Capri Global Capital Ltd (NSE: CGCL) Q1 2026 Earnings Call dated Aug. 05, 2025
Corporate Participants:
Unidentified Speaker
Rajesh Sharma — Managing Director & Chief Executive Officer
Analysts:
Unidentified Participant
Harvik Doshi — Analyst
Gaurav Purohit — Analyst
Sweta Padhi — Analyst
Chintan Shah — Analyst
Sagar Shah — Analyst
Asutosh Mishra — Analyst
Ninad Jadhav — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to the Capri Global Capital Limited Q1 FY26 earnings conference call hosted by Goindia Advisors. 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 this conference call, please signal an operator by pressing Star than zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Harvik Doshi from Capri Global Capital Limited. Thank you. And over to you, sir.
Hello. Yes sir. Please go ahead.
Harvik Doshi — Analyst
Good morning everyone and welcome to Q1FY26 earnings call for Capri Global Capital Limited. This is Harvik Doshi, Head, Corporate Finance and Investor Relations. As a brief disclaimer, the discussion on today’s call regarding Capri Global Capital Limited’s earning performance will be based on judgments derived from the declared results and information regarding business opportunities available to the company. At this time, the company’s performance is subject to risks, uncertainties and assumptions that could cause results to differ materially in future. Given these uncertainties and other factors, participants on today’s call may observe due caution while interpreting the results. The full disclaimer is available on slide 63 of earnings presentation which is also available on our website.
Participants are requested to take note of the same with us today on the call we have Mr. Rajesh Sharma, Managing Director of the company Mr. Kishore Lodha, Chief Financial Officer Mr. Sanjeev Srivastava, Chief Risk Officer and Ms. Divya Sutar, Director, Business Strategy. I now request our Managing Director Mr. Rajesh Sharma to present the opening remarks.
Rajesh Sharma — Managing Director & Chief Executive Officer
Over to you sir. Thank you. Good afternoon everyone. I hope you are all doing well. We announced our unaudited financial Results for the first quarter of the financial year 2026. Earlier this month on the 1st of August. I trust you had the opportunity to review the earning presentation which is also available on our website. Before I move on to the financial and operation highlights, there are a couple of things I would like to specifically highlight. During the quarter we successfully completed a qualified institutional placement raising Rs. 2000 crores in primary equity capital. This was a landmark event for the Capi Global.
Marking our first PIP in over a decade. The offering received a strong and broad based response from both domestic and as well as foreign institutional investors which we view as a powerful endorsement of our financial performance, governance standards and long term strategic roadmap. This capital infusion significantly strengthens our balance sheet and enhances our ability to scale operations across core lending verticals including MSME Affordable Housing, Gold Loan and Construction finance. Importantly, it also provides us with the additional flexibility to invest in next generation technology including generative AI and data science capabilities which continue to play an instrumental role in sharpening our underwriting, risk management and customer engagement.
Beyond business expansion, this fundraise opens up new avenues to further diversify our borrowing and deepen our liability franchise as we scale responsibly. We remain focused on improving credit access for underserved customer segment, driving greater operating efficiency and building a resilient, well diversified secured portfolio coming to our business and earnings performance during the quarter. Overall I would say it is a good start to the year. A good quarter on volume, asset under management, opex profitability ROE and ROE. We commence FY26 with healthy momentum across our lending businesses. As of June 30, 2025 our consolidated AUM stood at Rupees 24, 754 crores resisting a year on year growth of about 42%.
This performance was led by robust retail AUM group driven by a 69% year on year surge in gold loans and 32% y on y increase in housing loans. CO lending AUM reached about 4681 crores, up by 64% year on year and contributing 18.9% of consolidated AUM versus 17.8% in Q4 FY25, underscoring our deepening partnership with leading banks, Businessmen for The quarter grew 51% year on year to Rs 8,458 crores supported by expanding distribution reach and improved customer onboarding. Growth continues to be granular and well diversified with number of customers surpassing five and a half lakhs, reinforcing the strength and scalability of our retail led model.
MSME loan grew to Rs 5477 crores while our housing brands portfolio stood at Rupees 5490 crores translating to robust year on year growth about 14% and 32% respectively. The MSME business is gaining from our calibrated rollout of small ticket size secular business loan called Microlab now present in over 94 locations helping us reach emerging self employed borrowers with lower ticket price requirements in housing finance. We continue to see resilient borrower demand across the affordable segment where rising urbanization, income formalization and housing upgrades are driving demand for secured credit. Further, the Dharmantri AWA Sujana subsidy scheme is also fueling the growth Our gold loan business maintained strong momentum in quarter one FY26 with AUM rising 69% year on year rupees 9105 crore rupees.
