vision intelligence strengthen visual verification. Predictive models support risk differentiation while conversational system facilitate contextual customer engagement. Our next phase of technology development is focused on the convergence of agentic AI, intelligent work flows orchestration and ultra-low latency decisioning. We are preparing to introduce a cluster of specialized AI agents across our digital customer channels designed to provide multilingual round the clock assistance and progressively automate defined servicing work flows. In parallel, we are developing an in-house decisioning framework targeting a reduction in processing latency from seconds to milliseconds for eligible automated decisions. This convergence of real-time data, predictive intelligence and autonomous work flows execution represents an important progression towards increasingly frictionless customer journeys, faster decision-making and higher straight-through processing. Our emphasis will remain on translating these innovations into measurable improvements in transactions economics, processing productivity, decision consistency and customer experience. As we look ahead, the convergence of our technology architecture, advanced analytics and artificial intelligence is fundamentally redefining the economics of our operating model. We are progressively building an intelligence-led enterprise. The cumulative impact extends well beyond conventional productivity improvements. It creates the foundation of for sustained operational leverage, structurally lowering marginal costs and scalable growth while reinforcing the quality, consistency, resilience of our earnings. On the ESG front, we are pleased to share that Capri Global ESG practices have received recognition from leading global rating agencies. The company achieved an S&P Global ESG score of 70, ranking 20th globally and 7th in Asia Pacific, and was recognized in the S&P Global Sustainability Yearbook as the highest scoring NBFC in the its category, receiving the prestigious Industry Mover Award. Capri Global also achieved a CRISIL ESG score of 72 and NSE ESG rating of 73, placing it in the leadership category. The company has also been assessed to having low ESG risk by Morningstar Sustainalytics. Our commitment to sustainable financing is further reflected in our sustainable financing framework, which received a good rating through an independent second-party opinion by Sustainable Fitch. We have also strengthened the credibility and transparency of our ESG disclosures with BDO providing third-party assurance over scope 1, scope 2 and scope 3 emissions, including financed emissions. This represents a significant milestone particularly as relatively few NBFC have attained assurance covering this breadth of emissions disclosures. We also released the third edition of our sustainability report reflecting our continued focus on transparency and alignment with globally benchmarked standards. Together these achievements reinforce our commitment to responsible growth and the integration of sustainability considerations across the company. Before we open the floor for question and answer, let me sum up. We delivered a strong performance in Q2 FY27 with healthy AUM growth across our key lending segment supported by diversified and predominantly retail secured portfolio. Our proactive liability
Rajesh Sharma (Capri Global Capital Limited): Profitability significantly improved during the year driven by changing mix to high yield product, improving margin, strong growth in fee based income and operating leverage from existing branch network while asset quality remains under control. With a strong capital position and continued investments in technology and distribution, we are well positioned to scale efficiently and are confident of achieving our AUM target of ₹65,000 crores and by FY '28 and sustainable return on average equity of about 20% 20 to 21% and return on average asset between 4.2 to 4.7% by FY '28. We shall now be happy to take your questions.
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