Capri Global Capital branch productivity and co-lending drive gold-loan growth

Investment View: Gold-Lending Franchise at an Inflection Point

In its initiating-coverage report dated August 26, 2026, Deven Choksey Research views Capri Global Capital Ltd (CGCL) as a gold-lending franchise at an inflection point. The broker has a BUY view, supported by three structural drivers:

• Higher customer and branch productivity.
• Operating leverage from the existing cost base.
• Co-lending that improves capital efficiency.

The broker expects these levers to support healthy AUM compounding and strong returns. However, it notes that the gold-loan book has limited seasoning and has not yet been tested through a full gold-price cycle.

Volume-Led Gold-Lending Growth

The central growth thesis is increasingly volume-led gold lending rather than reliance on gold-price appreciation. In Q1 FY27, gold AUM rose 13 per cent quarter-on-quarter to Rs 19,179 Cr despite a 4 per cent decline in gold prices. Collateral held increased 6.3 per cent to 20.2 tonnes, while active gold customers rose 11 per cent.

CGCL had approximately 1,000 gold branches, with around 760 active customers per branch versus approximately 1,400 for Muthoot Finance. More than 60 per cent of CGCL's branches are below optimum productivity. Deven Choksey sees substantial scope to increase volumes from the already-built network.

Management plans to add 400 branches by December 2026, including 150 by the end of Q2 FY27, with a focus on southern and eastern India. The broker considers southern India a meaningful execution risk because entrenched competitors, high branch density and distinct borrower behaviour could pressure growth or credit costs.

Operating Leverage and Productivity

Reported operating leverage has been material, with cost-to-income declining from 70.5 per cent in Q4 FY24 to 49.4 per cent in FY26 and 44.2 per cent in Q1 FY27.

The broker cautions that the improvement in cost-to-income is driven as much by income and net interest margin expansion as by cost containment. Management guides for cost-to-income of 44-45 per cent while expanding the branch network. Deven Choksey forecasts 43.4 per cent in FY27E and 39.7 per cent in FY28E, explicitly identifying this as its most aggressive forecast assumption.

Even using a 44.5 per cent cost-to-income ratio, the broker's target price would decline only to approximately Rs 310.

Co-Lending and Financial Forecasts

Co-lending is a key capital-efficiency lever. In Q1 FY27, co-lending penetration was 29.5 per cent of gold segment AUM, 20.7 per cent in MSME and 13.8 per cent in affordable housing.

The broker estimates that co-lending could contribute approximately 211 basis points to FY27E return on average equity. It forecasts FY27E co-lending income of around Rs 260 Cr and approximately Rs 2,617 Cr of capital released through off-book AUM.

Asset Quality and Key Risks

Asset quality was sound in Q1 FY27, with gross non-performing assets at 1.06 per cent and net non-performing assets at 0.60 per cent. Stage 2 loans rose to 3.77 per cent of gross loans, largely because a 4 per cent fall in gold prices caused loan-to-value-related migration in the gold book. Gold GNPA remained at 0.3 per cent.

The broker considers a sharp correction in gold prices to be the dominant risk. Such a correction could reduce loan eligibility, trigger margin calls and auctions, and compress AUM and revenue rather than create large credit losses.

Other risks identified by Deven Choksey include:

• Greater concentration in gold lending.
• Regulatory compliance risks in a rapidly expanding branch network.
• Competitive pressure on gold yields.
• Deterioration in MSME asset quality.
• Equity dilution.

The model assumes a Rs 2,500 Cr placement in Q3 FY27 at Rs 250 per share. This is a broker assumption rather than management guidance.

Valuation and Target Price

Deven Choksey values CGCL at 2.5 times FY28E adjusted book value per share of Rs 125.3, after fully deducting net non-performing assets, to arrive at a target price of Rs 316.

The multiple reflects a modelled FY28E return on equity of 18.7 per cent, high-teens sustainable returns and low-double-digit terminal growth. The broker uses FY28E because the assumed FY27 equity raise distorts book value and return ratios, and because branch maturation needs time to be assessed.

A 15 times FY28E EPS cross-check gives Rs 332, but the broker adopts the lower book-value-based target.