Capri Global Capital (NSE:CGCL) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to Capri Global Capital Limited Q2 and H1 FY 'twenty seven Earnings Conference Call. As a reminder, all participant lines will be in a listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Note, this conference is being recorded. I now hand the conference over to Ms. Shweta. Thank you, and over to you, ma'am. Thank you. Good evening, everyone, and a warm welcome to Q2 and H1 FY 'twenty seven Earnings Conference Call for Capri Global Capital Limited. This is Shweta, Senior Vice President, 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 earnings performance is based on judgments derived from results declared and information on business opportunities available to company at this time. The company's performance is subject to risks, uncertainties and assumptions that could cause results to differ in future.

1:14 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 today's call will be opening remarks by the management team followed by Q and A. Let me now introduce the management team from Capri Global Capital present on the call today. With us, we have Mr. Rajesh Sharma, Managing Director and Promoter Ms. Divya Sutar, President and Executive Director, Business Strategy Mr. Kishore Lodha, Chief Financial Officer and Mr. Sanjeev Srivastava, Chief Risk Officer. I would now request our Managing Director, Mr.

2:01 Rajesh Sharma, to present his opening remarks on the results. Over to you, sir. Yes. Thank you. Good evening, everyone. I hope you all are doing well. We announced our financial results for the second quarter of FY twenty seven on October 27. I trust you have had the opportunity to go through the 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. Global energy shock, aggressive monitoring tightening and surging domestic inflation as the critical macroeconomic headwinds led to overall environment being soft for the quarter.

2:48 Amid this soft macro environment, Capri Global delivered strong growth and profitability in Q2 FY 'twenty seven, successfully navigating challenging macros marked by rising funding costs, global monetary tightening and a 25 basis RBA repor rate hike. Yet I am delighted to share that Capri Global raised $300,000,000 through its GMTN program during as shown FY twenty twenty seven via a Madden U. S. Dollar senior secured bond issue. As part of our liability diversification journey, we further raised INR 500 crore via commercial papers in addition to INR $12.71 crore raised in Q1 FY twenty twenty one through a combination of NCD and CP. We continue to diversify our funding structure to capture global growth opportunities, optimize capital efficiency and hedge against rising domestic interest rates.

3:47 Moreover, as part of our branch network expansion journey, we added 176 branches for the quarter gone by with continued focus on expanding digital journeys, embedding AI into customer and collection operations and strengthening the platform that supports the lending cycle. Last quarter, we demonstrated our capacity to scale AI. This quarter, the scale has translated into measurable customer adoption and structural cost efficiencies. Besides establishing firmly our footprint in South with two brand campaigns starring acclaimed actor and entrepreneur, Nayantara is our brand manager, helped us in campaign reach INR141 million plus positive visibility impact of 93.8% and gold loan search growth of 173% plus, our ESG rating continues to soar higher as we achieved a crystal ESG score of 72, placing it in the leadership category.

4:47 With this backdrop, I'm pleased to say that Capri Global delivered a strong quarterly performance in Q2 FY twenty twenty seven, continuing its growth momentum and maintaining asset quality, while delivering highest ever quarterly profit of INR $4.18 crore, a 77% increase year on year and H1 FY twenty twenty seven profit of INR $7.72 crore, almost double from the last year. The cost to income ratio improved to 42.6 from 48.1% in in H1 FY twenty twenty seven, reflecting stronger operating leverage. H1 FY twenty twenty seven ROE stood at 20.4% reinforcing the company's progress on sustainable profitability.

5:39 Now coming to our detailed business and earnings performance during this quarter. We continued our strong momentum across all our lending businesses in Q2 FY twenty twenty seven. Our consolidated AU stood at INR $43,008.78 crores, reflecting a robust 62% year on year growth and 9% quarter on quarter growth. Gold loan grew an impressive 102% year on year and MSME grew at healthy 25% year on year. While housing loan rose 39% year on year, Disbursements for the quarter rose 49% year on year to INR 13,309 crore on account of growing customer base and widening distribution network. Our growth remains granular, diversified and retail led with our customer base now exceeding eight lakhs.

6:31 For our gold loan business, we delivered a strong and well balanced performance in line with our strategic objective of growth driven by branch expansion while maintaining focus on effective risk management. With a net addition of 176 branches during the quarter, our overall branch network is to date sixteen oh nine branches as of September 26 with eleven fifty four branches dedicated towards gold loan. While we entrenched in Southern Belt through gold loan in Andhra Pradesh and Telangana markets, the North And Central part of Uttar Pradesh, Madhya Pradesh and Rajasthan also saw a strengthening of gold loan branch footprint in Q2 FY twenty seven. AUM saw robust growth to INR 21,000 crore, a sequential increase of 10% quarter on quarter led by steady customer demand in productivity gains.

7:28 Our aggregate branch productivity continues to remain resilient and now stands at INR 18.2 crore per branch versus INR 19.2 crore per branch, which is function of rapid network expansion and addition of new branches during the quarter and the natural time lag for new branches to achieve full operational velocity. Alongside increased employee base in gold loan business, the employee productivity from INR 1.8 crore a year earlier to now INR 3.4 crore. This steady productivity gains and the fact that with over 86% branching network have already making profits continue to support Capri's gold loan book expansion. Collateral weight in custody increased from 16 tonnes a year ago to 21 tonnes in Q2 FY 'twenty seven, an increase of 28% year on year and 4% quarter on quarter and number of active customers increased by 44% year on year and 8% quarter on quarter.

