Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.
Capri Global Capital Ltd (NSE: CGCL) Q4 2026 Earnings Call dated May. 04, 2026
Corporate Participants:
Hardik Doshi — Head of Corporate Finance & Investor Relations
Rajesh Sharma — Managing Director
Analysts:
Ishank Gupta — Analyst
Unidentified Participant
Unidentified Participant
Unidentified Participant
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Capri Global Capital Limited Q4FY26 earnings conference call. As a reminder, all participant lines is in a 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 that this conference has been recorded. I now hand the conference over to Mr. Hardik Doshi.
Thank you. And over to you, sir.
Hardik Doshi — Head of Corporate Finance & Investor Relations
Good afternoon everyone and Warm welcome to Q4FY26 earnings call for Capri Global Capital Limited. This is Hardik Doshi, Head Corporate Finance and Investor Relations. Before we begin, let me read out a brief disclaimer. The discussion on today’s call regarding Capri Global Capital Ltd. Earnings performance is based on judgments derived from the results declared and information on 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 in future.
In that context, participants on today’s call are advised to consider the same while interpreting the results. A full disclaimer is available on Slide 63 of the Earnings presentation which is available on our website. Participants are requested to kindly take a note of the same format of today’s call would be opening remarks by the management team followed by Q and A. With that let me now introduce the management team from Captic Global Capital present on the call. With us Today we have Mr. Rajesh Sharma, Managing Director and Promoter.
Ms. Divya Sutar, Executive Director, Business Strategy. Mr. Kishore Lodha, Chief Financial Officer and Mr. Sanjeev Srivastava, Chief Risk Officer. I would now request our Managing Director Mr. Rajesh Sharma to present his opening remarks on the results. Over to you sir.
Rajesh Sharma — Managing Director
Yeah. Thank you, Azik. Good evening everyone. I hope you all are doing well. We announced our audited financial results for the fourth quarter of FY26 of on the 30th of April. I trust you have had the opportunity to go through our earning 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 the key developments during the quarter. Recent geopolitical situation triggered demand approval due to supply chain disruptions.
And higher fuel and energy cost. However, India’s economy continues to demonstrate resilience amid a mixed and uncertain global macroeconomic backdrop, with domestic High Frequency indicator for March not reflecting much adverse impact. Amidst this soft macro environment, I am delighted to share a key development in the history of Capri Global. The company has secured credit rating from two leading global rating agencies, Long Term Issuer default rating of BB minus with a stable outlook by Fitch Ratings and BA3 corporate family ratings with a stable outlook by Moody’s Ratings, marking a significant milestone in our growth journey and offering strong validation of our business model, governance, standard and risk management practices.
These ratings reflect Companies diversified and 100% secured lending portfolio, the strong asset quality, robust capitalization and focus on prudent lending and risk management processes. The stable outlook from both agencies underscore confidence in the company’s ability to sustain its growth momentum while maintaining financial discipline. With this backdrop, I am pleased to say that Capri Global delivered strong quarterly performance in Q4FY26, continuing its growth momentum and maintaining asset quality while delivering highest ever quarterly profit of rupees 283 crores, a 59% increase year on year and full year profit of rupees 949 crores, almost double from the last year.
Also, we delivered marked improvement in asset quality this quarter with gross NPA declining to 0.9%. Now coming to our detailed business and earning performance during the quarter, we continued our strong momentum across all lending businesses. In fourth quarter FY26 our consolidated AUM stood at rupees 36,623 crores reflecting a robust 60% year on year growth and 20% quarter on quarter growth. Gold loans grew an impressive 111% year on year and MSME grew at healthy 23% year on year while housing loans rose 43% year on year.
Disbursements for the quarter rose 116% year on year to Rs. 18,145 crores on account of growing customer base and widening distribution network. Our growth remains granular, diversified and retail led with our customer base now exceeding 6.9 lakhs for our gold loan business, we delivered a strong and well balanced performance in line with our strategic objective of growth driven by branch expansion while maintaining focus on effective risk management. During the quarter we further expanded our presence in high potential southern and eastern regions of India with the net addition of 89 new branches mainly 36 in Telangana, 18 in Andhra Pradesh, eight in Karnataka and 20 in Odisha to support the next phase of growth, gold loan AUM saw robust growth to Rs 69.65crore, a sequential increase of 33% quarter on quarter.