The portfolio is supported by 821 specialized branches with average AUM per branch at rupees 11.1 crores. As of June 25, 737 branches are operating above the breakeven of rupees. 5 crore AUM per branch marked a fully digitized loan journey. AI enabled security system and high customer sickness driven by Repeat borrowers of 55% to power this growth. With ongoing network expansion and the activation of full lending partnership, Gold loans remains a key growth driver of high yield secured growth business model. Our construction and finance portfolio grew 61% year near to Rs. 4,521 crore, now funding over 280 active residential projects with an average sanction of size of Rs.
41 crore. The book remains well diversified and granular reflecting our focus on working with mid sized developers in Metro and tier one cities. We continue to emphasize disciplined underwriting through rigorous due diligence and escrow based cash flow management ensuring a risk first approach. Demand in the affordable mid income housing segment remains strong providing a steady pipeline for scalable and student growth. Now I am coming to earning performance. Let me now provide an update on our core earnings. Our yield and spread some net advances remained healthy in the quarter at 16.9% and 7.2%. Our net interest income for quarter one FY26 reached at rupees 416 crores marking a 38% year on year increase driven by robust growth in our loan book.
We continue to strengthen our non interest income streams in quarter one FY26 reinforcing our strategy of building a diversified and resilient earning profile. Non interest income grew 53% year on year to Rs. 166 crore contributing 28.5% of net total income for the quarter. Driven by strong growth in co lending, fee income and insurance distribution, our Karl Noram distribution business maintained its steady momentum with originations of rupees 2,651 crore in quarter one FY26 up 19% year on year. With a growing footprint and deep relationship across 12 partner banks and financial institutions, we have built a scalable and high volume platform in this segment.
In insurance distribution we generated net fee income of Rs. 28 crore in the quarter with partnerships across 18 insurers and increasing penetration across our retail customer base. We expect this business to become a meaningful contributor to our overall fee income going forward. Meanwhile, co lending income stood at rupees 73 crore supported by rising disbursement volume with partner banks. Our branch Network expanded to 1,138 locations in quarter one FY26 with a net addition of 27 branches while our employee base remains steady at 11,546. Over the past few quarters we have seen a clear shift in operational efficiency with our cost to income ratio improving meaningfully to 55% to 49% in 4Q FY25 and 65% 1Q FY25.
During the quarter we had one time benefit out of the 15 crore in the operating expenses due to the reversal of provisions of account of change in the perquisite policy. Adjusted for that, our cost to income ratio would have been 49%. The sharp improvement reflects the benefit of our maturing branch network, rising productivity due to various AI enabled tools and increasing digital enablement pre provision. Operating profit surged 115% year on year to Rs. 312 crores during the quarter underscoring the impact of operating leverage and discipline execution. As our network continues to mature and technology adoption deepens, we see further headroom to drive productivity gains and sustain this trend of improving operating efficiency.
We continued our strong profitability momentum in Q1FY26 delivering a robust profit after tax of rupees 175 crore up 131% year on year. This sharp growth was driven by expanding margins, operating leverage benefits and consistent performance across all key business segments. Despite the impact of recent equity fundraise, return ratios remain healthy with ROE of 13% and ROE about 3.2% for the quarter. Asset Quality Our credit cost for the quarter increased to rupees 81 crore in quarter 1 FY26 from rupees 18 crore in 4Q FY25 or 1.6% of the gross loan book and our provision coverage ratio on stage three loans remained at 41% demonstrating our prudent provisioning and conservative approach to risk management.
Increase in credit cost was on account of higher provision of rupees 55 crore mainly driven by increase in stage one provision of rupees 24 crore. Increase in stage two assets in MSME housing loan for rupees 71 crore resulting in an incremental provision of rupees 22 crore. One account in construction finance without outstanding loan Rs. 16 crore slipping into NPA which provisions of rupee 8 crore has been created. However, there was a writeback of 7 crore provision due to recovery from the previous accounts one off provision on car loan receivables of rupees 11 crore rupees. Gross stage three assets were at 1.7%, marginally higher on a sequential basis but improved by 48 basis year on year while net stage three stood at 1% down 19 basis year on year.
Collection efficiency remains strong, reinforcing the resilience of our portfolio. We are further enhancing our risk management framework by leveraging advanced analytics and data science to sharpen customer risk profiling and improving underwriting, ensuring disciplined sustainable growth. Following the successful completion of rupees 2000 crore equity raised through QIP during the quarter, our balance sheet is significantly stronger providing ample headroom to accelerate growth across businesses while maintaining financial prudence. This capital infusion has resulted in a robust standalone capital adequacy ratio of 34% for CGCL supported by total equity of Rs.6,438 crore while Capital Housing Finance Limited closed the quarter with a healthy capital adequacy of 29%.