8:26 The strategic branch expansion that stands supporting volume growth as improving branch productivity at existing locations continue to sustaining a strong book growth momentum despite underlying market volatility. Importantly, LTV on fair disbursement during the quarter remained disciplined at 73.8%, in line with the increased RBA's prescribed limit for small ticket loans and permissible limit for income generating loans. On the asset quality front, Stage two spike remains a blip as our collateral cover remains highly resilient, while we're rigorously managing overdue account through targeted collection strategies and timely auctions. Capri Global maintains stringent auction policy versus competition to curb loss in the event of acute price volatility.

9:13 Because the gold loan portfolio is predominantly granular and short term, Capri's digital first ratio will act as a continuous feedback loop to catch credit deterioration before it turns into bad loans. Driven by data analytics, Capri's gold loan business utilizes automated LTV tracking, real time LTV breach alerts and rapid recovery mechanism to minimize actual losses and establish a clear competitive edge. Overall, Q2 marked strong performance for gold loan business, combining growth through capitalizing strong branch expansion alongside maintaining discipline on asset quality amid gold price volatility. Our branch expansion plan for the year is underway and we expect to close the financial year with approximately 1,500 branches reflecting our commitment to expand our presence.

10:01 Our MSME AUM grew to INR 7,016 crores, up 25% year on year and investment stood INR 8.60 crore for Q2 FY twenty twenty seven, up 36% year on year, primarily attributed to new geography foray, namely in Delhi, Uttar Pradesh, Mumbai and Pune. Moreover, our expansion into new geographies focuses heavily on direct sourcing, which has driven a higher revenue contribution from our internal direct team. Within MSME, our micro lab business continued to gain traction with AUM rising to INR929 crore as of end of Q2 FY twenty twenty seven. This vertical enable us to serve emerging self employed borrowers with smaller ticket size requirement. In this segment, we have implemented BRE getting criteria to filter out unsuitable customer prospects right from the start.

10:54 Said that, while exercising caution in sourcing, we are refining our sourcing strategy to target higher tier profiles and increase the average ticket size, thereby proactively elevating overall input quality. In Q2 FY twenty twenty seven, asset quality remained steady at 3.1%, similar level of Q1 supported by strategy, focus on middle and higher level customer segment across digit sizes and the tech initiative like the new risk panel moving beyond traditional borrower profile, the platform synthesized location industry sourcing and employee performance metrics into a unified risk assessment. Our housing AUM stood at INR 8,325 crores delivering a year on year growth of 39% anchored by robust customer retention, disciplined portfolio management and the progressive scaling of the South India franchise.

11:52 While focusing on current network productivity, we intend to enhance presence in the Southern States, particularly Tamil Nadu and Andhra Pradesh, where we see attractive opportunities for affordable housing finance. From a product and customer segment perspective, we will continue to focus on smaller ticket loans and higher yielding business with increased emphasis on self employed non professional customers, which now contributes 76% to our AUM. Sequential asset quality held steady with G and P standing at 1.2% on Q2 FY twenty twenty seven, reflecting our consistent adherence to disciplined credit and risk management framework. Our Construction Finance AUM saw healthy growth of 51% year on year to 7,503 crore spread across three zero four active projects with an average sanctioned ticket size of INR 48 crore and outstanding portfolio ticket size of 25 crore. The strong growth for the quarter comes ahead of positive demand and healthy traction in residential sales. Our portfolio remains geographically well diversified, reflecting a strategic focus on midsize small developer across metro and Tier one cities. This footprint expanded further in Q2 with our marine to Tamil Nadu metro market. Our construction plan book remains granular with emphasis upon disciplined underwriting through rigorous due diligence and escrow based cash flow management, ensuring a risk containment approach.

13:16 Q2 FY twenty twenty seven saw sharp improvement in asset quality with negligible NPA reported for the quarter led by recoveries from return of accounts to the tune of about INR 8.5 crore and we further expect recoveries over the next twelve months. Our total branch network expanded to sixteen oh nine locations in Q2 FY twenty twenty seven with a net addition of 176 branches during the quarter. We are steadily expanding our network and geographically reach to establish a large scale Pan Indian retail lending footprint. Now coming to earning performance, let me now provide an update. Our blended yields and spreads on net advances increased in the quarter to 17.58.3% respectively, driven by increasing share of high yield products and leveraging competitive cost of funds. Our net interest income for Q2 FY 'twenty seven stood at INR $8.12 crore, up 69% year on year, driven by strong loan book expansion.

14:19 In line with our focus on building diversified resilient earning profile, we continue to strengthen our non interest income stream in Q2 FY twenty twenty seven, reinforcing our strategy of generating recurring quality fee income, non interest income grew 34% year on year to INR $2.73 crore, contributing 25% over net total income for the quarter. This strong increase was largely driven by growth in commission on insurance distribution and treasury gains. In our insurance distribution business, we generated net fee income of INR 51 crore during the quarter. On the IRDA consultation paper, based on our review of the consultation paper, we expect the primary impact to be in the areas of distributor governance, sales monitoring, customer disclosure, audit trail, policy tagging, reporting and compliance oversight rather than any fundamental change in the insurance distribution model. We have initiated a GAAP assessment covering sales, journeys, distribution management system, customer consent capture, policy issues, workflows, training, certification record management, information system and regulatory reporting.