Led by healthy customer demand and trust. Our aggregate branch productivity continues to see strong gains and has improved now from Rs. 14 crores per branch in previous quarter to Rs. 17 crore per branch. Our Gold Loan employee base increased only by 10% year on year the resulting in significant improvement in our employee productivity from rupees 1.6 crore year earlier to rupees 3.1 crore now. Considering the volatility in Gold Loan prices, we maintain conservative loan to value ratios for new disbursement while ensuring strong collection practices across the portfolio.
Our efforts in controlling asset quality proved effective. The gross NPA in Gold Loan stood amongst the best in the industry at 0.3% underscoring our focus on management and portfolio quality. Overall, Q4 marked strong performance for the Gold Loan business combining growth through geographical diversification alongside risk discipline and operational execution. With 90% branches now operating above the breakeven threshold of Rs. 5 crore AUM per branch, our MSME AUM grew to Rs. 6,465 crore up 23% on year on year and disbursement stood at Rupees 2,550 crores for FY26 up 65% year on year.
Led by steady execution in network expansion within MSME, our micro led business continues to gain traction with AUM rising to Rs. 824 crores Ajax the end of Q4FY26. This vertical enable us to serve emerging self employed borrowers with smaller ticket size requirements in this segment. Our immediate priority is to leverage robust technological interventions to boost sales productivity and enhance operating efficiency across the expanded network before moving into the next phase of branch expansion.
Our housing AUM is today Rs.7447 crores delivering a year on year growth of 43%. We continue to see resilient demand across the affordable housing segment where rising income levels and a stable interest rate regime are driving demand for housing loans with foray into high potential South India market by entering states such as Andhra Pradesh in the previous quarter. We now have strengthened our presence in south India with 25 branches. The strategic expansion step towards geographical diversification, increasing portfolio granularity and support yield expansion over time.
Further, our yields in housing finance segment have increased consistently as a result of our efforts to pivot the mixed word self employed customer segment in which now comprise 74% of AUM. Our construction finance AUM saw healthy growth of 38% year on year to Rs. 5708 crore rupees spread across 282 active projects. With an average pension ticket size of rupees 48 crore and outstanding portfolio ticket size of rupees 20 crore. The book remains granular and well diversified by geography 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 containment approach. Our total branch Network expanded to 1429 locations in Q4 FY26 with a net addition of 98 branches during the quarter and 318 branches during the year. We continue to invest in expanding our network and geographical footprint in line with our goal of becoming a large scale Pan India retail lender. Let me now provide an update on our core earnings.
Our blended yields and spreads on net advances remain healthy in the quarter at 16.3% and 7.1% respectively driven by increasing share of high yields product and decline in cost of funds. Our net interest income for Q4FY26 is stood at rupees 596 crore of 56% year on year and FY26 two date rupees 1998 crore of 50% year on year driven by strong loan book expansion. In line with our focus on building a diversified and resilient earnings profile, we continue to strengthen our our non interest income stream in Q4 FY26 reinforcing our strategy of generating recurring quality of income.
Non interest income grew 36% year on year to Rs. 247 crores contributing 29% over net total income for the quarter. This strong increase was largely driven by growth in commission on insurance distribution and co lending fee incomes in our insurance distribution business. We generated net fee income of rupees 65 crore during the quarter and rupees 153 crore for the full year. With the help of our upgraded fully digital end to end platform Caprecare launch in Q3 third quarter, we can now issue policy real time with speed and convenience thus significantly easing insurance adoption across our retail customer base and scale.
Our insurance distribution While our loan protection insurance has addressed life related risk, we embedded preventive healthcare and wellness solutions such as annual health screening and cashless consultation into the capricare ecosystem evolving it from a claim driven product offering into a proactive health and protection partner for our customers going forward we will continue to strengthen our insurance offering for Gold loans and MSME customers while expanding into cross sell for retail, health and motor insurance through digital channels.
This digital fast integrated approach is expected to drive higher insurance penetration, improve customer engagement and meaningfully enhance fee income contribution over time our co lending AUM surged 91% year on year and 9% quarter on quarter to Rs 7,783 crore now accounting for 21% of total AUM reflecting our strategy of Capital Efficiency Group. As you would be aware, new CO lending guidelines have come into effect from 1st January 2026 and as for that, industry will start moving to new co lending guidelines once existing contracts expire.
Because of this there could be temporary slowdown in CO lending volume for a couple of quarters but eventually volume should come back. Going forward we would also be exploring direct assignment route at a faster pace and higher volume as there is a good demand for the same from partner banks. Considering the PSL nature of our loan book as well as Gold portfolio, our co lending and DA income for the quarter is 2 days rupees 97 crores up 76% year on year and down 16% quarter on quarter driven by higher disbursal volume and deeper engagement with partner banks.
