Capri Global Capital Limited (CGCL) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Capri Global Capital Limited Q1 F527 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance, then this conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note, this conference is being recorded. I now hand the conference over to Mr. Hardik Doshi, Head, Corporate Finance and Investor Relations. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone, and warm welcome to Q1 FY27, 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 for today's call. The discussion around today's call regarding Capri Global Capital Limited's earnings performance is based on judgments derived from the results declared and information on business opportunities available to companies at this time. The company's performance is subject to risk, 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. The complete disclosure is available on slide 65 of the earnings presentation. Participants are requested to kindly take the note of the same. Format of the today's call would be opening remarks by the management team, followed by Q&A. Let me now introduce the management team for the Capri Global Capital present on the call today. With us, we have Mr. Rajesh Sharma, Managing Director and Promoter, Ms. Divya Sustar, Executive Director, Business Strategy, Mr. Kishore Loda, Chief Financial Officer, I would now request our Managing Director, Mr. Rajesh Sharma, to present his opening remarks on the results. Over to you, sir.

Thank you, Ardik. Good afternoon, everyone. I hope you all are doing well. We announced our unaudited financial results for the first quarter of FY27 on 27th July. I trust you have had the opportunity to go through our earnings 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 key developments during the quarter. Uncertain global geopolitical situation, energy security, oil and gold price volatility, rupee depreciation, and volatile capital market led to overall macro environment being soft for the quarter. However, Indian economy continues to be resilient and better placed amongst global economies supported by its relatively higher GDP growth expectation, strong consumption-driven demand, Large, employable workforce, and fast adoption to rapidly evolving technology landscape. In this soft macro environment, I am pleased to share that Capri Global has delivered yet another quarter of robust growth and profitability while safeguarding its access quality. One of the major developments on the technology front is that we have now collaborated with Open AI to bring enterprise-grade generative AI across key business functions to transform the way we serve our customers, empower employees, and build an AI-native lending institution. Some of the other developments during the quarter work, we established our first GMTN program for USG 1 billion global medium-term node, which will enable us to diversify borrowing mix going forward. Besides this, to establish our brand presence and to support our expansion plan in South India, we have now collaborated with renowned actor Nayan Tara as our brand manager. With this backdrop, I am glad to share that Capri Global continued stack record of delivering strong performance quarter-on-quarter in Q1 FY27, Let me now come to detailed business and earning performance for the quarter. We continued our strong momentum across all our lending businesses in Q1 FY27. Our consolidated AUM stood at Rs. 40,112 crores, reflecting a robust 62% year-on-year and 10% quarter-on-quarter growth. Gold loans grew an impressive 111% year-on-year and MSM grew at healthy 24% year-on-year, While housing loans rose 42% year-on-year, disbursements for the quarter rose 31% year-on-year to Rs. 11,114 on account of growing customer base and widening distribution networks. Our growth remains granular, diversified, and retail-led, with our customer base now exceeding 7.6 lakhs. For our gold loan business, we delivered a strong and well-balanced performance. In line with our strategic objective of growth driven by geographic expansion and branch productivity while maintaining focus on effective risk management, gold loan AUM saw robust growth to Rs. 19,179 crore, a sequential increase of 13% quarter-on-quarter. Despite the correction in gold prices, primarily led by healthy customer demand and improving bank productivity. Collateral weight in custody increased from 19 tons to 20.2 tons, an increase of 6% quarter-on-quarter, and number of active customers increased by 11% quarter-on-quarter. Following the addition of 89 branches in Q4 and 196 branches in FY26, our gold loan branch network during the quarter stood steadily at 1,000 branches, allowing those branches to mature and contribute to productivity. Our aggregate branch productivity continues to see a strong end and has increased now to Rs. 19 crore per branch versus Rs. 17 crore per branch at the end of previous quarter. Our branch expansion plan for the year is underway, and we expect to add 150 plus branches by end of Q2, reflecting our commitment to expand our presence in southern and eastern India. On the employees' front, the productivity front, while our AUM has increased significantly, our employee base increased only by 14% year-on-year, thus resulting in a significant improvement in employees' productivity to Rs. 3.4 crore AUM per