CGCLNSEQ2FY23November 12, 2022

Capri Global Capital Limited

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Management on call

Ravikant Bhat Sr. Vp

Investor Relations, Capri Global Capital Ltd.

Key numbers — 40 extracted

rs,

uld 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 d

47.4%

ess performance. Please refer Slides 6 and 7. Assets Under Management increased 47.4% YoY and 11.4% QoQ to touch Rs74,692mn. The share of retail loans was 74.3%, slightly lower than 7

11.4%

e. Please refer Slides 6 and 7. Assets Under Management increased 47.4% YoY and 11.4% QoQ to touch Rs74,692mn. The share of retail loans was 74.3%, slightly lower than 76.2% noted i

Rs74,692

s 6 and 7. Assets Under Management increased 47.4% YoY and 11.4% QoQ to touch Rs74,692mn. The share of retail loans was 74.3%, slightly lower than 76.2% noted in Q4 FY22. After the sea

74.3%

r Management increased 47.4% YoY and 11.4% QoQ to touch Rs74,692mn. The share of retail loans was 74.3%, slightly lower than 76.2% noted in Q4 FY22. After the seasonally soft Q1 FY23, we have seen a pi

76.2%

% YoY and 11.4% QoQ to touch Rs74,692mn. The share of retail loans was 74.3%, slightly lower than 76.2% noted in Q4 FY22. After the seasonally soft Q1 FY23, we have seen a pickup in the momentum in t

1.8%

ng to 182 branch locations in 7 states and UTs by the end of Q2 FY23. Gold Loan AUM constituted 1.8% of AUM in Q2 FY23. It took a more meaningful 10% share in the disbursals during the quarter. To r

10%

y the end of Q2 FY23. Gold Loan AUM constituted 1.8% of AUM in Q2 FY23. It took a more meaningful 10% share in the disbursals during the quarter. To reiterate what we have said here and in other fora

Rs14,860 million

le up shows our commitment as well as execution capability for new products. Disbursals touched Rs14,860 million, growing 57.2% YoY and 35.9% QoQ. Businesses in H1 FY23 stood at Rs25,793 billion and were up to

57.2%

as well as execution capability for new products. Disbursals touched Rs14,860 million, growing 57.2% YoY and 35.9% QoQ. Businesses in H1 FY23 stood at Rs25,793 billion and were up to 70% YoY. This

35.9%

execution capability for new products. Disbursals touched Rs14,860 million, growing 57.2% YoY and 35.9% QoQ. Businesses in H1 FY23 stood at Rs25,793 billion and were up to 70% YoY. This results both

Rs25,793 billion

bursals touched Rs14,860 million, growing 57.2% YoY and 35.9% QoQ. Businesses in H1 FY23 stood at Rs25,793 billion and were up to 70% YoY. This results both in MSME and housing picked up sharply, including gold l

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Guidance — 20 items

Ravikant Bhat

opening

“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.”

Rajesh Sharma

opening

“With our rights issue process yet to be concluded, we will have to restrain ourselves once again from giving a specific forward guidance.”

Rajesh Sharma

opening

“As mentioned at the outset, we are refraining from giving a formal guidance on where we expect the cost-to-income ratio to settle.”

Rajesh Sharma

opening

“We expect the remaining pool to exit moratorium by Q1 FY24.”

Rajesh Sharma

opening

“We hope to communicate the timeline of the capital raise in near future.”

Rajesh Sharma

“It is not possible to give a target on that because that has so many factors.”

Rajesh Sharma

“With regards ROE and ROTA at the moment, it is not possible for us to give any guidance.”

Anuj Narula

“So how much more opex do we expect here?”

Anuj Narula

“So how much more opex do we expect here?”

Rajesh Sharma

“However, our target is to open about 550 gold loan branches this year.”

Risks & concerns — 3 flagged

So, with that, we don't see much pressure.

— Rajesh Sharma

And there might be a margin compression.

— Rajesh Sharma

So, if we ask how many of our MSME customers will come for a gold loan, how many customers who have come for loan, will come for MSME, it is very difficult to comment.

— Rajesh Sharma

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Q&A — 6 exchanges

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 ambitions growing high, how will this share 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 sector. Any specific reasons on that part?