Our car loan distribution business maintained its steady momentum with origination of rupees 3,492 crore in Q4FY26 up 18% year on year and rupees 11,910 crore in FY26 up 13% year on year. With a growing footprint and deep relationship across 14 partner banks and financial institutions, we have built a scalable platform with Pan India Network in this segment with potential to monetize further for distribution of other products. On the expenses front, our operating expenses increased 7% quarter on quarter.
This was mainly driven by net addition of 692 employees up 5% quarter on quarter on account of new branch additions. Our continued focus on operating efficiency is visible with the cost to income ratio improving to 49.4% in Q4FY26 compared with 54.8% in Q4FY25. This sharp improvement signifies the benefit of investment in technology, a maturing branch network, rising productivity and improving operating leverage across our businesses as a result of margin expansion, operating efficiency improvement and a strong traction in fee income.
Our pre provision operating profit sells 68% year on year to rupees 4, 427 crore for the quarter and robust 97% year on year rupees 1,446 crore for full years. Further, we continued our strong profitability momentum in Q4FY26 delivering a robust path of Rupees 283 crores of 59% year on year and Rupees 949 crore for FY26 strong up strong 98% year on year. Our return ratios considerably improved during FY26 with the return on average equity at 16.5% versus 11.8% for previous year and return on average assets at 3.5% for the year versus 2.7% for the previous year.
Now coming to our asset quality, we saw marked improvement on our asset quality across each of our business segments. Our gross stage two assets decreased by rupees 100 crore driven by reduction of rupees 22 crore in MSME, rupees 18 crore in gold published 53 crores in construction finance. The decline in construction finance is an account of a strong collection efforts and rollback of pre account. Our gross stage 2 ratio for the quarter was down to 2.8% from 4% in previous quarters. Our gross stage 3 asset decreased by rupees 11 crore quarter on quarter mainly driven by decrease in housing loan.
Our gross stage 3 ratio improved quarter on quarter by gold loan to 0.3%. Browsing loan was 1% and remained flat 3% for MSME and 0.3% for construction finance. At consolidated level, our gross stage 3 ratio improved further 2.9% down sequentially by 61 basis while net stage 3 ratio stood at 0.5% down 35 basis sequentially which is among the top quartile in the industry. Our impairment cost for the quarter student rupees 54 crore. This is largely attributed to stage one provisions on account of increase in the loan book and included student management overlay and provision to account for evolving macroeconomic conditions of rupees 16 crore.
Historically our credit cost has remained in the range of 0.6 to 0.7% of the average. Total assets at consolidated levels are provision coverage ratio of state free assets remained steady at 41.2% and our segment wide PCR also remains healthy and amongst the best in our peer groups. Let me now talk about our liability side. Our borrowings increased by 55% year on year and incremental borrowing sanction limits for the full year mark around rupees 10,950 crore rupees. We added 15 new lender relationships this year and taking the active relationship now to 35 plus.
We also continue to diversify our borrowing by mix by raising funds through other instruments such as non convertible debentures and commercial papers. During the year we raised rupees 2,187 crore from non convertible debentures and commercial papers. In addition, we also closed Last week our second public NCD shells for rupees 489 crore with average tenure of four years. As a result of MCLR reduction in our active effort on repricing existing borrowings, our cost of borrowings declined further by 18 basis quarter on quarter.
Our balance sheet remains robust with low leverage ratio of 3.3x providing ample headroom to support growth across business segments. Our standalone capital adequacy ratio CGCL is about 25.8% and 27.7% for a housing grant subsidiary. Our liquidity remains comfortable with over rupees 3964 crores in cash and bank balances, investment and undrawn credit line across CGCL and cghfl. On the technology front this year our focus was something fundamental or building fast, that is to build right. Four years ago we made a deliberate structural choice to move away from being a traditional nbsp that operates on technology to becoming a platform native AI first financial institution.
What we have built is not a static endpoint, it is scalable architecture that will continue to deepen operating leverage as we progressively embedded AI across the technology stack. Let me anchor this in the numbers first. As you all are aware our AUM grew 60% year on year disbursement grew by 83% while headcount grew just by 19%. The delta between disbursement growth and headcount growth is not incidental. It reflects technology and AI replacing linear growth with intelligent scale and this is clearly visible in our financial outcome.