employee versus Rs. 1.8 crore year earlier. Despite the gold price volatility during the quarter, our efforts in controlling asset quality proved effective with gold loan gross NPA at 0.3%, amongst the best in the industry, underscoring our focus on portfolio performance for the gold loan business, combining growth through capitalizing on vintage of existing branches while maintaining discipline on asset quality amid gold price volatility. Our MSME AUM grew to Rs. 6779 crore, up 24% year-on-year, and businessmen stood at Rs. 616 crore for Q1 FY27, up 32% year-on-year, led by steady execution and network expansion. Our branches that opened in Uttar Pradesh in Q3 FY26 are scaling up well and have started delivering Rs. 80 to 20 crore distribution per month. We are further expanding our footprint into Telangana in Karnataka with 16 branches scheduled to become operational from Q3 of this year. Within MSME, our micro lab business, which enables us to serve emerging self-employed borrowers with smaller ticket size requirement, is seeing steady growth, with AUM rising to Rs.876 crore at the end of QNF 527. On this segment, we implemented higher threshold for sourcing and selection of customers leveraging our data science capabilities, for example, a BRE and Bureau scorecard, getting criteria to disqualify non-eligible customers up front. On our housing AUM stood at least 7,815 crore, delivering a year-on-year growth of 42%, we continue to see resilient demand across the affordable housing segment, where rising income levels and low interest rate regime are driving demand for housing loans. Our expansion into high-potential southern India, states such as Andhra Pradesh, Telangana, and Karnataka, with 30-plus branches in the last quarter, is showing good traction with disbursement volume scaling up to Rs. 65 crore per month. This strategic expansion is stepped towards geographical diversification, increased portfolio granularity, and risk diversification while supporting improvement in yield over time. Further, our yields in housing finance segment have been improving, as a result of our continued focus on self-employed customer segment, which now comprises about 75% of AUMs. Our construction finance AEM saw healthy growth of 40% year-on-year to Rs. 6,332 crores spread across 291 active projects with an average sanctioned ticket size of Rs. 41 crore and outstanding portfolio ticket size of Rs. 20 crore. The book remains granular, secured, and well-diversified by geography, reflecting our focus on working with mid-size developers in metro and TA1 cities. We continue to emphasize discipline in writing through rigorous due diligence and escrow-based cash flow management, ensuring a risk-containment approach. Our total branch network remains steadily at 1,433 branches locations in Cuban FY27, with plans to open around 400 branches for the current year. We will continue to invest in expanding our network and geographical footprint in line with our goal of becoming a large-scale Pan-India retail lender. Now, coming to earning performance, let me now provide an update on our core earnings. Our blended yield and spreads on net advances improved further in the quarter to 17% and 7.8% respectively, driven by increasing shares of high-yield products, increase in our gold loan yield, and improvement in cost of borrowing. Our net interest income for Q1FY27 is due to pay 736 crore, up 79% year-on-year, driven by strong loan book growth and margin expansion. In line with our focus on building a diversified and resilient earning profile, we continue to strengthen our non-interest income stream in Q1FY27, In 2021, generating recurring quality fee income, non-interest income grew 28% year-on-year Turkish, 217 crores, contributing 23% on our net total income for the quarter. This strong increase was largely due by growth in commission on insurance and card-on distribution. In our insurance distribution business, we generated net income worth of 42 crore during the quarter. The continued investment in technology and digital transformation established insurance partnerships and distribution capabilities is helping us strengthen Capricare, our digital platform, as a scalable and customer-centric insurance platform. Capricare further expanded its product portfolio through the launch of Quotein Life and General Insurance products in partnership with Leading Insurance, strengthening the platform's ability to offer comprehensive insurance solutions. A significant milestone was the expansion of Capricare as an open market insurance distribution platform. The growing PUSP network has enhanced insurance accessibility beyond the lending ecosystem, providing seamless access to the distributors, connectors, and partners associated with the CAPRI group, enabling efficient onboarding, policy issuance, and customer service at great scale. Going forward, we will continue to increase our insurance offering for gold loan, housing, and MSME customers while expanding into cross-sell of retail health and motor insurance through digital channels. This digital-fast approach is expected to drive higher insurance penetration and meaningfully enhance fee income contribution over time. Our co-lending and DA-AUM served 74% year-on-year to increase 8,126 crore and 4% quarter-on-quarter, now accounting for 20% of total AUM. Reflecting our