15:30 Also, Capri Global leverage a tech driven distribution model to maintain efficiencies, proprietary insurance tech platform utilizes data analytics, AI and digital channels, such as apps and call centers to structurally lower customer acquisition cost. This advanced technology architecture will ensure seamless operation transition across products and channels fully aligning with the proposed regulation. Moreover, compared to peer MBSE that only heavily on insurance cost selling for pretax profit, Capri Global's core earnings remains highly anchored to retail loan book like gold loan, housing finance, MSME, co lending. Therefore, if implemented, the new draft guidelines, while FY 2027 may not likely see much impact, we expect return on average equity for FY 2028 and 2029 to decline by about 1% for consolidated level.

16:22 Also, the consultation paper puts forth the framework that could allow higher remuneration for distribution in the underserved market, including rural areas, smaller towns and smaller cities, thereby incentivizing distributor where customer access is limited, Capri Global could be a potential beneficiary here. Our core lending AUMs are 60% year on year and 12% quarter on quarter to INR 9,083 crore, now accounting for 21% of total AUM reflecting our strategy of capital efficient growth. As you would be aware, new co lending guidelines have come into effect from 01/01/2026 and as per that, investors already started moving to the new CLA guidelines once existing contracts expire.

17:07 Over half of the number of our partner bank have already transitioned to the new CLA guidelines, while such a transition may cause a temporary softness in disbursement in the co lending mode. Advanced technology integration and stronger bank partnership have ensured that we are able to maintain our 21% share despite these changes. Also, the near term impact is expected to be offset by rising direct assignment arrangement with the later now contributing 28% to our co lending AUM. Partner Bank continued to show strong demand for these arrangements, attracted by the private sector lending compliance of our loan book and gold portfolio. Our core lending and BA income for the quarter stood at INR 72 crore, up 11% quarter on quarter, driven by deeper engagement with partner banks.

17:54 Our car loan distribution business maintained steady momentum with originations of INR 3,601 crore in Q2 FY twenty twenty seven, up 27% year on year. With a growing footprint and deep relationship across 13 partner banks and financial institutions, we have built a scalable platform with Pan India presence of eight twenty one locations with potential to monetize further distributors and other products. On the expenses front, our operating expenses increased 7% quarter on quarter. This was mainly driven by net addition of $14.77 on account of higher branch addition and strategic network expansion during the quarter. Yet the cost to income ratio improving to 41% in Q2 FY twenty twenty seven from 44% in Q1 FY twenty twenty seven and forty nine percent in Q2 FY twenty twenty six, reflecting our continued focus on operating efficiency.

18:49 This sharp improvement signifies the benefit of investment in technology and maturing branch networks, rising productivity and improving operating leverage across our business. As a result of margin expansion, operational efficiency improvement and strong traction in fee income, our pre provision operating profit surged 84% year on year to INR $6.36 crore for the quarter. Further, we continued our strong profitability momentum in Q2 FY twenty twenty seven, delivering a robust profit after tax of INR $4.18 crore, up 77% year on year. Our return ratio considerably improved during Q1 FY twenty twenty seven with return on average equity at 21.6% versus 14.4% for the previous year and return on average assets at 4.4% for the year versus 4% for the previous year.

19:48 Now coming to asset quality. We saw improvement in asset quality across each of our business segments. Except gold loan, our gross Stage two assets spiked by twelve sixty six crore, which is entirely attributable to gold loan Stage two spiked by similar level and are temporal in nature. Also given the high collateralized value of the underlying assets and focus on proactive collections. Following the RBA revised gold loan guideline with effect from April 2026, which required accrued interest to be factored into LTV ceiling for bullet loans, most major gold loan lenders move towards shorter tenure products. We similarly introduced monthly and bimonthly repayment frequency loans in Q1 FY 'twenty seven. This shorter cycle led to technical delinquencies driven by repayment convenience rather than borrower ability or willingness to pay. Shorter loans simply trip overdue threshold sooner. This was a widely reported industry experience. We have already discontinued these schemes and reverted to standard longer tenure structures.

20:58 The increase in reported GNPA in gold loan particularly reflects product level repayment dynamics and our calibrated approach to collateral enforcement rather than a corresponding increase in expected credit losses. Importantly, the underlying collateral coverage and historically demonstrated recovery performance continue to provide substantial protection against principal loss. As part of our transition to the revised regulatory framework, we introduced certain shorter tenure repayment structure during Q1 FY twenty twenty seven. While these products were designed to facilitate more frequent repayment discipline, the change in repayment frequency created some friction for customers accustomed to conventional billet repayment structure resulting in high technical delinquencies.

21:55 On gross Stage three assets is INR 5 by INR 95 crore quarter on quarter mainly on account of INR INR 126 crore increase in Gold Finance segment. However, INR 45 crore were written off on account of construction finance slippage of Q1, wherein we recovered INR 9 crore during the quarter and expect further recoveries over next twelve months. Our consolidated gross Stage III ratio spiked by 22 basis quarter on quarter to 1.2% due to spike in gold loan at around similar level. Housing loan Stage III remained steady at 1.2% and Construction Finance Stage three improved significantly dropping to 0.02 level on account of write off and recoveries as mentioned earlier. The net Stage three ratio stood at about 0.8%, up 22 basis sequentially, still standing among the top quartile in the industry.