As mentioned, our cost to income ratio for the year has compressed to 49% from 60% year on year and return on average assets expanded to 3.5% and return on average equity expanded to 16.5%. 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 into decision grade intelligence. In Q4 alone we processed over 115,000 customers interaction through speech to text pipeline and executed more than 40,000 multilingual AI voice interactions entirely autonomous and without human intervention.
The real value however is not in the volume, it is in the conversion of interaction into intelligence. These interactions feed into a continuous learning feedback driven system that generated over two 85,000 structured intelligence output during the quarter, each one tagged, scored and rooted into our credit risk and collection engine in real time. We have fundamentally graduated from process based lending to data and power decisioning. Our Bureau rule Engine processed over 61,000 applications in Q4 alone.
Our automated bank statement analysis pipelines completed over 29,000 acceptance without human intervention. What this means in practice is that a growing share of our book is now witnessing reduced variability, compressed tax and improved portfolio behavior coupled with consistency. During Q4FY26, our Capri loans customer app recorded over 31.5 lakh digital customer engagement in terms of financial through output, the app facilitated transaction of approximately rupees 784 crore during the quarter.
For the full year FY26 the app delivered over 85 lakhs customer engagement with an aggregate transaction value exceeding rupees 1700 crores. On the collection side, the system operates as a predictive closed loop framework. We triggered approximately 1:45,000 automated nudges every month driven by AI led action model. Our platform is built on an API first microservices driven architecture which handled worth 310 million external API calls in a single month across our various applications. Behind these external calls are billions of internal interactions that allows us to run the entire lending life cycles in real time.
At this scale we are no longer operating applications. We are running a unified intelligence platform that power high quality decisions at a scale. Let me now come to what we believe is the most important strategic milestone in this transformation journey. While most institutions today are consumers of AI, they integrate third party LLMs layer workflows on top and position that is transformation. Capri has moved into a different category. We have built and deployed our own specialized small language model SSLM that is Domain trained model, purpose built for financial services use cases in India and already operating in production for collections, communication across voice and messaging channels.
Because it runs within a controlled closed loop environment, it deliver our critical Property support simultaneously I.e. Low latency, high domain accuracy, zero external data leakage and near zero hallucination risks. Equally important, every output is auditable, external and aligned with regulatory expectations. This is not an incremental layer on top of existing system. It is a fundamental shift in how intelligence is created, controlled and deployed within the organization. I can now say that CAPRI technology and AI has become a mode and not merely a tool.
On the ESG front I am pleased to share that our ESG practices have been recognized by leading global independent rating agencies including SNP Global and Morningstar First Analytics. CAPRI Global has achieved an SNP ESG score of 70, ranking 20th globally within its industry and 7th in the Asia Pacific region, the highest amongst our NBFC peers. We have also been recognized in the S and P Global Sustainability Yearbook as the highest scoring NBFC in its category, receiving the prestigious Industry Mover Award.
Further, the company has established a sustainable financing framework independently validated by Sustainable Pitch through a second party opinion rated good and has been assessed as low ASG risk by Morning Style System Analytics. These ratings places us firmly among the leaders in ESG practices within the NBSD sector and reflect our adherence to globally benchmarked standards. Importantly, these assessments are based on publicly available, independently verified data, reinforcing the strength, transparency and resilience of our operating model.
Before we open the floor for questions and answers, let me sum up. We delivered a strong performance in FY26 with healthy AUM growth across our key lending segments supported by a diversified and predominantly retail secured portfolio. Profitability improved during the year driven by changing MIX to high yield products, improving margin, strong growth in fee based income and operating leverage from existing branch network. While asset quality remains resilient. With a strong capital position and continued investment in technology and distribution, we are well positioned to scale efficiently and are confident of achieving our AUM target of Rs.55,000 crores and sustainable return on average equity of 16% to 18% and return on average assets to 4 to 4.5% by FY28.
We shall now be happy to take questions.
Questions and Answers:
Operator
Thank you. We’ll now begin the question and answer session. Anyone who wishes to ask question may press Star and one on their touchstone telephone. If you wish to room yourself from the question queue, you may press STAR and two participants are requested to use handset while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. The first question is from the line of Ishan Gupta from Choice Institutional Equities. Please go ahead.
Ishank Gupta
Yeah. Hi sir. Good afternoon. So my first question is regarding our AUM Mix. Gold Loan AUM Mix is already reached 46% as of last quarter we were targeting around 45% gold loan mix. So what would be our target for the Gold Loan Mix?