strategy of capital-efficient growth, co-lending volume slowed down during the quarter and grew by 4% quarter-on-quarter on account of new co-lending guidelines, Coming to effect the requirement of partner banks to move to CLM1 model of our relevant partners. Six banks have already moved to CLM1 model. We have completed tech integration for new arrangements with CLM1, and we are in the process of migrating other partner banks as well. To further enhance capital efficiency, we are also leveraging direct assignment and PTC instrument, which is showing a good demand and given higher share of gold loan and the PSL nature of our loan book, our income from co-lending and DA for the quarter-stool date to pay 65 crores, down 8% year-on-year, driven by lower disbustle volumes. Our car loan distribution business grew strongly with origination of Rs. 3,282 crores in Q&A 527, up 43% year-on-year. With growing footprint and deep relationship across 13 partner banks and financial institutions, we have built a scalable platform with Pan-India Network, which has potential to monetize further for distribution of other products. On the expenses front, our operating expenses remained flat quarter-on-quarter. This was mainly driven by only modest increase in number of employees by 156 employees on account of branch and optimization. In line with our guidance and conscious effort towards improving operational efficiency, our cost-to-income ratio further improved to 44.2% in Q1 FY27 compared to 49.4% in Q4 FY26. This sharp improvement signifies the benefit of investment in technology, a vintaging branch network, and rising productivity, and improving operational leverage across our businesses. As a result of margin expansion, operating efficiency, improvement, and strong traction of income, our pre-provision operating profits such as 71% year-on-year to Rs. 532 crores for the quarter. Further, we have continued our strong profitability momentum in Q1 FY27, delivering a robust path of the 353 crore rupees, up a strong 102% year-on-year. Our return ratio considerably improved during Q1 FY27 with return on average equity at 19.1% versus 13% a year before and return on average asset at 4.1% versus 3.2% a year before. Coming to asset quality. Now, look at the trend on asset quality. Our gross stage 2 assets increased by Rs. 385 crore, largely driven by increase of Rs. 373 crore in the gold loan, which is low risk in nature. As a result, this, our gross stage 2 ratio for the quarter increased to Rs. 3.8% from 2.8% in previous quarter. At consolidated level, our gross stage 3 ratio at 1.1%, and net stage 3 ratio is 2.6%, which is amongst the top quartile in the industry. During the quarter, our gross stage 3 assets increased by 74 crores, quarter-on-quarter mainly on account of Rs. 31 crore increase in construction finance. Our growth stage 3 ratio for the other segment largely remains in range of range bound with a gold loan at 0.3%. Our impairment cost for the quarters today to be 62 crore, up by 16% quarter on quarter, and was 0.7 on average total assets which is in line with our historical average of 0.6% to 0.8%. During the quarter, we increased PCR on construction finance segment to 70.5% and PCR on consolidated level increased to 43.3%. This is in line with our prudent provisioning policy of maintaining healthy PCR across segments and keeping buffer for evolving macroeconomic conditions in the form of management overlay. Coming to capital, liquidity position, and borrowings, let me now talk about our liability side. Our borrowing increased by 73% year-on-year, and incremental borrowing sanction limits was around 3,868 crore during the current quarter. We added five new lenders' relationship. During the quarter, taking the active relationship now to 40+, we also continued to diversify our core, our borrowings mixed by raising funds through capital market borrowing, such as non-convertible dimensions and commercial paper, which now contribute to about 10%. During the quarter, we raised Rs. 3,868 crore from bank borrowing and Rs. 1,271 crore from non-convertible debentures and commercial paper. As a result of our active effort on repricing existing borrowing, MCLR reduction, and optimized ALM through charging mix, our cost of borrowing has been consistent improvement quarter-on-quarter. Our balance sheet remains robust with comfortable leverage ratio of 3.7x. Capital adequacy ratio for both entities remains quite healthy at 24.7% for the capital global capital and 27.8% for capital global housing finance, thus providing headroom to support growth across business segments. Our liabilities, our loan tenure, and our assets are short to medium tenure, placing us in a favorable position on the AU front with cumulative surplus across all buckets. Liquidity remains comfortable with over Rs. 4,037 crores in cash and bank balance, investment, and undrawn credit lines. Coming to technology. This quarter marks an important milestone in our technology journey. AI had moved beyond being a capability. We were building to become a capability that is delivering measurable business outcomes across organization, origination, underwriting, collection, and customer engagement. Today, every customer interaction is analyzed by AI, not merely sampled. During the first quarter of FY27 alone, the platform analyzed 6.7 lakh customer