Liquidity remains comfortable with rupees 3,700 crore in cash and bank balances, investment and undrawn credit lines across CGC and cghfn giving us the agility to navigate evolving market conditions and deploy capital strategically. Bora is due at rupees 15,979 crore with a debt to equity ratio of 2.5 times. We continue to diversify our funding mix by tapping capital markets, increasing the share of NCDS and commercial papers. During the quarter we successfully raised rupees 150 crore of NCDs at competitive rates between 9 to 9.25%. Our board has also approved a public NCD issuance of 1000 crore rupees if we plan to tap opportunistically.
Additionally, the softening interest rate environment driven by reduction in GAAP rate and subsequent decline in MCLR is expected to further lower our cost of borage, supporting our profitability. Our technology investment remains foundational to our ability to scale securely and efficiently. We invested Rs. 26 crore this quarter in technology, data science and systems reflecting our belief that technology is not a one time capex but a continuous engine of transformation. We are focusing on leveraging generative AI in further enhancing our processes for evaluating customer profile, collateral and collections, cybersecurity and compliance. Let upgrades remain core priorities as we expand our digital footprint.
I’m also pleased to share that CAPRI Global has received a Strong ESG rating of 69 from NSE Sustainability Rating analytics placing us ahead of the most listed NBFCs on the NSE and reflecting our robust governance practices as well as our structured approach to environmental disclosures. While we see room to further strengthen the Social pillar, this rating is a strong validation of our ESG journey and our commitment to responsible growth. Complementing our ESG progress, we continue to strengthen our brand visibility through impactful campaign like Tarakti Kehaar which has significantly enhanced awareness and recall across our key markets.
Backed by a 360 degree media plan spanning TV, print, digital and branch level activation, this campaign is helping us to build not just visibility but also deeper emotional connect with the people we serve. Now we would like to open the session for question and answer.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch tone telephone. If you wish to remove yourself from the question queue, you may press star and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Gaurav Purohid from Systematics. Please go ahead.
Gaurav Purohit
Hi sir, Am I audible?
operator
Yes sir, you’re audible.
Gaurav Purohit
Okay, so I have a few questions. I’ll start with growth. So growth has been fairly robust in the recent quarter and given the current momentum that you’re seeing, is there a possibility that we exceed the 30% guided growth range for the next few years?
Rajesh Sharma
Thank you. I think we are going to remain on course for a 30% growth and that we believe that is quite healthy growth. We don’t think we are going to exceed that this year.
Gaurav Purohit
Okay. Also sir, on growth, what is giving you comfort on growing progressively? I understand that you are primarily into secured businesses and what do you think can go wrong given the current environment because some of the peers have started reporting some stress in MSME segments. So do you think that could. Later. On result into some delinquencies or are you seeing that sign in your portfolio right now?
Rajesh Sharma
So 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 out of about 35% portfolio. The gold which is the asset quality remains in our complete control where we can auction the gold and recover our money. With regards to other segment, we agree that NSME, we have seen some CPAs more particularly from a state of Madhya Pradesh where we are already toning down our disbursements and cautiously we are progressing on that.
However, other segment of housing finance remains very stable where we have not seen much challenge in the asset quality and now credit subsidy coming in the play where the loan to value further goes down giving us a higher security margin. I think we are going to see the good growth in that segment. So while this quarter some more delinquencies have come because of various reasons including that first quarter is always we are seeing the rise in the delinquency either because of seasonality but also Q4 we run a lot of campaigns and incentive programs and one of the reason is also that quarter is less than 90 days.
So some of the CPA because of the February of the 28th month, some of the 6,190 cases slips on in the month of April because of those two days advantage in the last quarter. So combination of this. However if you see the overall delinquency that is still our GMP is in the range about 1.7%. Net NP is about 1%. It is very very healthy and robust. And sir, like the trend we’ve seen.
Gaurav Purohit
In the last year, do you see the slippages coming down significantly in the coming quarters?
Rajesh Sharma
I will say that slippages will not be as much as what we have seen. You will see that overall asset quality remain in the range we have projected. So as a company we have given the guidance that our growth gross NPA will never cross 2%. The net NPA will never cross 1.2%. I think we intend to maintain within that range Specifically to projects above quarter. Will not be possible. It can always vary 10 basis here and there but overall range will remain the I said fair enough sir.