Rajesh Sharma

So, cost income ratio while it is coming down, overall is looking higher. But gold loan also start contributing the way the AUM is growing. Every branch breaks even and starts contributing after 18 months of time. So, this is an investment phase. However, our growth in MSME shall continue…MSME and affordable housing remain good growth drivers. So, I don't see that MSME disbursement growth has gone down. If you look at our MSME disbursement during the current quarter, it has been about Rs312 crores compared to previous quarter (disbursals) of Rs182 crores, which is about 71% growth. If we talk

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 ratio look like in the next couple of years? Also, how many branches are we planning to open in FY23 itself? And what sort of gold loan AUM are we targeting by the end of this fiscal year?

Rajesh Sharma

Your voice is broken. Can you repeat it again please? 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 ratio look like in the next couple of years? Also, how many branches are we planning to open in FY23 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

Sir, my question was with regards to the gold loan business. As it is mentioned in the presentation, the disbursement yields are close to 15%. And if I look at our overall business yield for our company, it 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 a landscape which has already seen moderation in yields? As your yields are also close to 15%, it doesn't give you abnormal pro

Rajesh Sharma

What you are saying is very correct - that gold loan business has a strong competition coming in. And there might be a margin compression. But if you look at the theme that Capri Global operates on – it is servicing the customers who are not catered to by the banks - whether it be MSME, affordable housing, or be it our gold loan - the product and philosophy remains the same. By borrowing money from bank, we don't want to target customers which can be catered to by a bank. We are targeting a particular type of customers who do not have adequate income proof. Now if we are able to operate in Nor

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 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 t

Rajesh Sharma

I think North and West as I said will continue to grow. It does not have the deep coverage and concentration what South India has. So, there an opportunity exists. Our entire MSME - 145 branches are in the Gujarat, MP, Rajasthan, Maharashtra, and NCR. And I believe, as I said gold loan overall market size is close to Rs4 lakh crores which is inching up at 10% annually. Can we have a 2% share of the opportunity – the answer is yes. And even though it makes an ROE of 16-17%, that is perfectly alright. That's why we are targeting higher. But on a conservative side, even if we take that, I think i

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?

Rajesh Sharma

So, your voice is somehow breaking – so maybe at my end, can you repeat your question, please? Sir, my question was, if this gold loan business of yours, is it totally separate new business or is there any commonality between your existing customers and this gold loan business? For example, are your MSME customers also availing any new loans against gold collateral or not? So, if we ask how many of our MSME customers will come for a gold loan, how many customers who have come for loan, will come for MSME, it is very difficult to comment. Some percentage may be common in future. But we have jus

As I said during my initial remarks, we will continue to remain focused on serving the customers which are not catered by the bank. Our key growth driver is going to remain MSME and affordable housing. Gold Loan is a new addition. There will be a good fee income contribution from the car loan distribution business. This is a pure fee play and is going to contribute to almost 1-1.5% to the ROE. We clearly see that in next 5 years, we intend to build a very high-quality, secured book and continue to grow on our strategy, which we decided few years back – portfolio which is good in quality and fo

Management

Speaking time

Rajesh Sharma

Moderator

Amresh Kumar

Shreepal Doshi

Akshay Doshi

Anuj Narula

Ravikant Bhat

Ashish Kumar

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Opening remarks

Ravikant Bhat

Thanks Michele. 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 FY23 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.

Rajesh Sharma

Yes. Thank you, Ravikant. Good afternoon and season greetings to all of you. I once again take the pleasure in welcoming you all to Capri Global's post earnings conference call. We declared our reviewed consolidated results for Q2 and H1 FY23 on Friday, which is 4th of November 2022. I hope you had a chance to go through the investor deck. With our rights issue process yet to be concluded, we will have to restrain ourselves once again from giving a specific forward guidance. I hope our discussions today around CGCL's performance during Q2 and H1 FY23, we'll provide you all with sufficient clarity and cues to understand the direction of Company’s progress. In this commentary, references to P&L and balance sheet aggregate as well as ratios shall refer to consolidated values. Let me first start with our business performance. Please refer Slides 6 and 7. Assets Under Management increased 47.4% YoY and 11.4% QoQ to touch Rs74,692mn. The share of retail loans was 74.3%, slightly lower than 7

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