calls, converting every conversation into structured intelligence beyond compliance monitoring. It identifies customer behavior patterns, repayment intent, emergency signal, fraud indicators, and sentiment shift, generating insight, that is, strengthen underwriting, optimize collection, strategies, improve customer engagement, and support targeted coaching for frontline teams. Beyond digital interaction, we have also created a rich layer of physical intelligence during the quarter. Over 2.64 lakh geotagged field visits were recorded across sales, credit, personal discussions, technical evaluation, and collection activities. Every widget is digitally verified in a location stamp, creating high-quality field intelligence that symptom fraud detection, validate process adherence, enriching and collecting data, and provide a more comprehensive view on borrowers' behavior than digital interaction alone. Together, this creates a continuously expanding data ecosystem where every transaction and every field interaction feeds back into AI models. AI volume scales the platform, becomes progressively smarter, enabling faster decisions, stronger risk management, and improving operating efficiency, creating a compounding technology advantage that strengthen with every customer interaction. Collection is where our AI platform delivers its most tangible financial impact. Kronos 4.0 is now deployed across the entire collection portfolio, continuously protecting repayment behavior, prioritizing customer outreach, and optimizing the next-based recovery action through a self-learning decision engine. Every customer interaction fits back into the model, making each subsequent intervention and more precise and improving recovery outcomes over time. Supporting this is our in-house omnichannel engagement platform, whose throughput has increased more than threshold from 166 625.29 messages per minute, reducing campaign execution time by 53%. In the first 12 days of June alone, the platform reached over 1.3 lakh customers with a 95.5% delivery rate for pre-due communication, demonstrating its ability to execute large-scale, highly targeted engagement with the Layered on top is our multilingual AI voice platform, operating across nine Indian languages, which analyzes every customer conversation for repayment, intent, sentiment, risk signal, and promise to pay while continuously enriching our collection intelligence. Field recovery has also become technology-led with our geotech collections visit, providing complete visibility, stronger governance, and measurable execution on the ground. The business impact is already evident. Nearly 90% of inbound payments across the organizations are digital, with MSME and housing finance exceeding 93%, reflecting a decisive shift towards more efficient, lower cost, and data-led recovery journey. Further, approximately 35% of collection across the MSME and housing finance verticals are now managed through technology-enabled solutions and the direct digital engagement with customers create a scalable collection engine that simultaneously improve productivity, lower service costs, strengthen risk management, and continuously enhance model performance on transaction volume, grow, Creating a compounding operating advantage. Underlying, all of this is our API-first microservices architecture processing nearly 70 million actual API transactions every month and enabling real-time or testeration across origination, services, and collections. As transaction volume increases, our AI models continually learn and improve, creating a compounding advantage rather than a static technology platform. Most importantly, these are not technology metrics. This translates directly into faster turnaround times, lower operating costs, stronger control, and better collection. The four operating levers that ultimately drive profitability, and because every one of these systems improves, as it processes more transactions, the advantage compounds with scale making our technology platform an increasingly meaningfully Competitive differentiator for the business. In addition, as part of our collaboration with OpenAI, over the coming months, we will explore the implementation of secured AI-powered deployments and workflows, tools to enhance customer service, knowledge, management, and the operational processes across its branch network. So, in summary, four quarters ago, AI at Capri was about building capability. Today, it is delivering measurable business outcomes. Before we open the floor for question and answer, let me sum up. We are delivering a strong performance in Q1 FY27 with healthy AU growth across our key lending segments supported by a diversified and predominantly retail secured portfolio. Profitability improved further during the quarter, driven by all-round performances across all metrics. Robust income growth, improving margins, strong growth in the fee income and opening leverage from our existing branch network, while asset quality remained resilient, with a strong capital position and a continued investment in technology and distribution. We are well positioned to scale proficiently and confident of revising our AUM target of Rs.65,000 crore by FY28 and consistent return on average equity of 19% to 21% and return on average asset about 4.2% to 4.7%. We shall now be happy to take questions.