Rajesh Sharma
Yeah, thank you. So Gold Loan Mix looks like the way we are operating opening more branches. Gold Loan Mix can be reached about 50%.
Ishank Gupta
Got it. Got it. And as of last quarter you mentioned that you were going to go to RBI to seek permission to open new Gold Loan branches. But in RBI in fair policy have done the requirement to take the permission. So what? What Is the target for new branch addition Gold loan branch addition over the next two years.
Rajesh Sharma
So next two years we would like to add about 700 to 800 branches including gold loan majority will be the Gold loan branches. And now as you rightly said we don’t require any permission so that will make us plan in a manner that we will be able to grow branches in a very time frame manner. This year we should be able to add about 350 branches in gold loan alone and all these brantes should be operational within this financial year.
Ishank Gupta
Got it. Our yields on Gold Loan have again dropped sequentially by 90bps. Last quarter we were targeting 18% gold loan yield. So what would be the sustainable yield for the Gold loan segment and overall blended yield?
Rajesh Sharma
So if you look at this growth have happened largely because we also followed a high co lending and BA book and in that we have decided that to capture the market and also to open the new market we lower the yield but we are able to do downtale through the co lending route. So meeting those banks criteria and some of the customer being whom we would not otherwise lend we have decided to lend in the co lending scheme and overall it’s it is an accretive to the overall profitability and contribution per branch While the yield has gone down that is compensated by much higher volume growth
Ishank Gupta
Sir, but the poll ending AUM in the gold loan segment has reduced sequentially from 39 odd percent to 31%. So going forward for specifically for Gold loan what would be the target in terms of poll lending?
Rajesh Sharma
So I think as a company between the DA and CO lending it will remain in the range of 20% is the target
Ishank Gupta
That is overall 20 to 25%.
Rajesh Sharma
Yes. No 20% not 20%. 20% overall AM will remain in the coal lending India across mix of all msme Gold and housing.
Ishank Gupta
Understood. And my last question was regarding the cost of funds so last quarter we said that we will be targeting a reduction of 20 to 25 basis over the next year but in the quarter itself we have witnessed a reduction of 18 to 20bps. So is there a possibility of further reduction and if yes, how much over the course of next two years.
Rajesh Sharma
So overall basis cost of fund have come down because we also changed the mix of borrowing by including the debentures and commercial paper and I think this year looking at the interest rate hike might happen the post election and other things I think we should be able to do about 10 to 20 basis this year we are not expecting much cost of borrowing go down but even though we’ll do 20 basis that will be very good from our perspective.
Ishank Gupta
So exit of around 9 to 9.1% for the year 9%
Rajesh Sharma
Conservatively you can consider 9%
Ishank Gupta
And for 28 any further reductions.
Rajesh Sharma
28. I think it will also be expect our some point of time credit trading upgrade to happen and that will be in addition to this rate reduction. If the credit rating happens in next six to nine months which we expect to in that case the further cost of fund will go down by another 20 basis.
Ishank Gupta
Would like to add in one last question. So our sustainable credit cost could be 0.6 or 0.7% for the year. Because for the quarter it came at 0.8%.
Rajesh Sharma
So sustainable our credit cost will remain by and large in the range of 0.7. This increase has happened because we have taken the management overlay as guided by a board and we are very conservative that way. So we taken about 16 crore rupees additional management overlay due to macroeconomic environment. And barring that if you look at our asset quality it has been best in the quarter in the year so. And almost majority of the provisions have also come because of the new loan book. So there is no slippage.
It has happened.
Ishank Gupta
Got it. All the best for the future. Thanks.
Operator
Thank you. A reminder to all participants that you may press star and one to ask question. The next question is from the line of Siddhesh from PL Capital. Please go ahead.
Unidentified Participant
Hi. Am I audible?
Operator
Yes sir.
Unidentified Participant
Hello. So Sidhas wanted to understand on the car loan front. So what is the strategy to monetize and what are the plans for starting other products in that entity?
Rajesh Sharma
So currently Carloan is a completely distribution business. We are currently distributing the leads generated by our team with about 12 plus institution and partner banks. And in the times to come we’ll add the more product like used car, credit card, personal loan and mortgages over the period of next three to four years. This year we’ll be adding the used car and the advantage will be the same Supervisory team and team of 1800 people will be able to drive the same business. So that cost allocation will happen on the higher revenue.