Gaurav Purohit
Also in one of your recent media interactions after the QIP you had mentioned that there is a potential of credit rating upgrade. So any progress over there? If you can share with us about what credit rating you had mentioned in one of your media interview.
Rajesh Sharma
We should see the result by mid of September.
Gaurav Purohit
Okay. And then there is a possibility of a reduction in your cost from third quarter onwards.
Rajesh Sharma
Yeah I think because as far as the reduction of cost is concerned, I think for the next 12 months we’ll be having a higher dependency on NCD commercial paper and also lot of loans whose MCLR is going to get reset. NCLR have already announced the reduction by various banks and we see the inflation also come down. So overall interest rate scenario should look like the interest rate is going to remain softened. That effect will be Seen over a period of time next six months whenever the individual banks MCLR get rejected will get the advantage plus our incremental borrowing are going to be at a lower level by at least 30 to 40 basis so we’ll see quarter on quarter our cost of funds will come down and by the end of the year I think our overall cost of the fund should be at least come down by 40 to 50 basis.
Gaurav Purohit
That was a sizeable reduction. Okay, just one specific question on your micro lab because you said that is helping you scale up your msme one of your peers has actually discontinued such investment in that business specifically in the South India market. So any comment on that? I understand it is a very recent venture and the book is not yet seasoned but any signs of stress that you’re seeing there?
Rajesh Sharma
I think we are also growing that book very cautiously depending on the various feedback and observation that delinquency have risen in micro lab segment however we are creating a differentiation by using the technology and also data science capability where various risk triggers are being built and we have gone a little slow till our full stack of technology get rolled out which should be happen by end of September. So we are cautiously trading there and we are confident that given our experience in the collateralized lending we’ll be quite cautious the way we do the collateralization legal title search any case going back you can your ability to recover comes from the confidence, the right valuation and the right title.
So we are quite confident that we’ll be doing better than the competition that business that backed by our technology and data science capabilities.
Gaurav Purohit
Answer one last relating question.
operator
Thank you. The next question is from the line of Shweta Padi from SBS Securities. Please go ahead.
Sweta Padhi
Hello sir. Thank you for the opportunity of numbers. So in this portion we are seeing a slight interview in the GNT and the construction finance on that and second question is on the cost to income ratio. The performance has been very good on the cost to income front. So where do we expect this cost to income to settle by FY26 exit?
Rajesh Sharma
I think our cost to income ratio on the increased scale of operation it should come down. However we are going to add another 150200 branches this year. So we expect this cost to income ratio remain in the range about 50% throughout the year. If we remove the impact of the addition of the branches then cost of income ratio in real terms will be in the range about 46 to 47%. But we assume that because of those branches the impact will be there. So still it will be much Lower than the last year. And if we are able to do even the cost income ratio in the range of 50% we are on the track to deliver RoA in the range about 3.5%.
Sweta Padhi
Yes, sir. And on the construction finance part, the site increase in the gnp.
Rajesh Sharma
So there is one account which has slipped into the NPA and on account of that the value of that account was 16 crore. 8 crore rupees provision have been provided for. But already for that account as you do if you see the last last quarter the recovery has also happened in this on account of 1 of the NP about 7 crore. This is constant phenomena. Further there are lot of developer who are coming forward to take over that account. So this remains on a consistent basis that whenever NP happens through the surface other means you are able to attract the other developer to take over the count and recover amount.
Sweta Padhi
Thank you, sir.
operator
Thank you. Thank you. Our next question is from the line of Chintan Shah from ICICI Securities. Please go ahead.
Chintan Shah
Yeah, thank you for the opportunity and congratulations on a great set of numbers. So this firstly on this basically the asset quality as you mentioned the GNP is likely to be below 2 percentile and NTA below 1.2 percentage. Also like given that some lenders have already flagged some risk on the MSME portfolio. So what gives us the confidence, how are we getting that confidence? And if you could just throw some light on the collections part as well, how the collection is planning out. Yeah, that’s the first question please.
Rajesh Sharma
So yes, as regards the collection is concerned, I think we have all 520 people very strong team and we have a very good team analytics on the collection. The processes automation is in place. We are able to track actively our selection agent performance and drive them. We have attractive incentive plan to push them higher. Having said that, yes, we have seen some of the happening in msme. We are more cautious for our incremental underwriting and taking the right measures. Currently our collection efficiency in the range about 97% of upward in the segment. So we are quite confident that our focus will be to resolve the old NPA faster by doing lot of settlement and other things.