Yes, sir.

Should we open the floor for Q&A?

Lovely.

Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to withdraw yourself from the question queue, you may press star and 2. Participants are requested to use hands-up while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question comes from the line of Kiran Shah with KSA Shares and Securities. Please go ahead.

Hello. Congratulations on a strong quarter. I just had a couple of questions. So on this case to increase, can you please split the 384-close sequential rise by segment? And is it recent origination or is it seasoning on older vintages? And also, why has the coverage been cut from 11.8% to 9.4% while the pool grew from 47%? What changed in the loss estimate and any mixed shift into gold? Thank you.

So, thank you for your first part of the question related to stage 2. Out of 385 crore, which is increased in stage 2, 10 crore have increased in MSME, 15 crore have been increased in housing. Construction finance, it has been decreased by 13 crore. Gold loan, it has increased by 373 crore. Thus, total increment in stage 2 by 385 crore. Gold loan, primarily it has gone up because the gold prices have on the lower side and quarter-on-quarter basis, we have seen the 4% decline in the price and that has resulted in more stage 2 cases.

Okay, thank you, sir. And one more question on the project finance. So, 125 crore under DCCO extension, is it inside or outside the 0.7% construction finance GNPA? And also, is it real slippage or just the new norm?

So, it is outside, and the construction finance, GMP, is about 7%. 1.7. 1.7%. 1.7%, yes, sir. And it is outside the... So, DPPO cases are not considered as NPA, they are still considered as standard.

All right. Thank you so much, and all the best for the next one.

Thank you.

Thank you. The next question comes from the line of Rushi Bhagal.

Right. Kokem Bank, please go ahead.

Yeah. So, first of all, congratulations to the Capri Global, one of the leading NBFC. And my question is, Ms. Divya posted one statement about the weak monsoon will impact on the gold loan increase. So, my question is, if the monsoon comes stronger, then it will increase the requirement of the gold loan.

What you say is, yeah, if the monsoon is weaker, some of the microfinance and farmer, marginal farmer will go for the requirement to meet their cash gaps by way of adopting the gold loan. However, I think the normal growth will keep coming, and in any case, we have seen that on a steady-state basis, growing here at 25% of books is absolutely possible. Plus, we will keep on adding the branches, so the more new branches will add the more growth. So the growth will happen by two accounts. Number one, from the existing branches, in normal Okay, thank you.

Thank you. The next question comes from the line of Suhani Singh with Ross Capital. Please go ahead.

Hello, sir. Good afternoon. So, I had a couple of questions. Earlier, you had indicated plans to add around G50 dedicated gold loan branches during FY27. But, however, the grant additions in quarter one appear to be relatively more test. So, could you provide an update on the rollout plan?

So, our rollout plan will be in Q2, Q2, about 150 branches, and then by balance, Q3, we will add another 250 branches, so total 400 branches, we should be up and running by Q3. That is the plan, and I think the plan is on the track. Okay.

So, are you still confident of achieving the full year branch expansion target? And should the addition be more back-ended?

So, I think as we predicted, as we communicated earlier, the branch expansion, now we have revised upward to 400 branches, and that will be completed on or before December 2026.

Okay, that's all, sir. So, the gold loan yields have improved to around 18.6% this quarter. Do you believe the current yields are sustainable, or should we expect some moderation or competition increase?

So, as a change in strategy, we have gone for the smaller ticket size, and accordingly we have changed our incentive plan to bring the attention on the smaller ticket size where the yield improvement is possible and which has taken place. So, I think next quarter also we will see some improvement in the yield, and current improvement has happened to about 18.5%, I think another 50 to 75 basis further improvement will happen in the yield.

