Capri Global Capital Ltd
NSE:CGCL
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Capri Global Capital Ltd
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Good day, ladies and gentlemen, and welcome to the Q2 FY '23 Earnings Conference Call of Capri Global Capital Limited hosted by Go India Advisor. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Ravikant from Capri Global Capital Limited. Thank you, and over to you, sir.
Thanks, Michel. Good morning, everyone. This is Ravikant. I shall read out a brief disclaimer for today's call. .
The discussion on today's call regarding CGCL's earnings performance will be based on judgments derived from the declared results and information regarding business opportunity available to the company at this time. The company's performance is subject to risks, uncertainties and assumptions that could cause actual results to differ materially in future. Given these uncertainties and other factors, Participants on today's call may observe due caution while interpreting the results. A separate disclaimer is available on Slide 2 and Slide 3 of the Q2 FY '23 investor deck. Participants may please note the same.
I now request our MD, Mr. Rajesh Sharma, to present the opening remarks. Over to you, sir.
Yes. Thank you, Ravikant. Good afternoon. Thanks, and [indiscernible] greetings to all of you. I once again take the pleasure in welcoming you all to Capri Gobal's post earnings conference call. We declared our renewed consolidated results for Q2 and H1 FY '23 on Friday, which is 4th of November 2022. I hope you had a chance to go through the investors deck.
With our rights issue process yet to be concluded, we will have to [indiscernible] once again from being a specific forward guidance. I hope our discussions today around CGCL's performance during Q2 and H1 FY '22, we'll provide you all the sufficient clarity and use to understand the direction of companies. In this commentary refers to P&L and balance sheet aggregates as well as the ratio shall refer to [indiscernible] good value.
Let me further start with our business performance. We refer to Slide 6 and 7. Assets under management increased 47.4% year-on-year and 11.4% quarter-on-quarter to a is [ INR 77,692 million ]. The share of retail loans was 74.3%, slightly lower than 76.2% noted in Q4 FY '22. After the seasonally soft Q1 FY '23, we have seen a pickup in the momentum in the retail loans.
Secondly, the growth in wholesale specifically construction client segment has been front-ended due to a strong section pensions pipeline. Having already achieved the diluted for FY '23 as soon as we sell the segmental prior to sustain unit currently. The share of retail loans, therefore, could include in the FY '23. The other entity, we achieved an important product milestone. We launched our gold loan business through 108 branches, expanding to 182 branch locations in 782 states and by the end of Q2 FY '20. Gold loan [indiscernible] concentrated 1.8% of AUM in Q2 FY '23. It took a more meaningful 10% share in the business during the quarter. To reiterate that part we have said here in other forums, the launch of gold loan business and ongoing scale up shorter commitment as well as execution capability for the new product.
Business on cash INR 14,860 million, growing 57% year-on-year and 35.9% quarter-on-quarter. Businesses in H1 FY '23 to [ INR 25,793 billion ] and were up to 70% year-on-year. This vessel both MSME and housing picked up sharply, including on the share of retail businesses was 48% compared to 35% in Q1 FY 2015. Lab data from industry data [indiscernible] MSME, pulp and [ NHB ] housing report show that [indiscernible] and firm trade credit over past earlier in the segments we operate in. Our strong business momentum also reflects that. As part of our growth strategy, we have begun expanding in propagate, taking a branch network to 13 from 5 in Q1 FY '23. We have added new footprint in the pain with the addition of 3 new branches. We've also gone deeper in Rajasthan deposition new branches at this stage. Our loan gold loan branch network stood at 145, up from 17% in Q4 FY '22 and 123 Q1 FY '23. Details on our network expansions are given on Slide 29 and 30.
The car loan distribution business continued with the strong momentum. As shown in light clothe low angulation cash INR 334 million, up time year-on-year and 44.7% quarter-on-quarter. Total angulation in H1 FY '23 stood at INR 23,055 million. To place this in perspective, angulations for entire FY '22 stood at INR 17,022 million. I shall discuss the fee contribution from the vertical while committing to [indiscernible].