And we see that while Our MSME is 100% collateralized, not like many other where they are giving unsecured business loan, they are collateralized. Where we are LTV cushion about 55% is LTV there is. So with that cushion in place, even though the accounts slip into npa, we are quite confident to auction those properties or recover back of those property by mutual negotiation and recover Those amount focus during the next nine months will be that old NPA pool We are able to resolve faster by settling those accounts, by selling those properties faster. And I think with that pace coming back our NPA overall will remain in range bound.
As I said our GMPA will not cross more than 2%. Our net NPA will not cross more than 1.25%. Within that framework will work.
Chintan Shah
Sure this is quite helpful. And also secondly on this AUM group so we have guided for around 30 percentage AUM growth for FY26 but on a steady state basis probably over the next 23 years. Could we assume a similar or are we looking to moderate the growth post 26 on the growth front how we should, how should we look at it?
Rajesh Sharma
So I would like to say that if you observe that we are a well diversified company in secured segment we have currently five products. So we have ability to change the levers and increase one product which is doing better and reduce the other product which is doing better. Not that well given the macro environment in some of the segment or some of the geographies. With that capability in place I think we are quite confident to achieve the 30% growth for next year by targeting the aum to be 50,000 crore by FY 2028 and maintaining our ROA at 3.5% upward.
So with those two metrics in place we are quite confident to continue on that path. And I think gold loan we have done well where the yield is very good. Similarly our retail construction finance segment is also doing quite well giving the housing demand on rise and a lot of traction. We are seeing Reva in place, security structures are good again the housing loan remains a very high very good growth driver. So with all combination of this I think we are well placed to achieve a 30% growth for next three years.
Chintan Shah
Sure. And just lastly on the OPEX front so I think our OPEX is relatively elevated like around 6 percentage odds. So do we see this moderating like if the ROA is set to improve from year on. So what could be the key drivers? Other interest income, OPEX or margins or credit cost. Some thoughts on that please. Thank you. That’s the last question. Thank you.
Rajesh Sharma
If you see our cost income ratio if you look at last quarter Q1FY25 it was about 65% constantly by our golden branches delivering higher margins and skills overall skills scale is also going up. The cost to income ratio have this quarter come below 50%. And as I said earlier if overall basis we intend to maintain our cost to income Ratio in the range about 50%. Given that we are going to add another 200, 250 branches this year. Had not been that then our cost to income ratio would have been in the range about 47%.
Chintan Shah
Sure sir, this is very helpful. Yeah, thank you. And that’s it from my side and all the rest for the future quarters. Thank you.
operator
Thank you. Our next question is from the line of Sagar Shah from Spark Capital. Please go ahead.
Sagar Shah
First of all congratulations sir for excellent set of numbers. Had around three questions. My first question was to do credit cost this quarter we saw the highest reduced almost credit costs in this compared to last few quarters. And you said you given the clarification that was regarding the one account, construction, finance and some stress in MSME. So looking the picture and looking like the Q2 will follow, will follow and will see a kind of a mirror to our Q1. So what kind of credit cost should be building for the entire year? So for FY26 that’s our first question.
Rajesh Sharma
Thank you. So I think overall basis if you look at our credit cost have been in the range about 60 basis and we don’t see that much elevation. At the most credit cost will not go beyond 70 basis. It is too early to say because we are. We have seen the seasonality that every year Q1 is little higher. So this year will be slightly more higher than the previous average. But Q2 to Q4 between that we see the remarkable recovery in terms of our old NPAs. And by that we will be able to bring overall credit costs down.
Even though on the conservative side we said this year if the credit cost goes up by 10 basis points it will not cross more than 70 basis for overall year basis.
Sagar Shah
Okay. Okay, thank you. My second question was related to our growth in this quarter was the VM of the industry average and you know one of the best quarters for you in terms of EM growth. So even sequentially the EM has grown by almost a more than 8%. So I wanted to understand which geographies are you exactly targeting? Is there any geographies that you particularly that you’re targeting that you are getting such a robust growth and that in such a period.
Rajesh Sharma
So I think we are going to add second half the year Southern India market which will be Tamil Nadu, Andhra, Karnataka and Odisha. Also we are going to add as far as the gold low is concerned. So these states we are good. Andhra, Telangana, Tamil Nadu, Karnataka and Odisha. These are the five states we are going to add gradually and we will roll out the branches in the last Quarter of this year.
Sagar Shah
Okay, so basically it’s fair to assume that this growth has been from the non southern region means in the western as well as the northern region.
Rajesh Sharma
Yes.
Sagar Shah
Okay. Okay, thank you sir. My third question was Last question was related to the lending area. Co lending a for this quarter was at around 19 so going ahead for the entire year what kind of how much percentage should assume for the co lending am and to be a mix.
Rajesh Sharma
We intend to project in the range of anything between 18 to 20% range and this range only we intend to maintain this.