Okay, that's it, sir. Also, the cost of funds declined by around 10 basis points during the quarter. So, given the current interest rate environment and your evolving borrowing mix, what scope do you see for reducing funding costs over the remainder of FY27?

So, I think FI27, we don't see much scope in the cost of fund reduction from this level. However, diversification perspective, we already approach publications of the bond, capital market, raising the commercial paper, raising the refinancing from institutions, and then bank borrowings. And now, some point of time, depending on the market condition, and we will also have set up the GMT program So, we can access the offshore dollar bond market. So, there will be enough diversification efforts have taken place, and we will see that the overall bank borrowing percentage will come down. But as regards to the cost is concerned, I think cost will remain more or less stable during the remaining quarters.

Thank you, sir. Thank you so much. All the best.

Thank you. Ladies and gentlemen, if you wish to ask a question, you may press star and 1. The next question comes from the line of Soumya Raghuanshi with Nirvana Securities. Please go ahead.

Good evening. Am I audible?

Yes, ma'am.

Am I audible?

Yes, ma'am, you're audible. Please go ahead.

Thank you so much for the opportunity. My first question was on gold loan mix. Gold loans now account for nearly 47-48% of the overall AUM. Considering the recent volatility and correction in gold prices, how do you see the optimal portfolio mix evolving over the maximum-medium term? Do you have an internal target for the gold loan contribution to the overall loan look?

So, I think in the medium term, gold loan should be, overall, AUM mix should be about 55%.

Okay, sir. Got it. So, my next question is on MSME portfolio. As the percentage of overall AUM has gradually declined over the last few quarters, could you elaborate on the key reasons behind this trend? Is this largely a function of faster growth in gold loans or have you relatively more selective in MSME underwriting?

So it was primarily because we were opening the new branches in the gold loan and we wanted those branches to achieve profitability fast. So, all the credit line allocation of capital was towards the gold loan segment, and keeping the overall growth in the range of about 50% to 60% annual growth, we have kept the gold loan in a higher priority, and accordingly, we have kept the very measured way of growth in the MSME segment.

Okay, sir. Okay, sir. Got it, sir. That's it from my side. Thank you so much, sir.

Thank you.

The next question comes from the line of Nivedita Chaudhary with ICSA Securities. Please go ahead. Congratulations. Ma'am, we are unable to hear you.

Am I audible now?

Yes, ma'am. Please go ahead.

Congratulations on a very good quarter, sir. I have two questions. Firstly, earlier we had targeted F527 AM target that was 47,000 crores, and now we have given 65,000 crores as F528 target. So, is it correct to assume that we are also increasing F527 target with an average of adding 3,500 crores each quarter? Hello.

So, we will give you those data offline.

All right. Thank you so much, sir.

Thank you. Participants, who wish to ask a question, may press star and one. The next question comes from the line of Kaniqsh Gupta with SS Family Office. Please go ahead.

Hello, sir. Very good afternoon to you. Sir, just a question on the organizational continuity, sir. As we have seen over the past few years, we have observed a fairly elevated level of leadership transitions across the organization. So could you help us understand how the board thinks about leadership succession and retention and whether the current phase of organizational evolution is now largely behind us? And more importantly, what gives you the confidence that the company has reached a point where investors should expect greater stability and continuity in the senior leadership over the medium to long term?

So, I think if you see in totality, all the business heads who drive the revenue, they are quite stable. If you look at our presentation, corporate presentation on the website, which clearly say that Gold Loan Business Head, since the day we started, it is there. Construction Finance Business Head is since there almost about more than nine years. The Housing Finance, Chief Business Officer, almost 10 years with us. So, as far as MSM is concerned, the earlier business head was about seven years, and after that he has transitioned to somewhere else and we have got the replacement. So, we cannot say that on the business side there was any churning. As far as the risk side is concerned, Grabo Shah, on the credit side, is almost more than 7-8 years with us. CRO, Sanjeev Srivastava, joined almost 3 years with us. And so if you look at all these, couple of barring 1 or 2 positions, all the positions, and that is quite normal that 10-20% churning in leadership happens. That is quite natural.