[indiscernible] Q2, FY '23, the car loan distribution business had a presence in 3 locations and continue and are taking compared to 279 location sectors got the distal and we're taking in Q1 FY '23. The vertical exclusive branches in all other locations, it operates to a search sales force. I shall now turn to earning performance, I shall be referring to Slide 14 to 17. The net interest income, our NII increased to 29.5% year-on-year and 14% quarter-on-quarter to INR 1,528 million. This was reflected in the net interest margin, which improved 49 basis in [ Q2 87% ]. The NII for H1 FY '23 was up 25.6% year-over-year to push INR 2,868 million. [indiscernible] increasing landing base in both the return segment. We did had were undertaken during August 2022 is the same effect portfolio will become eligible for set, we shall consider repricing yields on these loans the pass-through on the wholesale side partners the group to the vial hike of 25 to 30 bps.
Let me now turn to loan interest income. In this regard, I would like to offer some stoical perspective between FY '18 to FY '22. The share of non impressions come in the net income averaged 14.5% with the FY '23 with the highest 19.5%. The contribution increase stood at 29% and 26% in Q2 FY '23 in H1 FY '23, respectively. The loan entrance has begun increasingly prominent to the last 1 year is a bit 2 key product lines. income rooms are considered under the head. The net fee income from car loan distribution business is the income on our time portfolio under the full level. Under FY '21, both these income, seems we don't adjust in FY '22 [indiscernible] condition to muted 7.1% of CGC net income. In Q2 FY '23 and H1 FY '23, both these income streams are contributed 6.8%, respective to the net EBITDA. Given the strengthening drivers a lot in question, during Q2 FY '23, increased 18.4% year-on-year and 49% on quarter-over-quarter to INR 610 million. Recurring fee income tied to business operations constituted a significant 86.7% versus 9.8% and non-interest income in Q2 FY '23 and H1 FY '23.
I shall now turn the operating [indiscernible]. We have been highlighting the upfront cost we will incur on the manpower operation cost for the podium. Expectedly, the cost income ratio got pushed further to 60.4% in Q2 FY '23. [indiscernible] is highlighted on Slide 16 that listed for that fee income is done vertical, the cost-income ratio would have 49% in Q2 FY '23. Similarly, the cost divided by a AUM ratio compresses to [ 57% to 10%], we have departed. The better we are looking at our costs which are divided by is to include the every carbon origination in the average. The cost divided by [indiscernible] then declined to 69% and 4.9% in the [indiscernible]. [indiscernible] in the outset, we are deferring from giving forward guidance on where we expect cost-income ratio to second. However, I would just highlight. The fact that the good loan business now operationally should contribute to the spread and any has to fit on the team.
This is a high-yield business and is highlighted on Slide 9 the disbursal in the business was 15.1%. I hope this offers you a perspective on the caution information. Secondly, despite the sharp increase in our operating expenses, we have reported an increase in our operating profit by 4.3% year-on-year and 6.4% year-on-year Q2 FY '23 [indiscernible] and H2 FY [indiscernible]. This is important. It shows our ability to grow our incremental profitability at a consolidated level even when we are at operating live disadvantage. We come to the credit cost and asset quality, we reported in net sale cost of this INR 40 million in Q2 FY '23.This includes the [indiscernible] INR 15 million net write-off and provision. This is share the acceleration from INR 246 million we reported in Q1 FY '23. The H1 FY '23 credit costs to INR 286 million only marginally lower in H1 FY '22 crdit costs, which 8INR 9 million.
During Q2 FY '23, we recovered INR 145 million from previously licenses. This includes the major recovery of INR 138 million, including interest [indiscernible] of Q3 FY '22. Cumulatively in H1 FY '22, we have recorded INR 154 million from the millions. To reiterate our strength in this part or first write-off in were that should have a part recover our deals. The [indiscernible] assets repo INR 1,781 million, lower than INR 1,0840 million Q1 FY '23 and marginally higher than INR 17,115 billion we reported in Q2 FY '22. The share fee ratio stood at 2.36% lower 35 basis Q-on-Q and 89 basis year-on-year. Our probability assets were 28.6%. The tender restructured effects come to 3%, 2.3% of AUM, around 50% of the INR 90 million plus of restructured assets held and [indiscernible] and speak 75% of toolhead began servicing that ever buy out of this structure. We expect the main food exit or [indiscernible] by Q1 FY '24.
Turning the bottom line, our console net profit after tax increased 22.1% on a 73% year-on-year to be INR 56.3 million. The H1 FY '23 net profit is up 4% to [ INR 1,023 million ]. And here, I would like to go even attention that despite a gold loan, the losses for the quarter 2, which is almost about INR 24 crores. we have achieved that increase in the overall profit has not go loan loss of have happened, the profit should have been about INR 75 crores. The reported capital adequacy ratio to list of CGCL 39.1% of [indiscernible] capital at ratio of declined 20 bps year-on-year, if you set ourselves on a [indiscernible] growth path over the past 1 year. The [indiscernible] infusing to [ 12 billion ] will be timely and augment our group equity. We hope to communicate the time line of the category rate in their future.
