Capri Global Capital gold-loan expansion strengthens growth, margins and return outlook

Investment View and Valuation

ICICI Securities retains its BUY rating on Capri Global Capital Ltd after raising FY27E-FY28E estimates by 10-15 per cent. The broker has increased its target price to Rs 270 from Rs 250, based on an unchanged valuation multiple of about 2.5 times FY28E book value.

The broker believes that strong execution in retail secured lending, particularly gold loans, improving operating efficiency, resilient margins and rising fee income will support sustainable earnings despite continuing growth investments.

Q1FY27 Financial Performance

Capri Global Capital reported strong operating and financial performance in Q1FY27. Consolidated AUM rose 62 per cent year-on-year and 10 per cent quarter-on-quarter to Rs 40,112 crore, while disbursements increased 31 per cent year-on-year to Rs 11,114 crore. The customer base crossed 97.6 lakh.

Broad-Based Secured-Lending Growth

Growth was broad-based across the secured portfolio. Gold-loan AUM grew 110.6 per cent year-on-year and 13 per cent sequentially to Rs 19,179 crore, despite a correction in gold prices. MSME AUM stood at Rs 6,779 crore, up 24 per cent year-on-year, while housing AUM increased 42 per cent to Rs 7,815 crore. Construction-finance AUM rose 40 per cent to Rs 6,332 crore across 291 projects.

Gold-loan branch productivity improved to Rs 19 crore per branch from Rs 17 crore in Q4FY26. Employee productivity reached Rs 3.4 crore of AUM per employee, compared with Rs 1.8 crore a year earlier.

Co-lending and direct-assignment AUM reached Rs 8,126 crore, representing about 20 per cent of total AUM. Sequential growth moderated to 4 per cent during migration to the CLM-1 model. Income from co-lending and direct assignment declined 8 per cent year-on-year to Rs 65 crore due to lower disbursals. Non-interest income rose 28 per cent year-on-year to Rs 217 crore, led by insurance and car-loan distribution commissions.

Management Growth Roadmap

Management raised its FY27 AUM guidance to about Rs 50,000 crore from Rs 47,000 crore and increased the FY28 target to Rs 65,000 crore, implying more than 30 per cent CAGR. It plans to increase gold loans to about 55 per cent of AUM and add around 400 branches in FY27.

• Management aims to sustain RoAE of 19-21 per cent and RoAA of 4.2-4.7 per cent through FY28.
• A higher gold-loan mix, repricing, branch maturation and technology-led productivity are expected to support margins and returns.
• Fee businesses, greater co-lending and securitisation are expected to improve capital efficiency and earnings.
• Gold-loan yield was about 18.5 per cent, with management guiding for a further 50-75 basis point improvement.

Funding and Margin Outlook

Management does not expect a further reduction in cost of funds in FY27. However, it expects funding diversification through its USD 1 billion GMTN programme, non-convertible debentures, commercial paper and pass-through certificate transactions.

The anticipated increase in gold-loan mix, repricing and operating productivity is expected to support margins. Greater use of co-lending and securitisation is also expected to aid capital efficiency and returns.

Asset Quality

Asset quality remained healthy, with consolidated gross and net stage 3 ratios of 1.1 per cent and 0.6 per cent, respectively. Impairment cost stood at 0.7 per cent of average assets.

The stage 2 ratio increased to 3.8 per cent from 2.8 per cent, mainly because the correction in gold prices triggered loan-to-value-related margin calls. Construction-finance GNPA rose to 0.7 per cent following one account slippage, for which 70 per cent provision was taken. A Rs 125 crore DCCO-extension exposure remained standard.

Key Risks

• Competitive intensity and volatility in gold prices could affect growth.
• Slower-than-expected branch productivity could limit operating leverage.