Sagar Shah
Okay, thank you so much and all this.
operator
Thank you. Next question is from the line of Ashutosh from Ashika Stock broking. Go ahead.
Asutosh Mishra
Thank you sir for the opportunity and congratulations for both set of numbers. So I like to understand fee income front so currently we are at 30% of our net revenue is coming from the fee income side of it. So what is our strategy going forward? On this one.
Rajesh Sharma
Is mainly coming from co lending, from car loan and from insurance distribution and our fee income we intend to maintain in the range of about 25 to 27% throughout the year. Final quarter can be up and down by 2% but overall yearly basis our plan is to maintain it in that range.
Asutosh Mishra
And within these three segments which we have discussed which is a major contributor and right now what are our strategies?
Rajesh Sharma
Co lending and also income from insurance.
Asutosh Mishra
Okay, second question is on the like no cost of fund front like how much of our borrowing liabilities fixed versus floating and how we see things going forward from here on that front.
Rajesh Sharma
So I think next 12 months we are going to keep a major reliance on raising the commercial paper and NCD to meet some of our requirements and those will be at a low cost. Our lending side we are going to remain more on the now given the few regulatory changes we might shift our some of the loan to the fixed basis because we see that interest rates are going to be remain softer going. Forward.
Asutosh Mishra
And like MCLR’s benefit and all those how much cost of fund benefit you are expecting in this whole year from the current rate do you expect it to come by 3040 basis points for this whole year? Something like that.
Rajesh Sharma
But there are two elements to it. One is incremental borrowing. Incremental borrowing already started coming down by 20 to 25 basis hoping that we will get some rating upgrade that will further go down by over 25. Second point is that all the MCLR rates are getting reset on the due date of their 1 year 6 months if the negotiation are done during the time of drawing that loan those banks and CLR rate reduction benefit will accrue. So by the on every quarter we see some benefit keep coming in overall basis I think we should be able to get the benefit of 20 to 30 basis depending on bank to bank.
Asutosh Mishra
And on this cost to income. IT expenditure is also one of the area which we are focusing on. So can you give something like what we are doing what type of expense you continue to incur in that area?
Rajesh Sharma
On various initiatives of technology, data science and now this year we are actively enhancing our team on the data science and generative AI site. We already deployed few tools on the AI transformation which are going to drive the productivity and impacting the reducing our cost to income. So I think this spend on the IT is going to be permanent feature. This is not going to be something that we achieve some milestone. It will come down. But this is a futuristic investment which will continue. We have currently about 200 people team in the technology and data science.
Asutosh Mishra
And last question geographical. So any changes in the opening of the new branches or something like that you want to highlight to investors on that front?
Rajesh Sharma
I think we are going to. As I said, we are going to add 200 branches this year. Combination of the gold, MSME, home loan etc and this space will remain for next year. We are going to eight, about seven to 800 branches. And that is important because we need to plan 30% for the next year. You have to plan at least. At least a six, nine month in advance.
Asutosh Mishra
These new branches will come new geography or our existing geography only.
Rajesh Sharma
So most of the new branches will come in the new zography. Some of the existing geographies where we see the potential will increase. But majority expansion will happen present in the eyesight earlier.
Asutosh Mishra
Okay, thank you sir.
operator
Thank you. Our next question is from the line of Nina Jadhav from LKP Securities. Please go ahead.
Ninad Jadhav
Yeah, for the opportunity so much question. Is on the inside. So you mentioned that the borrowing costs are expected to trend down by 4050 basis point for this year. So how are we looking at deals like are we going to pass on the benefit to our customers as well? And if you could quantify how much is.
Rajesh Sharma
So they are where I think we have to say that overall if the interest rate goes down for everybody that that at least cost advantage benefit will get passed on to the customer because of that intense competition in the retail segment. However, whatever cost benefit and risk spread going down because of the our negotiation and also the written potential upgrade, that benefit will be able to accrue to our P L.
Ninad Jadhav
Okay. So any. Any specific basis points it could go down bar.
Rajesh Sharma
I think our current spread is in the range about 7%. We we intend to maintain that SP trade 10%. It can slightly be better because gold loan composition is slightly improving. Another by so its current composition it will add another 3 to 4% and which is a high yield product and for which all the infrastructure cost and operational cost is already in place. So that is going to improve our overall spread in regards the interest rate benefit which comes to because of the potential rating upgrade. That initial benefit will happen as far as the MCLR reduction is concerned because of the competition.
That benefit as I said will get passed into the customers.
