Release Date: May 10, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Capri Global Capital Ltd (BOM:531595, Financial) reported a net profit of INR 8.6 billion, marking a 47% year-on-year increase and a 26% quarter-on-quarter increase.
- The company's AUM crossed INR 150 billion, reaching INR 156.5 billion, achieving a second consecutive year of 50% AUM growth.
- Gold loan AUM increased 3.1x year-on-year, crossing the INR 30 billion target, with exclusive gold loan branches reaching 750 as of March 2024.
- Housing finance book grew by 52.8% year-on-year, from INR 2,666 crores to INR 4,073 crores, with expectations of continued 30%+ growth.
- Non-interest income exhibited strong momentum, increasing 10% quarter-on-quarter and 25% year-on-year in Q4 FY24, with a full-year increase of 41% year-on-year.
Negative Points
- The cost-to-income ratio reached 70.5% during Q4 FY24, primarily due to strategic investments in expanding the team and marketing initiatives.
- Pre-provisioning operating profit declined 16% quarter-on-quarter to INR 1.096 billion, despite a 22% year-on-year increase.
- The net NPA ratio, although improved, still stood at 1.1%, indicating ongoing challenges in asset quality management.
- The company faced operational challenges due to new RBI regulations on gold loan disbursements, potentially impacting customer behavior.
- Despite significant investments in technology, the immediate impact on cost efficiency and productivity improvements is yet to be fully realized.
Q & A Highlights
Q: With the introduction of the new RBI regulation on gold loans, what operational challenges do you foresee for your branches? Do you anticipate an increase in defaults or a potential shift of customers back to the informal segment?
A: We do not foresee significant challenges. Most customers have bank accounts, and the RBI's clarification on cash disbursement limits will be uniformly followed by all NBFCs. This should not lead to a shift back to the informal segment.
Q: What percent of your gold AUM is cash disbursal-based?
A: It is difficult to pinpoint an exact percentage, but we have stopped cash disbursements following the new guidelines. Despite this, our volumes have not dipped, indicating that the transition to bank account disbursements has been smooth.
Q: Can you provide a brief overview of the housing market outlook and your plans for growth in this segment?
A: The demand for affordable housing remains strong, and we expect to grow our housing finance business by over 30% annually. We plan to add 20 to 30 branches each year to support this growth.
Q: Why was there a slight downturn in the car loan business this quarter compared to Q3?
A: The slight dip is due to a combination of factors, including a one-month period of lower volume and the process of shifting our operations to a new entity. However, we expect a 20% growth in car loans for FY '25.
Q: What measures have you taken to ensure the quality and valuation of gold loans?
A: We have trained around 1,600 staff members in gold valuation through a government-certified program. Additionally, we have robust audit processes and AI-based triggers to ensure the accuracy and quality of gold valuations.
Q: How do you see the competitive intensity in the gold loan space, and what are your growth targets?
A: We are not aggressively competing on rates but are expanding our branch network. We aim to achieve an AUM of INR 18.5 crores per branch next year, supported by co-lending arrangements that help us offer competitive rates.
Q: What is your outlook on the cost of funds and its impact on net interest margins (NIM)?
A: We expect the cost of funds to stabilize, with no further hikes anticipated. Our spread is currently around 6.4%, and we expect it to improve to 6.8%-6.9% due to the increasing proportion of gold loans in our portfolio.
Q: What is the average business per gold loan branch, and do you see this increasing?
A: The average AUM per branch is currently around INR 4.6 crores. We expect this to grow significantly, with a target of reaching around INR 12 crores per branch, similar to industry peers.
Q: What are your plans for the MSME segment, and what growth do you anticipate?
A: We expect the MSME segment to grow at a pace of about 15%, with gold loans and home loans growing at 30%-35%. This balanced growth will help us achieve our overall targets.
Q: How are you addressing the recent RBI guidelines on housing finance disbursements and interest charges?
A: We have implemented a system where interest charges start only when the check is handed over to the customer. This ensures compliance with RBI guidelines and prevents any undue interest charges.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
