Capri Global Capital Ltd Q4 FY23 Earnings Conference Call Insights

Key highlights from Capri Global Capital Ltd (CGCL) Q4 FY23 Earnings Concall

Q&A Highlights:

• [00:11:58] Mona Khetan of Dolat Capital asked about the typical tenure of the gold loan book and if there is any scope of further rise in yield. Rajesh Sharma CFO answered that CGCL’s gold loan typical tenure is about 6 months. The company expects the realized yield to be in the range of about 20.5%.

• [00:13:32] Mona Khetan at Dolat Capital also asked what percentage of gold AUM will have yields below 12%. Rajesh Sharma CFO said that the gold loan portfolio, comprising less than 12% of the total portfolio, is primarily used to cover surplus treasury funds rather than investing in a mutual fund. In certain schemes, the surplus funds can be parked at higher interest rates ranging from 11-13%.

• [00:14:21] Mona Khetan at Dolat Capital enquired what caused the sharp rise in the average home loan ticket size from INR12 lakh to INR16 lakh and what are the sourcing channels for the home loan book. Rajesh Sharma CFO replied that the home loan book is sourced through a direct sales team and the increase in the average ticket size is due to the rising cost of houses and expansion into new cities.

• [00:15:45] Hitesh Gulati with Haitong Securities queried about digital lending and new products. Rajesh Sharma CFO said that digital lending is still in the discussion phase with FinTech players. CGCL is reviewing the recent changes in RBI guidelines and will take a call once there is clarity on its repayment obligations. The company has a team in place, but it will still be at least 3-6 months before launching the service.

• [00:17:03] Hitesh Gulati of Haitong Securities asked about the target for gold loan as a percentage of AUM and the overall AUM growth target for the company. Rajesh Sharma CFO replied that overall AUM growth is expected to continue at 35-40% with adequate capital in place, and gold loan AUM is expected to reach 25% of the overall consolidated book over the next 4-5 years.

• [00:17:47] Pushkar Jain of Sequent Investments asked how competition from banks for gold loans is shaping up and what percentage of the gold loan book is yielding less than 15%. Rajesh Sharma CFO said the gold loan market is growing at a steady rate of 12-13% annually. Despite competition, there is a shift from high-interest informal lenders to organized lenders such as NBFCs and banks, targeting retail customers seeking loans ranging from INR10,000 to INR2 lakh. This transition is anticipated to fuel substantial growth in the gold loan market over the next 4-5 years.

• [00:19:39] Jai Dakshini with IIFL Securities asked that with 550 gold loan branches opened in the last 8 months, could the target of 1 ,500 branches be reached within 2.5 years and how will this affect growth, opex and CI in the coming years. Rajesh Sharma CFO said the current focus is on making the existing 750 gold loan branches profitable before starting the next phase of opening the remaining 750 branches. The goal is to achieve target business numbers and profitability faster, bringing the elevated cost income ratio back to 45-50%.

• [00:24:14] Nikhil Nyati with Equirus Securities enquired how is the cost of funds panning out in the next 3-4 quarters, given that it has remained stable over the last year despite rate increases. Rajesh Sharma CFO said that interest rates are borrowed from PSU banks are reset annually and the impact of rate increases is felt when rates are reset. The majority of resets started in quarter three and were completed by the end of March, resulting in an increase of 40-50 bps, which can be passed on to new customers.

• [00:28:49] Ashish Kumar with Infinity Alternatives asked about the profitability and cost-income ratio of the car loan distribution business with a revenue of INR118 crores. Rajesh Sharma CFO clarified that from a topline of INR118 crore, the car loan distribution business achieved profitability of around INR30-32 crore.

• [00:32:03] Gaurav Sharma of HSBC Securities asked about the breakup of borrowings from Commercial Bank into MCLR, EBLR and REPO rate linked bonds, and the cross-selling opportunities are being explored in loan products. Rajesh Sharma CFO replied that the company has a small amount of debt, mostly in the form of term loans from public sector banks. The debt will be repaid in full by the end of next June.

• [00:34:30] Satadru Chakraborty enquired how CGCL sees the MSME business progressing in FY23, FY24, with an increase in avg. ticket size and accounts. Rajesh Sharma CFO answered that the MSME business is showing good results with a decrease in the restructured pool from INR200+ crore to INR193 crore. The avg. ticket size will remain less than INR25 lakh, currently at INR19 lakh, and growth will come from adding more branches and strengthening the distribution network.