Capri Global Capital's Gold Loan Growth Drives Q1 FY27 Earnings Beat

Investment View and Q1 FY27 Earnings Beat

Choice Equity Broking maintained a BUY rating on Capri Global Capital Limited (CGCL) following a Q1 FY27 earnings beat driven by strong assets under management (AUM) and net interest income (NII) growth. Profit after tax (PAT) was Rs 3,534 million, up 102.0 per cent year on year and 25.0 per cent quarter on quarter.

The reported performance was ahead of Choice Institutional Equities estimates. AUM was 2.4 per cent above estimate at Rs 401.1 billion, NII was 7.1 per cent above estimate at Rs 7,364 million, and PAT was 3.0 per cent above estimate. Choice has set a target price of Rs 280 using the residual income approach.

AUM Growth Led by Gold Loans

Consolidated AUM increased 62.0 per cent year on year and 9.5 per cent quarter on quarter to Rs 401.1 billion. Growth was led primarily by Gold Loans, whose AUM rose 110.6 per cent year on year and 13.1 per cent quarter on quarter to Rs 191.8 billion.

Loans grew 60.1 per cent year on year and 11.1 per cent quarter on quarter to Rs 312,855 million. Car loan origination improved 43.0 per cent year on year to Rs 32,829 million, supported by an average ticket size of about Rs 1.2 million.

Strong NII Growth and Operating Leverage

Q1 FY27 NII grew 77.2 per cent year on year and 23.6 per cent quarter on quarter to Rs 7,364 million. Reported net interest margin (NIM) improved to 9.7 per cent from 9.2 per cent in Q4 FY26, helped by a 170 basis point sequential increase in gold-loan yields.

Total operating expenses were broadly flat quarter on quarter at Rs 4,626 million. Consequently, the cost-to-income ratio improved to 46.5 per cent from 52.0 per cent in Q4 FY26. Pre-provision operating profit increased 70.8 per cent year on year and 24.7 per cent quarter on quarter to Rs 5,321 million.

Non-interest income rose 32.2 per cent year on year but declined 12.0 per cent sequentially to Rs 2,583 million, partly due to lower co-lending fees.

Asset Quality and Credit Costs

Asset quality weakened sequentially during the quarter. Gross Stage 3 increased 14 basis points quarter on quarter to 1.1 per cent, while net Stage 3 increased 6 basis points to 0.6 per cent. Credit cost was 0.8 per cent, and Stage 3 expected credit loss provision coverage improved to 43.3 per cent from 41.2 per cent in Q4 FY26.

• Management attributed the higher Stage 2 assets largely to the temporary effect of lower gold prices.
• The increase in Construction Finance GNPA arose from one account becoming an NPA. Management expects recovery within six to nine months through project resolution.
• Management indicated that a correction in gold prices could marginally affect growth but should not affect gold-loan asset quality.

Branch Expansion and Management Guidance

Management maintained FY27E AUM guidance of Rs 500 billion and raised FY28E guidance to Rs 650 billion from Rs 570 billion. CGCL plans to add about 400 Gold Loan branches over the next two quarters, mainly in South and East India, and 700 to 800 branches over the next two years.

Gold Loan branch productivity reached Rs 190 million per branch, compared with Rs 170 million in the preceding quarter, and management is targeting Rs 200 million. Management expects stable cost of funds through the remainder of FY27, gold-loan yields to improve by a further 50 to 75 basis points, and the cost-to-income ratio to remain around 44.0 to 45.0 per cent despite the expansion.

CGCL also collaborated with OpenAI to deploy enterprise artificial intelligence in underwriting, collections, customer service and knowledge management.

Broker Estimates and Valuation

Choice forecasts AUM and loan compound annual growth rates (CAGR) of 33.1 per cent and 35.3 per cent, respectively, over FY26 to FY28E. The forecasts are supported by the planned branch expansion.

Choice raised its FY27E and FY28E NII estimates by 3.0 per cent and 2.8 per cent, respectively, and its PAT estimates by 1.1 per cent and 3.5 per cent, respectively, due to stronger AUM and NII growth. The Rs 280 target price implies FY27E and FY28E price-to-adjusted-book-value multiples of 3.1 times and 2.5 times, respectively.