22:45 Our impairment cost for the quarter stood at INR 79 crore. This is largely attributed to the return of accounts and construction finance book and prudent management overlay and provision to account for evolving macroeconomic condition. Our credit cost for the quarter stood at 0.8% and we expect to maintain credit cost in the range of 0.6% to 0.9% level on a sustainable basis going forward. At consolidated level, our provision coverage ratio on Stage III assets stand at 33.3% and our segment wise PCR also remains healthy and amongst the best in our PA Group. Now coming to capital, liquidity position and borrowings. Let me now talk about liquidity side. Our borrowing increased by 82% year on year and incremental borrowings sanction limits was around INR 4,428 crore. We now have 40 plus lender relationship.

23:40 We also continue to diversify our borrowing mix by raising funds through other instruments such as non convertible debentures and commercial paper. Just after the close H1 FY 'twenty seven derailed INR 160 crore from non convertible debentures besides the INR $12.71 crore days in Q1 FY 'twenty seven. As a result of liability diversification and our active efforts on repricing existing borrowing, our cost of borrowing have increased only marginally quarter on quarter to 9.2%. Our balance sheet remains robust with low leverage ratio of 3.8, providing ample headroom to support growth across business segments. Our stand alone capital adequacy ratio for Capri Global Capital is 22.727.8% for Capri Global Housing Finance. Our liquidity remains comfortable with over INR 6,057 crore in cash and bank balances, investment and undrawn credit line for the consolidated entity.

24:44 On the technology front, over the years, technology at Capri has evolved from an operational enabler into strategic differentiator. Our proprietary platform, artificial intelligence and digital infrastructure are translating into measurable gains in productivity, credit discipline, customer engagement and operating leverage. With our technology ecosystem predominantly developed in house, we have the ability to continuously refine platform, recalibrate decision model and respond accordingly to evolving portfolio behavior and business requirement. This enables us to embed intelligence directly into operating architecture, strengthening execution efficiency, consistency and control as we scale. During Q2 FY twenty twenty seven, this progress was evident across digital adoption, underwriting collections and AI led productivity digital penetration across our MSME and housing businesses continues to demonstrate sustained momentum with 91.2% of the inbound payment received digitally in September compared to 90.7% in June. Our Capri loan application facilitated over INR 17 lakh transaction aggregating approximately INR $5.94 crore during Q2, adjusting 47% quarter on quarter growth in transaction value.

25:56 Monthly transaction value increased consistently to INR $2.19 crore in September, more than doubling INR 106 crore in January. With over three lakh transacting customers, the application is progressively evolving into a high engagement self servicing transition ecosystem. Our proprietary underwriting intelligence platform, Sentinel, continues to mature into an integrated credit listening ecosystem, combining rule based automation, behavioral analytics and portfolio informed risk intelligence. Our evolving underwriting architecture brings together Decision AI, Vision AI, Generative AI, emerging agent AI capabilities to interpret financial information, validate documentation, assess borrower behavior and identify risk exceptions.

26:44 These interconnected intelligence layers progressively equip credit managers with real time insight, contextual risk assessment and actionable recommendations, enabling faster, more consistent and better informed credit decisions. During Q2, our Bureau rule engine evaluated over 1.08 lakh applications, registering 34% quarter on quarter growth with automated policy validation origination. In parallel, over 21,000 bank statement assessments were processed through intelligent analytical workflows. The larger transformation is from fragmented, manually intensive training assessment towards edge integrated AI assisted decisioning architecture where human judgment is augmented by real time intelligence. As these capabilities mature, we expect to improve underwriting productivity, accelerate decision turnout, strengthen portfolio selection and create a structurally more efficient credit operating model, supporting disciplined credit cost and sustainable risk adjusted returns.

27:46 Our collections transformation is underpinned by Pegasus, our proprietary collections execution platform operating in conjunction with Cronos, our collection intelligence model. The integration of these capabilities is progressively transitioning our collections architecture from conventional activity led recovery processes towards predictive, behaviorally segmented and intelligent orchestrate intervention. Technology enabled collections across MSME and housing increased to 34% in September compared with 32% in June. Our speech AI and conversational intelligence capabilities have already achieved meaningful production scale. We are progressively extending these capabilities across our gold loan portfolio for approximately eight lakh customers, initially focusing on delinquency management, repayment reminders and collections, speech intelligence, enterprise customer interaction, document intelligence and structures, unorganized information and vision intelligence to strengthen user verification.

28:45 Predictive model support risk differentiation, while conversational system facilitate contextual customer engagement. Our next phase of technology development is focused on the convergence of agentic AI intelligent workflows orchestration and ultra low latency decisioning. We are preparing to introduce a cluster of specialized AI agents across our digital customer channel designed to provide multilingual round the clock assistance and progressively automate defined servicing workflows. In parallel, we are developing an in house decisioning framework targeting reduction in processing latency from seconds to milliseconds for eligible automated decision. This convergence of real time data, predictive intelligence and autonomous workflows execution represents an important progression towards increasingly frictionless customer journey, faster decision making in higher states through processing.

29:41 Our emphasis will remain on translating these innovations into measurable improvements in transactions, economics, processing productivity, decision consistency and customer experience. As we look ahead, the convergence of our technology architecture, advanced analytics and artificial intelligence is fundamentally redefining the economics of our operating model. We are progressively building an intelligence led enterprise. The cumulative impact extends well beyond conventional productivity improvements. It creates the foundation for sustained operational leverage, structurally lowering marginal cost and scalable growth, while reinforcing the quality, consistency and resilience of our earnings. On the ESG front, we are pleased to share that Capri Global's ESG practices have received recognition from leading global rating agencies.