Ninad Jadhav
So my second question is on the recent announcement. So we have incorporated two new companies. One is financial services. So if you can tell us on how we are looking to scale these businesses, you know and what kind of customers we are looking to target. And with the cost for setting up these businesses will affect our cost income guidance for this year or for next year as well.
Rajesh Sharma
There are two companies we have incorporated. One is going to carry out the investment banking activities only for the debt capital market. And another company is a securities company which are going to engage in the sales and distribution of the debt placement at institutional level online bond platform and exchange trading. Both of these will not consume much capital and they will be from the the year one that will be accretive to the profit rather than taking any dent on the cost income side on a full scale operation. We expect that this will also enhance our fee income for that by the end of the year we will give the exact projection for the coming year.
This year it is in the setup mode. However, whatever the cost they will be able to make that kind of money. So. So that would be cost neutral and no impact on the cost income side.
Ninad Jadhav
Sure. Sir. Any probable customers? We are looking to target customers.
Harvik Doshi
Sorry, can you come again on the question probable set of customers for which segment?
Ninad Jadhav
For these companies which we have incorporated.
Rajesh Sharma
These companies we will be. We have a team of about 10 people. We are going to add more people there. The team is specialized in understanding the need of the bond market. See the price trend and be a large treasury book within that we use those funds to buy the bond and do the buying and selling of the bond. Plus we hold them for a short term 15 to 30 days. We help the corporates to come out with the issuance of the bond as a machine banker. So these are the fee based activities we are going to do.
These clients can be corporates mid size with the larger site and it is similar to various bond issuance bankers. You would have observed that they are associated with such bond issuance. Further, this team will also help us to reduce our cost of fund because of their access to the capital market and their connect and understanding of the bond market.
operator
Thank you. Our next question is from the line of Darshal Javeri from Crown please. Sorry the the participant is not connected right now. The next question is from the line of AKA J from AG G. Please go ahead.
Unidentified Participant
Hello. Hi sir. Am I audible? Yeah. So first of all congratulations for great set of numbers. Most of my questions I have already been answered so thanks to the previous participants. One question related to your business model. So I mean we are fully secured and have high ending book but macroeconomic cycles I mean can pressure demand collections and risk appetite. So how resilient are our models across down cycles Especially in MSME and construction finance I mean where borrower cash flows can be volatile.
Rajesh Sharma
So Saksha Vinay, we are seeing that there are two three important things have happened. One that after RERA coming in there is a designated construction account is a receivable account of the customer where all the money comes in and we see it is a very very strong monitoring tool as well as the security structure. So having seen the good demand in the construction finance side we don’t see any such challenges and even out of the 280 account every year one or two account which slips into NPA for one other region our team have shown the capability to find another developer take over that account in the and recover the entire amount.
So we are quite confident that even the risk adjusted return with the low opex and secured nature backed by the strong cash flow of the sale of those apartments we don’t see any problem there. So we are quite confident and this business we are doing since last almost 12 years we have built a very niche very good monitoring tools and we don’t see any surprises coming in that segment at all.
Unidentified Participant
Okay and one last question I mean. Post this fundraise of 2000crore how soon. Can we expect return ratios to normalize?
Rajesh Sharma
So I will say this year the we are confident to deliver ROE in the range of about 13.5 to 14% and ROE will not be less than 3.5% next year onwards our strong fee income and coupled with our cost income ratio further coming down because now leverage of operating skills is shrink so then our ROI will improve to about 4% and ROE should be in the range about 16 to 17%.
Unidentified Participant
Okay so ROE 13 to 14 this year. And 15 to 16 in FY27.
Rajesh Sharma
FY27 ROA will be about 4%. ROE will be in the range about 16to 17%.
Unidentified Participant
Okay. Okay. Thank you. All the best.
operator
Thank you. Our next question is from the line of Somil Jain from Lucky. Please go ahead.
Unidentified Participant
Hi. Thank you for the opportunity. Sir. Congratulations on good set of numbers on the 30% AUM growth guidance. Can you talk a little bit about what the mix will look like between the segments? Do you expect momentum in gold to continue and the softness in MSME to continue?
Rajesh Sharma
So we see that gold will continue to grow. Even we are adding more branches in that segment. Because we see the strong traction and demand. And now our distribution team is all in place. So gold should be in the range about 37 to 40% kind of thing. MSME will remain in the range about 2022%. Housing will remain in about 2022%. Construction finance will remain in the range about 17, 18%.
Unidentified Participant
Okay. Gold you mentioned 37 to 40%.
Rajesh Sharma
Yes.
Unidentified Participant
Okay. And secondly under branch addition guidance. So they think you mentioned two branches, right?