And next year we will be able to see that about 20 crore rupees of profit is able to deliver by the car loan entity alone. And idea is and Target is the next 45 years. This 20 crore has become to significant amount of 6070 crore rupees of income which is coming purely from the fee income. So in that direction this year we are adding another product of used car loan distribution through Our partner banks.
Operator
Understood. And how do you see AUM mix changing at the company level?
Rajesh Sharma
So as of now EU mix is about 46% gold. I think gold will become about close to 50%. And rest of the three segments of MFME, housing finance, construction finance will vary between 16 to 18% each.
Operator
Okay.
Rajesh Sharma
And
Operator
So lastly, can you help me with your AUM ROA
Rajesh Sharma
And ROE target for FY27 in terms of guidance? So as I said in my opening remark, also our guidance for the FY27, our aim will be to achieve a ROE about 4% and ROE not less than 16%.
Unidentified Participant
Understood, sir. That’s it from my side. Wishing you all the very best. Thank you, sir.
Operator
Thank you. The next question is from the line of Hardik Dara from Chromo Credit Advisor. Please go ahead.
Unidentified Participant
Hello. Good evening, sir. Am I audible? Sir, just. Thank you so much for taking this question. Just wanted to understand the strategy apart from gold loan on the other three verticals, msme, HSC and Construction finance. How aggressive are we planning to grow these other three verticals? And what can be the growth expectations? I agree that 16 to 18% is the tentative mix. But just wanted to understand that how aggressively will these three grow over the next two years?
Rajesh Sharma
So individually I think these segments will also grow in the range about. MSME will grow in the range about 20 25%. Construction finance will also grow in the range about 25 to 30%. And housing will also grow in the 25 to 30%. So overall if you look at our business mix is designed in a manner to grow in tandem with overall growth. Gold has done wonderfully well. Because gold price increase also helped in the faster growth. So we assume that price remains stable. We should be able to grow all the segment together.
Gold can still rise more because there are a lot of branch addition also happening. But all other segments will rise in the range about 25% to 30%. Got it. Thank you.
Operator
Thank you. The next question is from the line of Suani Singh from Seja Capital. Please go ahead.
Unidentified Participant
Hello. Hi, good afternoon. I wanted to understand how do you see origination growth trending in the car loan segment?
Rajesh Sharma
So, car loan. If you see we have seen about 18% growth. We expect our car loan originally will continue to grow in the range of 12 to 15% year on year. And next coming year our more focus will be improving the margins rather than the volume growth alone. FY26 we originated about 11,910 crore and which was up by 13% year on year.
Unidentified Participant
Okay, okay. Also with pressure on fee margins despite higher growth volume. Where do you see margin stabilizing and profitability settlement?
Rajesh Sharma
You are asking about the car loan or overall? So overall we clearly see there are two things. One is the operating scale is kicking in so that efficiency is coming in where the cost income ratio is coming down. And our overall efficiency is going on because of a technology part as well. And another efficiency, I would say that Gold loan branches, the old branches which are growing which is already delivering the high profit because breakeven point is long back is crossed and more volume the per branch AEM grows the more profitability improve in the Gold loan segment as well.
So current our branch for AUM about 17 crore and we make break in about 5 crore rupees. I think para branch union basis we are among the top three players in the country. And that speaks our profitability of the branch. So I think Gold loan business will start delivering the higher profitability. This is the per branch AUM in the coming year. And as far as the MSME and home loan is concerned, Home loan have achieved a base of about 7,500. So operating scale will kick in there also. And their margin will significantly improve in the coming year.
MSME is already stabilized. MSME margin will remain stable on the similar pattern what was in the current years.
Ishank Gupta
Okay, thank you so much sir.
Operator
Thank you. A reminder to all participants that you may press star and one to ask question. The next question is from the line of Prince Chaudhary from Pinch Wealth. Please go ahead.
Unidentified Participant
Yeah. Hi sir, can you share more light on what are the changes of RBI for the
Operator
New guidelines of co lending and how this will impact our growth for couple of quarters.
Rajesh Sharma
So RBI guideline in the co lending comes on the part of one is more clarity. Second on the loan of moratorium they have advised that interest accrued should be included in the LTV. And third the income assessment of the customer above loan of 2 50,000 should be done. So these are being implemented across our co lending partners and technology integration will take some time. So we expect the company to resume at the full volume with their co lending partners in the quarter of July to September. This by June I think most of the players will go live.
Couple of players have already gone live and rest of the partners will go live by the next quarter. So I think the full volume we will be able to see from there September quarter.