Sir, can the board state that these leadership transitions were unrelated to any structural role?

No. Second, our head of internal audit, CCO and CFO, when our housing subsidiary have achieved a scale and to comply the RBI regulation, you have to like the moment 5,000 crore AUM is achieved, you have to have a separate CCO and in the housing finance. So, we are internally Everybody transferred from parent NVFC to the HFC. So these three positions of head of internal audit, CCO, and CFO have been transferred from here to there. So it is not that they moved out. So you have to look at in totality. So I believe that if you look at all the numbers together, there was just transitions are normal and taking in account all these internal transfers, hardly it is very few positions.

In the last couple of years, you have seen multiple CEOs turning up and still the position is vacant. So, when can we see the CEO coming up for the longer term?

There is no CEO position vacant and there is no plan to bring any CEO.

Okay, sir. Thank you for answering me. All the best for the future.

Thank you.

Thank you. Before we take the next question, we would like to remind participants that you may press star and 1 to ask the question. The next question comes from the line of Santosh Shetty with LGC Capital. Please go ahead.

Good evening, sir. Hello.

Yes, sir.

Sir, you had previously guided towards achieving a medium-term ROE of 4.2% to 4.7% and ROE of 19% to 21%. With ROE already crossing the 4% mark in Q1, could you share the expected timeline for achieving these targets ranges on a sustainable basis?

By FY28. I think we are quite confident to deliver this on a consistent basis, despite remaining on the expansion phase, 400 to 500 branches a year.

Okay, sir. And, sir, another one. While the car loan businesses continues to report healthy year-and-year growth, origination volume and values have moderated subsequently during the quarter. Is this primarily driven by a strategy of prioritizing profitability over growth, or are you witnessing some moderation in demand or increased competition intensity? So, like, how do you see this business evolving over the next few quarters?

So, I think in car loan origination, there is a distribution of car loan sourcing through our employee and dealer network and passing on to the bank, to the technology platform. And in that, we follow the unit economics. So, at the cost of profitability, we are not increasing the volume. There are some players who do the cash burn and grow their volume, But we are following a philosophy not to do the cash mark. And every transaction should result in some profitability. And we will not chase the only growth. Growth has to be along for the profit region. And keeping in that philosophy, I think our growth in the car loan is happening to the extent which is not causing us any kind of loss. But, you will see in the next couple of years, these margins will improve because at some point of time, we are going to launch the used car loan product also, as a pilot and then full-fledged. So, we are not growing the book only because of the, for the sake of the numbers.

Okay, thank you so much. Thank you, Phantom.

Thank you. The next question comes from the line of Payal Sharma, the DD Group. Please go ahead.

Hello. Congratulations on a good set of numbers, sir. So, I have some follow-up questions. First is that spreads have expanded to approximately 7.8%, right? So, like, which is significantly above historical levels. So, like, should investors consider this to be a sustainable level, or is there still scope for further improvements, like product mix optimization and lower borrowing cost?

We believe that a spread will remain in this region only in the range of about 7.8 and maybe around 8% some point of time in gold loan proportion cross 52-53%. That is a time we can see about 8%. So, it should be stabilized around that level.

Okay, okay, sir. And my next question is related to, like, cost to income. So, like, the cost to income ratio improved meaningfully, like, as operating leverage continues to play out. So, like, with significant grant expansion planned during the year, how should we think about the trajectory of the cost to income ratio, like, over the next 12 to 18 months?

So, I think next 12 to 18 months, cost-income ratio should remain in this range. It will not go further down, keeping in mind that we are going to add more branches, and the more branches expenses will get offset in the larger volume from the old branches. So, but cost-income ratio, if you are able to maintain this 44%, 45%, I think this is a good achievement and this will support us better the ROE and ROE.

Great, great, sir. And my last question is, like, given the recent corrections in the gold crisis and the possibility of further volatility, So, like, how do you assess the potential impact on gold loan disbursement and medium growth, yield, and asset quality? And additionally, like, what risk management measures are in place to mitigate these risks?