30:33 The company achieved an S and P Global ESG score of 70, ranking twentieth globally and seventh in Asia Pacific and was recognized in the S and P Global Sustainability Yearbook as the highest scoring NBFC in its category, receiving the prestigious Industry Mover Award. Capri Global also achieved a crystal ESG score of 72 and MSEEG rating of 73, placing it in the leadership category. The company has also been assessed to having low ESG risk by Morningstar Sustainalytics. Our commitment to sustainable financing is further reflected in our sustainable financing framework. We received a good rating through an independent second party opinion by Sustainable Pitch. We also strengthened the credibility and transparency of our ESG disclosures with video providing third party assurance over Scope one, Scope two and Scope three emissions, including finance emissions.

31:26 This represents a significant milestone, particularly as relatively few NBFC will attend assurance covering this breadth of emissions disclosure. We also released the third edition of our sustainability report, reflecting our continued focus on transparency and alignment with globally benchmark standards. Together, these achievements reinforce our commitment to responsible growth and the integration of sustainability consideration across the company. Before we open the floor for question and answer, let me sum up. We delivered a strong performance in Q2 FY twenty twenty seven with healthy AUM growth across our key lending segments, supported by diversified and predominantly retail secured portfolio. Profitability significantly improved during the year, driven by changing mix to high yield products, improving margin, a strong growth in fee based income and operating leverage from existing branch network, while asset quality remains under control.

32:21 With a strong capital position and continued investment in technology and distribution, we are well positioned to scale efficiently and are confident of achieving our AUM target of INR 65,000 crores and by FY twenty eight and sustainable return on average equity of about 20 to 21% and return on average assets between 4.2% to 4.7% by FY twenty eight. We shall now be happy to take your questions. Thank you very much. We will now begin the question and answer session. Tone telephone. If you wish to remove yourself from the question queue, you may press star and 2.

33:07 Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Ishank Gupta from Choice Institutional Equities. Please go ahead. Good afternoon. Congratulations for a good set of numbers. So my first question is large in the whole loan industry have observed a decline in yields over last few quarters. So majority of this peers have their network, particularly in South, and we are aspiring to build the build the network there. So how how we are targeting to defend the yields on gold loans?

33:55 And could you also please enlighten the trend that we expect in terms of incremental and overall portfolio yields? Yes. Thank you. So we have if you have seen, observed our numbers, our yield has improved slightly by keeping a focus on a ticket size, not growing on a larger ticket size segment and doing more of a teaser loan and falling in the only growth target and the competition. We are focused on granular growth where ticket size is not as high as 5% and above.

34:42 And some of the contribution have also come because the moment gold loan customer default their interest rate also goes up. And with this combination, I think our yield has improved by 19%. Going forward, even while the competition is increasing, we are quite confident that our yield will not go significantly lower, and we will always maintain an equilibrium between the yield growth and asset quality. We do not wish to grow at a low yield, rather we will focus on if required, we can always increase the lever of our smaller ticket lending in the gold loans rather than going for the big ticket side. So I think that strategy is playing well. Our data science tool, we are able to identify which are the customer, which are likely to result into giving a better yield.

35:37 And that is where we differentiate, while we have also launched Vaparmila, Movoso and all. But again, in that also, we focus on the smaller ticket size customer. So with this strategy, I think we should be able to withstand this competitive pressure and should be able to maintain our yields. Thank you. Next question is from the line of Laksh from Share India Securities. Please go ahead. Good evening, sir. This is Warren from Share India Securities, and congratulations on your strong set of numbers.

36:22 Sir, you highlighted about Viapat Mela. I think so there, the gold loan was starting at around 11%. So can you tell me I mean, us that how much of overall gold loan was given in this Yapar Mela at what rate of interest was it given? I mean, if you can just highlight that. So when you launched the Japar Millar that also not for all the number of days, they have been given for a particular day to immediately attract the customer attention and bring them in. But actually, when the customer comes in, necessarily that every customer you will be offering those kind of rates. While we can offer those rates to the bigger customer, but the smaller customer for various other regions then they so there could be that low LTV, low interest rate, while the maximum LTV in some of the smaller customers still we maintain our original rate.

37:21 And so that is a different kind of activity where you create a budge, but you always keep a sharp focus that you should not end up lowering the portfolio yield by substantially doing the business at low yield basis. And precisely that is reflected in our numbers. No issue, sir. Sir, also if you can tell me, I mean, your AUM per branch has gone down, I mean, from INR 19.2 crores to around 18.2 crores. So what is the reason for this? Because you're expanding your branches continuously in the whole loan segment. So why this AUM per branch is actually coming down? I mean, if you can just highlight something. So last quarter number of branches versus this quarter number of branches addition have happened.

38:09 So numerator, the numerator effective put in, the new branches will immediately will not do the AUM. So on a base of 1,000 crore where branch was INR 19 crore per branch AUM. You add the new branches numbers there, then automatically 154 branches, if you add that, those 150 branches, these are INR $3.04 crore rupees, not INR 19 crore rupees. That effect will be seen in the average. Okay. So that means, I mean, the pace at which you are going to add the gold loan branches, this number will come down further in coming quarters. And then because you're adding gold loan branches, right? So efficiency perspective, how we do see that our more than eighteen month gold loan branches, there is much still be about INR 20 crore.