Before concluding, a word on our digital and packaging initiatives, we have recently hired single leadership position in data analytics and digital partnerships. -- in the brick and mortar nature of our business is unlikely to change. pathologically play lutein how to efficiently given the pipes. All our tech initiatives shall remain focused towards that end.
With that, I conclude my commentary. We shall now take questions.
[Operator Instructions] We have the first question from the line of Akshay Doshi from InCred Capital.
Sir, my first question is that the MSME share of overall AUM has been declining in this quarter. and you have guided previously that to remain in the range of 45% to 50%. So sir, now along with our gold loan admissions growing high. So how will this shape up going ahead? So that's my first question. And also, sir, on the disbursement under the MSME sector, that has been also declining in this. Any specific reasons on that part?
So cost income was sure while it is coming down, overall is looking higher. But [indiscernible] also start contributing the way the pro every brand become a breakeven and start contributing after 18 months of time. So this is an investment phase. However, our growth in MSME demand continued over [indiscernible], good drivers. So I don't see that everything discussion growth has gone down. If you look at our MSM division during the current quarter had been about INR 2 crore as compared to previous [indiscernible] of INR 182 crores, which is about 71% growth. If we talk year-on-year, the last year same quarter was INR 40 crores. And this current about to let go. So it's again 30% up on Q-o-Q basis. So I think going to remain our key group did. .
Okay. Okay, sir. Sir, my second question is that how much of the coal lending we would have done till now? And any new tie-ups here Also, sir, with the coal lending gold loan and car loan businesses, what sort of return on equity and return on assets do you think to come in the next few quarters. .
So coal lending, we have -- we have various partners, a new partner added by an [indiscernible], so far core lending happening are still not antitechnology interface with the bank, which is under development in the bankers That has in the pace will pick up. However, we have already done about INR 350 crores plus on an collegian that is grown [indiscernible] in part month. It is not possible to be a target on that because that is so many factors. But steadily, we are in about 30, 35 plus, which is likely to increase with the addition of the new partner in the previous month, which has been activated. As regards ROE and [indiscernible] at the moment, it is not possible for us to give any guidance. But overall basis, we need not to put any much capital, only 20% of capital allocation happened of the overall profitability for INR 100,while the spread comes on is on which the bank partner land and 20% of what we land only that much capable is required. So typically, for over lending of INR 100, while our capital is required only on our share of 20%, whereas the spread comes in and in. So it will be very, very high ROE accretive.
[Operator Instructions] We have the next question from the line of Anuj Narula from JM Financial.
So I have a couple of questions. One is on gold loan business and another one is on car loan distribution business. So the spike on OpEx front is mainly attributed towards your expansion plans in gold loan business verticals. Now you have plans of getting over 1,500 branches in the next 4, 5 years. So how much more OpEx do we expect here? And how would our cost income look like in the next couple of years? Also, how many branches are we planning to open in FY '23 itself? And what sort of gold loan AUM are we targeting by the end of this fiscal year?
Your voice is -- has broken [indiscernible]. Can you repeat the car please?
[Operator Instructions]
So Am I audible now?
Yes, it's better.
Yes. So the spike on OpEx front is mainly attributed towards your expansion plans in gold loan business verticals. Now you have plans of getting over 1,500 branches in the next 4, 5 years. So how much more OpEx do we expect here? And how would our cost to income look like in the next couple of years? Also, how many branches are we planning to open in FY '23 itself and the gold loan AUM we are targeting by end of this fiscal year? And another one on the car loan distribution as well. So in this, like I just wanted to understand like on this with car loan distribution business, what's our strategy for growth here? And how are we different to other peers working in this space. Will we expand our bank networks to more banks for distribution of this product? These are my couple of questions.