Operator
Thank you. The next question is from the line of Samia from Nirva Capital. Please go ahead.
Unidentified Participant
Hello, Good evening. Thank you so much for the opportunity. I just have couple of questions starting with what is the strategic rationale behind entering capital markets and how do you see this contributing to fee income.
Rajesh Sharma
Because of fixed income. Since we are being NVFC always maintain a high liquidity in our treasury and some of those crazy most of the time remain in the negative carry because we put the money in the debt mutual fund where negative carry sometime even two and two and half to 3%. Second that we have decided to start this vertical where some part of the book we will maintain in the treasury operation by buying the bond and downselling them. And also helping some of the issuer to raise a bond from the bond market by managing their publications.
So it will contribute to the fee income as well as also to reducing our negative carry in our treasury income. So it will incidental to what we are doing today. And I think next year you will see that once we get this category we are. We have been told by sages that by end of June we can have that coming in. But income target in the range about 40 to 50 crore rupees at gross level. At net level it will be in the range about 20 to 25 cr.
Unidentified Participant
Okay sir. Got it. And secondly what is the current deal of revenue contribution from fixed income and bond related activity.
Rajesh Sharma
So bond related activity the contribution is likely that it reduces the negative carry first. So if we be mark about every 600 to 800 could be booked. We remain and we expect to reduce almost 3% negative carry on this portfolio. So it helps contributing indirectly about 25 crore rupees of income to the bottom line.
Unidentified Participant
Okay sir. Thank you so much sir. That’s it for my text.
Operator
Thank you. A reminder to all participants that you may press star and one to ask question. The next question is from the line of Kushal an individual investor. Please go ahead.
Unidentified Participant
Hello.
Operator
Yes. Are you audible?
Unidentified Participant
Yes. Since we are expanding a lot of branches currently we have 1400 branches. And those old branches are going to become efficient in next year. And our Target is around 700 branches. What is the pad guidance we are giving for FY27?
Rajesh Sharma
So we have given the PAT guidance of next year FY27 about 1300 crore.
Unidentified Participant
Okay. Thank you.
Operator
Thank you. The next question is from the line of Amer from HDC here. Go. Please go ahead.
Unidentified Participant
Hello sir. Am I audible?
Rajesh Sharma
Yes. Yes, you are audible.
Unidentified Participant
Yes. My question is it can give like the LTVs on the on book for the gold lo. So we have a disbursal ltv. But if you can provide the entities on the hold ons which are on the book currency,
Rajesh Sharma
So portfolio level LTV is about 66% and on the new disbursement portfolio LTV is about 70%.
Unidentified Participant
Okay. And on the overall EM guidance, so I think previous quarter we had said we will be doing around 55,000 crores of AUM by FY28. So is there any update on that number? Because I think what we have said as a target for FY26 we have surpassed that. So is there any upward guidance on the AEM spring? And also in the overall. So you have mentioned, you know individually MSME would grow between 20 to 25 and construction, finance and housing would grow between 25 to 30. So in this kind of a mix, how do you see the gold loans also growing?
Because we are adding branches. So how do you see that also growing?
Rajesh Sharma
Yeah, so overall growth we are targeting conservatively 25% and we are giving a guidance of 46,000 crore by end of FY27 and about 57,000 crore by FY28. So we revised the FY28 guideline by about 2000 crore. And as gold loan is concerned you are rightly said that yes, we are adding more branches. So gold loan proportioned overall EU will grow. Gold loan will grow in the range of about 25 to 30%. So overall growth may remain in 2025 to 30% range. But conservatively we are seeing 25% and the gold within that segment will go little higher because we are adding more branches as well.
Unidentified Participant
Okay, got it sir. Thank you.
Operator
Thank you. A reminder to all participants that you may press star and one to ask question. The next question is from the line of Keshweed from Centrainsight. Please go ahead.
Unidentified Participant
Thank you for the opportunity. So since the cost of borrowings are declining, how much scope remains further for expansion and share?
Rajesh Sharma
So cost of borrowing further decline. I said earlier also that by the year end we are targeting about 20 basis points and another 20 basis points can also be achieved further from the rating Upgrade from the 12 months from the rating upgrade happens. So I think we expect next six months some positive news on that. But however it depends on various other factors and it doesn’t remain in our complete control. But we hope that all the environment and macro environment remain positive. We can expect and aim for that.
Unidentified Participant
Okay. And do we see any impact of recent macro situations on MSME book?