38:54 The new branches, average you'll find depending on the what phase, it will be within INR 4 crores to 7 crore. Okay. Okay. Got it, sir. One last question, just wanted to understand, sir, because I mean there are several states who have actually declared lots. So what is the impact on this lot on your business, I mean not only gold loan, but other business as well? And also, will you go slow in any of the categories because of this dot like situation? I would like that Sanjeev Sivasar to answer this. Yes. So largely, we have analyzed all our portfolio, where the for those geographies where the drought has impacted. So as far as my MSME, HL, CF is concerned, we have practically not seen any impact. As far as gold loan is concerned, obviously, the branches that are in semi urban and rural areas, we have seen an opening sign of some stress there.

39:53 But of course, we are properly collateralized, and we have like right kind of security to cover this kind of any kind of unforeseen that might crop up in the future. Okay. But sir, would you go slow in terms of disbursement or sanction in these areas? Sorry, if you can repeat that question. Sir, would you go slow on disbursements or sanctions in these areas where you are seeing a little bit stress? Yes. So of course, wherever we are seeing a stress directly coming from the agriculture sector or these things, where we are tightening our trade screen. And we will as and when the numbers unfold and we get more understanding on this, we'll be increasing the fire ratio for income generating loans. We will reduce the LTV.

40:42 So we'll do those kind of activities, first of all. Thank you, sir. Thank you for answering my questions. And once again, congratulations on the strong set of numbers. Thank you. Thank you. Next question is from the line of Vishang Gupta from Choice Institutional Equities. Sir, your line got disconnected. So please go ahead. Yeah. So what trend do we oversee in incremental cost of funds and overall cost of funds by this end of this year and next year? We are not currently witnessing material pressure on our blended cost of domestic borrowing supported by the structure of existing liabilities and continued improvement in our credit profile.

41:36 A significant proportion of domestic borrowing is linked to MCLR based benchmark, where contractual reset provision provide a degree of insulation against immediate interest rate pricing because these rates get reset at the end of either six months or twelve months is the contracts are. Consequently, changes in benchmark rate do not immediately necessarily translate into equivalent or immediate increase in overall borrowing costs. More importantly, our improving profitability, operating scale and credit profile have enabled us to negotiate lower lending spreads with several banking partners, including on existing facilities. These reductions provide a meaningful offset against potential increase in benchmark rates. Accordingly, so far, there is no increase in the cost of 20%, but gradually over a period of time when the interest rate goes up and the MCLR get reset, to that extent, the rates will go up, But we'll also do offset by borrowing in the capital market short term money because our gold loan portfolio is behaviorally is about less than six months. So we'll increase that mix of shorter tenure borrowing of commercial paper and NCDs, where we are able to borrow at a cheaper rate.

42:52 But considering around 70% of our overall borrowings is bank term loan. And with an MCLR reset of six months down the line this year, we may... Within 50 bps repo hike, we may see about 25, 30 bps hike in our cost of funds. Is it fair to assume? So MCLR, whatever to that extent, it will increase of the bank. To that extent, on the day of reset, that much cost of fund will go up. So if we assume that repo rate will not directly translate the entire hike in the MCLR, So MCLR goes by 15, 20 basis to that extent, yes, it will increase. Understood. And third, sequentially, gross and net NPA has seen a sharp uptick. So could you explain a moment moreover what the slippage is driven by any specific geography? Or was this broad based?

43:48 So as we said, our slippage have not happened in MSME housing or construction finance. It has happened only on the gold loan. So gold loan, our slippage have increased. As I said, because there are just short term different tenure of the loan were introduced during the because of the new guidelines where we have given one month, two months, three months. And based on that, in gold loan portfolio, we have seen the Stage two have gone up by INR $12.66 crore. And this is a temporary behavior. We are quite confident that by end of the next quarter, this will significantly come down back because now those schemes where the payment was or interest was due between one and two and three months, they have been reduced.

44:47 Understood. That's it from my end. All the best for the next quarter. Thank you. Next question is from the line of from ICICI Securities. Please go ahead. Congratulations, sir, on good set of numbers. So given the strong performance in H1, do we expect to increase in AM, I mean guidance? Are we revising our FY twenty twenty seven guidance? So 'twenty seven guideline in terms of AUM, we are maintaining it about INR 50,000 crore. Already it is about INR 44,000, slightly better because of maintaining guidance at the INR 50,000.

45:33 As far as the profit after tax is concerned, I think we'll be about INR 1,600 crore. Next question is from the line of Gagandeep Singh from Doon Funds. Sir, congratulation on great set of number. My question was on the gold NPA. As you said, just wanted to confirm that this NPA gross... NPA in the... Net NPA would go down from the next quarter? Sir, you're not audible?

46:28 Am I audible now? Yes. The increase in reported gold loan delinquency during the quarter was attributable to identifiable largely operational factors other than a corresponding deterioration underlying credit quality. We are undertaking a detailed assessment of the contributing factors and have already implemented corrective measures, including discontinuation of the shorter tenure repayment structures that contributed to these technical delinquencies. So by end of the next quarter, you will see significantly delinquency coming down in the gold loan. And in any case, our loan to value remain very conservative. Its portfolio level is about 70%, leaving adequate margin and room available for us to Next question is from the line of Sadar Shah from Spark Private Wealth Management.