So if you talk about our cost income, cost income, if you talk about excluding the loans, it has come down from 5 to 4 9%. However, gold loan this year, our target is to open about 550 branch. Next year, a similar number of branches [indiscernible] activate. So the till end of FY '24 March, the expansion will continue. And then expansion will slow down the pit will want the best shot because by that time, we should have achieved our balance the corporate. Our gold loan banking starts contributing after a year of 18 months, so we keep investing. However, we see clearly that margin from a car loan as well as the understanding and affordable housing. We will feel great with the more increase in the growth because that is also growing at the rate of 25% here in Europe. So with that, we don't see much pressure. Plus we are intend to infuse capital by peer-price issue also. So in combination of equity and gold loan will contribute in a high-yield product. It is a product where we make the maximum number of money on of paid wide. And with the more branches, I think 5G and being able to build is what we are aiming for. As far as there are to lending partners are concerned linear loan origination partners are concerned. At the moment, we are stick e might add 1 or 2 more. No focus is with the PSU bank where their pricing is lower. And how is quality and collection efficiency in other aspects, we are able to pitch for them. and is a real situation for customers, for bank cuts and products. So that is why private sector is already doing in a good way. the PSU banks are also doing the agents and the rate of centesis also attracted to. So we're helping with collaboration with our existing distribution networks and the fee income base. So as I said, this year, we should be able to do INR 100 crore gross fleet from this and INR 30 crores should be the contribution from this vertical alone to the bottom line.
[Operator Instructions] We have the next question from the line of Shreepal Doshi from Equirus Capital.
Sir, my question was with regards to gold loan business. So as it's mentioned in the presentation, the disbursement yields are close to 15%. And if I look at our overall business yield for the business -- for our company is close to 14%, 15%. The second part or the second observation that I would want to add here is that in the gold financing space, we are already seeing such high level of competition from banks and better cost of fund players. Then what is it that pushes us to enter an landscape, which is already -- which has already seen moderation in yields as your yields are also close to 15%, so doesn't give you an abnormal profits from what you're already making? And then because these branches are exclusive branches that we have added and we aspire to further move that up significantly in the coming second half. So what is it that sort of motivates us to extensively do this business? .
Yes. So what you say is very correct that gold loan business is a competition coming in. And there might be a margin compression. But if you look at the key [indiscernible] operational for the customers who are not settled by the bank and whether these MSME with affordable housing, let our gold loan, the product and [indiscernible] the same [indiscernible] by borrowing money from bank, we don't want to target customers which can be catered by a bank. So we are targeting a particular type of customers who do own or adequate income group and how do we cater to them. Now if we are able to operate in not invest where the steel gold loan business is going much faster than the gold loan business growing in the Southern India. I think the opportunity exists. Plus as you know, we have already passed a newer smaller bank license. It help us to acquire more customers to move their behavior. Can we be the prospect to do the data and everything else from the home loan or MSME loan or any other [ product ] in the future. So keeping an eye at some point of time applying for a small finance bank clients. And also acquiring more customers, we want to add. I still believe that many players who are doing earlier, if you find some new ways to reduce our costs with the help of technology with the help of other measures, still is a large business [indiscernible] to build a book of INR 10,000 crores, the [ 5 ]of INR 4 lakh crore market, which is still growing at a in overall 2.5% that in the next 5 years. We can be profitability I believe that. And this is going to contribute towards our profitability, our customer acquisition, overall strategy to serve the customers who are not settled by the bank.
Sir, my second question was with respect to our approach in the gold financing. So are we more urban focused, semi-urban or rural? And what is -- like how are we -- what is our hiring strategy with respect to employees? So if you could just throw some color on the approach of that business model in that business model.
Our business model about gold loan or overall?
Gold loan, sir, gold loan.
Gold loan business is a model where our model is going to be where a customer walks in our balance sheet. This is not a model that you can target the customer by reaching out to them. And I'm assuming another housing there can be a specific area of specific year houses are being built or being sold or the industry fiscal, we can target our MSME ban. In case of go, you have to make people aware around the brand that we do this. And in the geographic year-to from deficit operating excellence and cost perspective, we have to be in the geographic operating so that our costs lower. And these are typically down from branches where a team of people, we are valued. And we know how to do a better service come around quickly in the next time, 110. We and customers would be working in the branch, we need them in the same time. Your price there no in lending, often in the loan. And immediately, you see that in the bad account, we are able to action the room and recovery of these. So what we see here, I think this model is not something about area. It is going to be about efficient execution.
[Operator Instructions] We have the next question from the line of Ashish Kumar from Infinity Alternatives.
I know there have been some discussions around gold loan, and I missed that. I think the question which I have is that we've seen these repeated rounds of competitive intensity in the gold loan business. And a number of new entrants do not kind of end up making it because the operating costs do not justify the throughput per branch. So why do we believe that we do have a right to win in that business? And especially -- and this question is especially in the context of the fact that the whole gold loan financing business has been seeing tremendous competition from the banks. I have seen, let's say, the ROEs for the market leader dropped from 229 to 16.7%, and some of the well-established names looking at low double-digit ROEs.