Rajesh Sharma
Yeah. 200 to 250 branches will add this year.
Unidentified Participant
Okay. And this will be any mix on gold or non gold.
Rajesh Sharma
Oh, I think gold will be in the range about 100 branches. And rest will be between housing. MSME.
Unidentified Participant
Okay. Okay. And finally on the 16, 17% ROE sort of expectation for next year. What is the credit cost that you built in?
Rajesh Sharma
So credit cash on a long term. We are. We are built in about 70 basis.
Unidentified Participant
70 base.
Rajesh Sharma
If you look at last few years credit cost. Except barring the COVID year the trade cost has remained more or less in this range.
Unidentified Participant
Right. And the quarter one OpEx you mentioned will stabilize for the year. Because you’re going to add more branches.
Rajesh Sharma
So I think operating cost, keeping in mind our branch expansion will be in the range about 50% cost income ratio.
Unidentified Participant
Okay. Thank you, sir.
operator
Thank you. Our next question is from the line of Lalit Kumar, an investor. Please go ahead. Hello.
Unidentified Participant
Hello.
operator
Yes. Yes, sir, you’re audible. Please go ahead.
Rajesh Sharma
Your voice is not audible.
Unidentified Participant
Hello.
operator
Hello.
Unidentified Participant
I’m audible.
operator
Yes, sir. Now you’re audible.
Unidentified Participant
I’m saying that my question has already answered.
operator
According to Lalitia. His question has already answered. We’ll move to the next question. The next question is from the line of Gaurav Purohit from Systematics. Please go ahead. It’s a follow up question. Please go ahead. Gaurav. Sir.
Gaurav Purohit
Hi, sir. Thank you for allowing this follow up. I just have one question on The Microlab book. I understand it is a very new business. But in case there is a default in future, what is the legal recourse? We have given that the ticket size is around 10 lakh and not eligible for surface.
Rajesh Sharma
So the eligible records. Ideally the major effort is by negotiation. We make borrower to agree to come forward and sell his property or find inner ecosystem to give him the money so that they don’t mean not to sell the properties much Discounted Rate and UN. Another option is section 138 to build the pressure and initiate the arbitration proceedings. And within that these tools are effective. The combination of bilateral negotiation or using these Section138 filings to bring the pressure as we move to the arbitration to rent the order and then sell the property and realize our money.
Gaurav Purohit
And what would be the typical timeline for this when you’re successful?
Rajesh Sharma
So if we bilateral negotiation you can yield the result case to case basis within less than a year. But cases which are not solved by bilateral negotiation if you go for arbitration then it takes a period of effective realization of money Anything between two to two and a half years.
Gaurav Purohit
Got it sir. Very clear. And last question I have on the competition intensity. So gold loan as sector is seeing phenomenal growth. Everyone is focusing on either growth or affordable housing. So what is the kind of intensity you are seeing here? Given that you know we have a steep target of doing 30%. So just wanted to your take on that.
Rajesh Sharma
So I think about all the segments which are collateralized. But if you talk about competition, it is very intense competitive. Your right to win has to be how you use your technology, automation and ability to turn on the sanction faster and do a better customer service in terms of how you handle them, how seamless your journey are, how less the you seek without compromising on the asset quality. So I think amid the intensity it is the turnaround time, it is the approach you take it simplified approach to carry out the whole process makes a difference.
The lending doesn’t have a quality other than the service.
Gaurav Purohit
Fair enough. Thank you so much for patiently answering all my questions.
operator
Thank you ladies and gentlemen. That was the last question for today. I now hand the conference over to the management for closing comments. Over to you, sir.
Rajesh Sharma
Yes. So I think I would like to say that our Q1 has set a solid tone for FY26. The addition of 2000 crores capital raise give us the financial strength to accelerate the growth across lending and new verticals. Backed by a secured book, healthy asset quality and solid technology infrastructure. We remain on Track to grow 30% annually and deliver sustainable ROE of between 16 to 18% ROE in a medium term to 4 to 4 and even growing up to 4.5%. There is a constant endeavor to bring our cost of fund down and you will see by the end of the year there’s significant reduction in the cost of fund will be quite conscious of bringing our operating cost in control by using technology and various other intervention of artificial intelligence.
As we have asset quality, there are enhanced effort on the collection side and monetizing the NPs disposing of those repudiate assets to bring the overall net NPA in the check. So overall basis we are on a quite good growth trajectory and we are all thankful for the support shareholder and other stakeholders are offering to us. Thank you.
operator
Thank you on behalf of Go India Advisors. That concludes this conference. Thank you for joining us and you may now disconnect your line.
Harvik Doshi
Thank you.