So, gold loan being a short-natured, short-term product, and the gold loan prices does not fall in one go 10, 15, 20 percent. There is a set, automatic, automated, system-driven margin call alert, and then some point of time when LTV breaches beyond a level of 85%, the auction notices are issued. So with that mechanism in place, I think it has proved to be well controlled and well behaved when the gold prices have fallen. We have seen in last six months, gold prices remain very volatile, and quarter-on-quarter basis also, if you see, there is a fall in the golden prices. So, we don't see that despite fluctuation, there will be any risk on the asset quality side. The further fall in the golden prices might affect some kind of a growth, but we are still operating in 1,000 branches and intend to add more and more branches. I think that will not impact beyond a point to us.

Thank you, sir. Thank you.

The next question comes from the line of Laksh Hinguvrani, with Chair India Securities. Please go ahead.

Yeah, sir. Congratulations on the good set of numbers. My first question was regarding the loan-to-value ratio for our gold loan. And secondly, till what extent are we protected from a fall in pricing of gold?

Can you repeat the first part of the question again?

What is the average loan-to-value ratio for gold loan?

So, average goal-to-loan ratio at the disbursement basis is about 71%. If you look at the slide number 7 of the presentation of the earnings, you will see that. That is displayed in slide number 7. So, disbursement basis is about 71%. And this 29% margin is a good enough margin from the risk perspective.

Okay. Thank you. That answers my question.

Thank you. The next question is from the line of Siddharth with FK Securities. Please go ahead.

Yeah, hi. Can you hear me? Yeah. So, sir, my question is regarding the asset quality. So, there was a deterioration in the construction finance book where the GNPA increased from 0.3% to 0.7% this quarter on a QOQ basis. Sir, can you please elaborate a little more on the reason for that and what can be the outlook on the asset quality going forward?

So, if you talk about the construction finance, this one particular account has slipped in the NPA, and we have also taken the provision of about 70% in that account. So, that is the reason that asset quality in this quarter has gone up. But we have seen the cycle in construction finance that within six to nine months, we are able to recover these accounts which are backed by strong collateral of project. We find some other project developer to take over the project and get out of the account. That we have shown repeatedly in the past in many occasions. So, in the, even the current quarter also we've seen the strong recovery of about 30 crore rupees from the past old NP account. So, this is normal, and on a steady state basis, this is long term basis, I think we will not see any kind of volatility in construction finance. During the interim period, some accounts slip in the NPN, then they again get recovered, but some point of time, some account happens. So, this is a continuous exercise, a continuous process. This keeps happening, and we keep recovering from old accounts.

Okay. Nice to know that. Thank you, sir. And regarding the overall asset quality of our loan book, what is the outlook for the remaining quarters of this financial year? Are we seeing any stress in any particular segments like MSME? Or what is the overall outlook on the asset quality front or the guidance from your side?

So, since we are into 100% collateralized secured segment, We have seen that last few quarters, the collection efficiency has been very good, and companies have invested heavily on their own collection team of 525 plus teams. We invested in the technology, data science capability, and culturally also we felt very strong collection culture in the company. So we believe that there will be not much surprise in the collection side. If current gross NPA are about 1.1 percent, and net NPA is about 0.6, I think this is a very, very good numbers. We don't see any reduction from here, but at the same time, the kind of price level, yield level we are landing in all these products, But our own benchmarks are GNP of about 2%, and that is 1%. These numbers are much below that. And so it reflects that our good performance in terms of asset quality and collection efficiency.

Okay, sir. Thank you. Thanks. Thanks for answering my questions.

Thank you. Ladies and gentlemen, due to time constraint, that was the last question for today. I now have the conference over to the management for closing comments.

I thank you for participating in the earnings call today. I would recreate we are committed to delivering strong and consistent performance quarter-on-quarter and are glad to revise our AUM guidance upwards to Rs. 65,000 crore by FY28, a 30% plus EGR with return on average equity of 19% to 21%, And return on average assets of 4.2% to 4.7%. Should we have any questions, you can reach out to us or our IR advisors, and we shall be happy to answer your queries. Thank you once again, and have a happy week ahead. Thank you.

Thank you, sir. On behalf of Capri Global Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.