I think north and west, as I said, will continue to grow. It will not have that the comparison concentration what India has. [indiscernible] we are at what we are marketing base or entire Anne, I mean 45 branches are in the Gujarat, Rajasthan, Maharashtra and NCR. I believe, as I said, we look over our market size to INR 400,000 crore, which is 10% annually. In 2 have profit of a profitability answer is yes. and even though it makes a ROE of 16%, 17%. That is perfectly all right. That's why we are targeting higher. But on a conservative side, even we take that I think in a secure portfolio where we now press acinar return when you do the AUM, we are very, really confident after proxies have said that the plus is probably I think in that kind of basis, we win 16%, 17% ROE, we are absolutely happy about it.
[Operator Instructions] We have the next question from the line of Ambrish Kumar from [indiscernible] Capital.
Since there is so much discussion on gold loan. And just one more question on that. So is this gold loan business totally separate from your other lending businesses? Or is there any commonality between the customers so far? And if that is the case, how much? So for example, your existing MSME customers, they are also borrowing against the gold collateral or what is happening there?
So your voice somehow, I'm troubling -- so maybe at my end, at can you repeat your question, please?
Sir, my question was, if this gold loan business of yours, is it totally separately new business? Or is there any commonality between your existing customers and this gold loan business? For example, are your MSME customers? Also any new loans against gold collateral or not?
So we see that how much customer who are any customer will come for a good how much customer welcome for only come to MSME. It is very difficult to comment. Some percentage may be common in future. But at the moment, we have just started our implement target is to build a intense what crop can be done. But yes, there are any customer of any in for the season, for example, a shop people who is able to get a good discount, say, their peak season Diwali. And they want to avail it to INR 200,00 loan for 60 days without moving the task, it is a whole loan product, which can give them the money in 1 hour or 60 days also in a timely basis. And then again, it can be paid. So there are many MSME customers we see across all other players in the money utilize that cash discount, which is much more attractive than the sector or the their profitability. So there could be some segment which we have seen happening in other gold loan companies. But are we targeting that thing, we are not targeting that. That could be an additional upside into man gold loan vertical stand-alone has to deliver its target our. That is the way we are going to track it and that is the way we have in to operate.
Okay. So second question is not related to gold loan, it is related to MSME loan. So what has been the top-up loans disbursed in the last quarter or so to these MSME customers?
Can you repeat it, please?
Top-up loans to MSME customers, just trying to understand the demand...
So top-up loans unless the customer property when you have a put. But unless customers we tractor is more than 3 to 6 months. We -- in an overall basis, you don't experience a top up. Too is only given to our existing customers with extra record or some customer has a point value of 5 million will be only taking time like to be grow because you don't meet that intima. And we will come again, and we see a cushion in probably revenue plus sooner, then we can consider. How many customers take in the top of loan, I think it is in 10% in the moment.
As there are no further questions from the participants, I would now like to hand the conference over to Mr. Rajesh Sharma for closing comments.
Yes. So as I said during my initial remarks, we will continue to demand focus on serving the customers which are not settled by the bank. Our key driver is going to remain an affordability going only a new addition. There will be a good fee income contribution from the car distribution business. There is a [ pure field play ] and is going to contribute to almost 1%, 1.5% in the ROE. So that is, again, it is no risk to move many close to the distribution business. We clearly see that in next 5 years, we intend to build a very quality -- high-quality book, secured book and continue to grow on our strategy, which we decided 2 years back portfolio, which is cooling quality and focus in growth of 25% plus. And bar in the cold year, I think all the year, we have continue on that. If we collectively to our great as for the 5 years actual year will still be 25% plus. We continue to remain on that part. And our capital evacuate ratio has been remain high, which goes away for our growth. Our liability side has been very, very strong with the competitive cost in housing finance, we get money from [indiscernible] less than 4%, and that helps us to get better margins and in with customers. In MSME and NBFCs, we have more than 25 lenders which ships lending of [indiscernible] of the [indiscernible] cost is better than many, many companies of our peers. So liability side has been very, very strong for us. So overall, we are quite confident to achieve our growth and maintain our asset quality. Thank you so much.
Thank you. On behalf of Go India Advisors, that concludes this conference. Thank you for joining us. And you may now disconnect your lines.