Rajesh Sharma
So far we have not seen any deterioration in our collection efficiency or asset quality. So we have not seen any signage as far as till now is concerned.
Unidentified Participant
Okay. And also the decline in capital adequacy appears mainly driven by subsidiary investment. So how do we think about this? Like what will be the capital allocation going forward?
Rajesh Sharma
So going forward we will increase the DA co lending that will conserve some part of capital and some point of time required. We will raise tier 2 capital also to shore up the capital base. So in nutshell about 18 to 24 months. Our aim is to effectively utilize all the downselling tools of BNCO lending and also raised tier 2 capital. So capital requirement is taken care of.
Unidentified Participant
Okay, thank you. That’s it from my side.
Operator
Thank you. The next question is from the line of Pehel Sharma from PG Capital. Please go ahead.
Unidentified Participant
Hello. I just want you to put some highlight on the strategic imprint like what is behind the proposed international bond issuance?
Rajesh Sharma
So international bond issuance with the purpose to diversify your resources of borrowing and it will give us one or more avenue to borrow the money and it can be done every year. We being into lending business always require the debt capital and which is one of the major raw material. So I think it is just opening that avenue and we have got the international rating done. But we are 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 next two, three, four months. Whenever it happens, we intend to reach and access the market depending on the underlying situation.
Unidentified Participant
Great, great. In addition with that question I have one more question that what are the key drivers like behind the improvement in GNPA and NMPA during the quarter?
Rajesh Sharma
So it is of course collection efficiency because a lot of emphasis is put not only on the technology but also on the ground by right hiring, right push, right training program, right AI enabled videos on various front and customer communication. So that has helped together across all verticals to improve our collection efficiency and hence our GMP net MP numbers are like that.
Unidentified Participant
Okay. Okay. Thank you so much and all the best.
Operator
Thank you. The next question is from the line of Kalmish from an individual investor. Please go ahead.
Unidentified Participant
Good afternoon. So my question is currently we are at 70% loan to value ratio. So what if the gold prices crash by 10 to 15% and how we manage that?
Rajesh Sharma
So I think we are very relevant question in terms of current volatility. So gold loan prices will not fall in one single day. So assuming that gold loan prices fall 4% and customer LTV Greece by to that extent either we give the customer ask him to additional money to bring back his Loan to value within the norm of 75%. Or he has to give additional gold to pledge to bring the LTV back in the norm and selling which we give him a notice that within 14 days if we don’t full take those goods margin goods we have right auction the gold and recover money.
So whenever it happens our teams on ground do collection calling and able to recover the money. For example only 1 lakh rupees 4% gold have fallen. We have to recover 4000 rupees. The jewelry worth about 5 and a half thousand rupees jewelry and I think a mix of those are able to do in most of the cases. And in case the customer don’t do as I said, we have right to auction the gold and recover money. So we hope the gold will not fall 10 15% in single day.
Unidentified Participant
Yes, I just asked a hypothetical question. But yeah. Thank you sir.
Operator
Thank you. The next question is from the line of Vignesh Iyer from Sequin Investment. Please go ahead.
Unidentified Participant
Hello sir, just one question from my side. So I wanted to understand what is the kind of growth that you can see on the insurance income side and the income side as a whole, you know in FY20000.
Rajesh Sharma
So I think insurance distribution is in purely in line with our AUM growth target. So insurance income should also grow in the tandem of about 25 to 30%.
Unidentified Participant
And overall the fee income, all the non interest income hard loan
Rajesh Sharma
Income will grow about 12 to 15%. Insurance income will grow in the line with our growth of 25 to 30%. And co lending income I would say that it will remain more or less same of the last year. Because co lending now da for 1/4 will be little lower side. So there may not be any growth in the co lending income but that will be compensated by the da. So more or less it will remain the same.
Unidentified Participant
Okay, thank you.
Operator
Ladies and gentlemen. We take this as a last question. I now hand the conference over to Mr. Rajesh chief for closing comments. Rajesh sir, please go ahead.
Rajesh Sharma
I thank you for participating in the earning calls today. Should you have any questions you can reach out to us or to our IR adviser and we shall be happy to answer your queries. I reiterate we are on track to achieve an AUM of 55,000 crore by FY28 with return on average equity of 16 to 18% and return on average assets of 4 to 4.5%. Thank you once again and have a happy week ahead. Thank you.
Operator
Thank you on behalf of mufg. That concludes this conference. Thank you. For joining us. You may now disconnect your lines.