47:36 Please go ahead. Yes. First of all, thank you for the opportunity and many congratulations to the Capri Global team for another excellent set of performance in the quarter. Sir, I had two questions actually. Now my first question was related to gold loans. You said that we were actually quite comfortable with the ticket size actually of the gold loan, and we are looking to actually decrease our ticket size or maybe maintain our ticket size actually, not going up the scale at least, maintain our yields actually. But if I look your Slide eight, and which you have mentioned the average ticket size, your average ticket size has been increasing for the last three quarters.

48:23 And now it's reaching almost to like 14,000. So I wanted to understand some perspective on that as well. At what level are we looking to stabilize on the ticket size, actually, especially when we are now expanding to some region where the competition is quite high? This is my first question. So what remains that our ticket size is still at less than 3 lakhs ticket size. And if you really see, there are some of the competition, we are doing the gold loan above INR 5 lakhs ticket size. And that is where the interest rate is very low in terms of net realization is lower side. So our focus will continue to remain in the below INR 3 lakh of ticket size where yields are better.

49:12 While you have to put more efforts, but you can command the yields better there. Simply, we are also not going in this CGCL loan competition, but focusing on our core smaller ticket size retail portfolio. And with this strategy, we have seen that last both the quarter, we are able to improve our yields and while maintaining the growth in our targeted growth trajectory. Okay. So basically, is it safe to assume that we'll be actually stabilizing with 3 lakhs and whichever target segment or slash target customer actually are there? Yes. And my second question was related to this new core lending guidelines.

50:01 Now almost major banks have already transitioned to that and Capri being 21% of the portfolio through the core lending part. So I wanted to understand the perspective that based on the provisions, how according to you, how will the new provisions certainly affect Capri Global in terms of your core lending plus or means slash originating of new loans or or is it or how it will affect your part of borrowings as well. So I wanted to understand that what is the net effect actually of these provisions on your side actually? So sir, as per new guideline, income will now get recognized over the lifetime of the contract instead of upfront and then revised co lending guideline.

50:57 So the impact is that you can't book the upfront income in the co lending contracts. Now as far as the various other operational changes are concerned, where within fifteen days, simultaneously, this investment has to happen and certain LTV, etcetera, norms has to be aligned with the new core gold lending guidelines. Integration with the bank partner have already happened more than 50% of our partner. And that is the reason that we are able to grow quarter on quarter about 12% in the core lending. Further, we also started doing direct assignment group, where so that will also help us to do the more of down selling our portfolio through DA. And with this combination, that will become very asset light model where we are able to get the entire spread, but our capital is released the moment we down sell able to do co lending.

51:55 So the overall impact is it is a capital light model without compromising the return. And in the books of the bank is reflecting the retail lending and private sector loan reflects another private sector. So it is a win win situation for both. Okay. So basically, we can assume your core lending income, which is your noninterest income, might get a hit once the actually entire website or the new scheme actually comes into force into your books of accounts as well? Just to clarify, the co lending income earlier used to get upfront booked. Now in the new guidelines, you cannot book it upfront.

52:41 So I think up fronting it changed. However, co lending providing the benefit that you need not to provide any capital because you already down sell that portfolio. However, you get the entire spread in your books. So as far as the earning potential is concerned, there is no change in that. As far as the allocation of capital is concerned, there is no change in that because capital get released. Only change is that you cannot do upfront upfronting of the income of the core lending portfolio that is booked over the life cycle of the contract of the coal lending. Okay. Okay. Got your point, sir. Thank you and all the best for your quarter. Next question is from the line of Neet from Integrity Ventures.

53:38 Yeah. Thank you very much for the opportunity, and, you know, congratulations on the great. Sir, just wanted to understand on the demand in the SME segment. Are we seeing any kind of stress because of geopolitical and macroeconomic issues on our work and on the demand? So that is my first question. So if you look at GNPA of segmental the MSME segment, it has remained quite stable. If you look at last three, four quarters, it has been remained in the range of about 3% to 3.1%. So there is no stress we have seen in the MSME portfolio.

54:24 So far, geopolitical situation has not given any impact on that. And growth is also having good. We are able to grow. We have discussed about close to INR $5.60 crores during this quarter and able to grow this portfolio as per our target. Okay. And just want to understand on the bank additions, what kind of bank additions we are targeting in the mix of Q3 and Q4? So this year, we intend to add about as per the has given us approval for 600 branches. We are going to add about 500 branches this year in the gold loan alone.

55:09 Besides that, we'll add more branches in the MSME and affordable housing. Last quarter, had 176 branches out of which 154 branches were for the gold and about 22 branches for the non gold segments. Got it. So 500, we would be adding in more than additional MSME also we have done, right? We'll be adding more MSME as well as in affordable housing segment. Okay. And last on the OpenAI partnership, we discussed in the last call. So what is the update on the technology integration that we have anticipated?

55:56 So I'll ask Vijay to take this question. Hi. Good afternoon. So on OpenAI, we have already initiated the partnership. The same has been institutionalized within the organization across various work teams. Definitely on the development side, we have started seeing an in terms of the productivity and other matrices. However, OpenAI is also working with our team to customer service side as well as the loan productivity management. And that product the entire project is under progress and we'll keep on giving you updates as it moves forward in the journey. Yes. Yes. Yeah. Thank you very much, and all the... Wait for the next.

56:52 Thank you. Next question is from the line of Sonia from Neera Securities. Please go ahead. Good evening. Thank you so much for taking my questions. Sir, gold loan AUM has doubled year on year, but live accounts have declined approximately from 10.1 lakh in q four to 9.83 in q two, if I'm not wrong. While average ticket size has increased to 2.14 lakh, How much of the AUM expansion is added... Attributable to gold price appreciation and higher ticket sizes rather than genuine customer acquisition? And are we seeing any moderation in underlying business volumes? So live account per customer have gone down. It it naturally means that the borrowing by the same customer in different land have gone down.

57:59 But overall number of live account Sir, you're not audible? Sir, are not audible. So if you look at our total number of customer have gone up from 659,000 to 713,000.

58:49 So there is an increase in number of unique customer about 8%. As far as the live account number have gone down because live account per customer has gone down. It means that same customer who are borrowing in different land, those land have gone down, but there is a growth in the customer have happened. So it is not that new customer have not been added. So the total live unique customer has been increased from seven thousand six and fifty nine to 713,000. Hello? Yeah. Yeah. Okay, sir. Got it. Got it, sir. So my next question is on incremental gold loan. LTV has increased from 16...

59:36 70% in q four to 74% in q two f five and seven alongside a significant increase in average ticket size. Is this primarily a competitive response or a deliberate change in underwriting strategy? How sensitive would the portfolio be to a meaningful correction and goal by this? So if the gold loan price is correct, if you see, it has corrected between May 15, May 13 to June 30 also in the last quarter. So correction of the gold prices would mean that we have to collect the margin from the customer by way of cash margin or by pledge of additional gold so that LTV can be maintained.

1:00:25 And your question, what is the risk that price volatility, lower size in the gold loan will bring in? So I think any sharp corrections happens, that would mean that we have to do the collection from the customer. Currently, portfolio level of LTV is about 70%. So it means that we our LTV is still lower than the prescribed of 75%. It means we have a good amount of cushion about 30% in the portfolio. So any correction of lower 5%, 67% to that extent, I think we have that ability, that cushion is there. And during that period, we also be able to collect the money from the customer. So we remain that we're quite conservative when the LTVs are at the lower side. So we don't see any risk on that front if the gold loan prices goes down.

1:01:26 Thank you. The last question from today is from the line of Suhani Singh from ROTH Capital. Please go ahead. Hello, sir. Good evening. So I just had a couple of questions. The MSME average sanction ticket size has increased from 1,200,000 to 1,700,000 year on year. So while the incremental LTV has also risen to 53.5%, So is the company consciously moving towards large borrowers to improve productivity? And how does this affect portfolio granularity and risk adjusted return? There's some network issue. Can you repeat your question, please?

1:02:15 Yes, sir. So the MSME average sanction ticket size has increased from 1,200,000 to 1,700,000 year on year. So while the incremental LTV has also risen to 53.5%, is the company still consciously moving towards larger borrowers to improve productivity, and how does this affect portfolio granularity and just adjusted returns? So you are referring to average ticket size per live account? You mean to say 1.7 going to 2.1? 1.2 to 1,700,000. So it's average sanction ticket size. Because if you see the trend is across these segments, every single side is going up because now the property prices are also going up and they are essentially function of not only their requirement of the loan, but also underlying property prices.

1:03:25 So over a period of time, when we are opening new branches, as well we are seeing the trend that the amount of demand is in the range about INR 20 lakh, INR 25 lakh as compared to earlier one. So every single size is going up, But that necessarily would not mean that the risk is going up because we are maintaining the loan to value ratio wherever the mortgage loans are happening in the MSME. Okay, sir. So also the stage three provision provision coverage has fallen sharply from 43.2% to 43.3%. Even if gross stage fee has increased, so is this declined largely due to a change in the composition of stressed assets, particularly towards the better collateralized loans, or has it been a change in provisioning assumption?

1:04:18 So if you can tell us how we should assess the adequacy of coverage across Indian individual segments? So I think we have to look at that individually. So in the MSME loan, our provision coverage ratio still is about 45%. Housing loan is about 38%. And in the construction rand, it's 50%, in gold loan, it is about 19%. So gold loan, if you look at the competition, so while in all other cases at par, even in the gold loan, which used to be our in our case, used to be higher, It is now rationalized at about 19%. Competition, which is doing broadly gold loan, not like us, where even 50% portfolio is owned gold. There, PCR is about in the range of about 15%.

1:05:07 So still our PCR is higher in the segmental in the gold as compared to our competition. Now PCR should be able to give you adequate coverage for the losses in case NP happens. So in the gold loan portfolio, the PCRs are 19%. That means even though your NP account, you have very well coverage ratio, so there will be no hit in the balance sheet. Similarly, in the our MSME, which is collateralized by property, housing is collateralized by property, so is the construction finance cash flow and underlying collateral of the land and construction is there. So I think that kind of provision is giving adequate cushion. So we have to look at the segmental rather than overall. Yes, overall, it has come down. But if look at the segmental logically, whether they provide the adequate cushion, answer is yes.

1:06:00 Okay. That's helpful. Thank you very much. Thank you. As that was the last question for today, I now hand the conference over to the management for closing comments. I thank you for participating in the earnings calls today. Should you have any questions, you can reach out to us or our IR advisors, and we shall be happy to answer your queries. I reiterate, we are on the track to achieve an AU of INR 65,000 crore by FY twenty twenty eight with return on average equity in the range of about 19% to 21% and return on average assets of 4.2% to 4.7%. Thank you once again, and have a happy week ahead.

1:06:50 Thank you. On behalf of Capri Global Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.