Ladies and gentlemen, good day and welcome to Capri Global Capital Limited Q1 FY2025 earnings conference call, hosted by Go India Advisors. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need any assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Hardik Doshi from Capri Global Capital Limited. Thank you, and over to you, Mr. Doshi. Good afternoon, everyone. This is Hardik Doshi. I shall read out a brief disclaimer for today's call. The discussion on today's call regarding Capri Global Capital Limited'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 risk, uncertainty, and assumptions that could cause actual results to differ materially in the future. Given this uncertainty and other factors, participants on today's call may observe due caution while interpreting the results. The full disclaimer is available on slide 42 of Q1 FY2022 investor presentation. Participants are requested to note the same. I now request our Managing Director, Mr. Rajesh Sharma, to present the opening remarks. Over to you, sir. Yes, thank you. Good afternoon, friends. I hope you all are doing very well. We declared our unaudited consolidated results for Q1 FY2025 on Saturday, August 3, 2024. I hope you had a chance to go through the investor deck. As you all know, Capri Global Capital Limited continues to have a strategic focus on serving a large and fast-growing addressable market, maintaining a retail franchise with a granular book and high-quality fee income. We have distinguished ourselves through our robust presence in the lending sector, focusing on secured MSME lending, Housing Loans, Gold Loans, Construction Finance, and indirect lending. We have also ventured into Micro LAP, focusing on smaller-ticket secured loans to self-employed customers. We are dedicated to using a digital fast technology-driven strategy to provide last-mile financing to the unbanked population. To achieve this, we have made substantial investments, which I will discuss subsequently. I'm pleased to report that all our technological initiatives have successfully gone live in the first quarter of FY2025. This positions CGCL to reap significant long-term benefits. I shall now move to the commentary on business and earnings performance. As regards business, please refer to slides four, five, and six. We maintain a strong growth momentum in Q1 FY2025, with our AUM reaching INR 17,457 crore, with an increase of 56% year-on-year. This growth was primarily driven by a 40% year-on-year increase in home loans and a strong growth in our Gold Loans. Our disbursement touched INR 5,619 crore during the quarter, reflecting 109% year-on-year growth. We remain focused on retail lending, with retail AUM constituting over 80% of our portfolio. We are well positioned to drive growth in our own track, which is our target of INR 30,000 crore AUM by FY2027. Our co-lending AUM continued to surge during Q1 FY2025, increasing to 16.4% of AUM compared to 11.7% in Q4 FY2024 and 6.2% in Q1 FY2024. We have further strengthened our bank partnerships, significantly increasing the acceptance ratio of loans with our partner banks compared to a year ago. With new technology in place, we expect this momentum of co-lending to continue to grow. We continue to build a granular and well-diversified portfolio for MSME and Housing Finance, with average unit size of about INR 19 lakhs. Due to the seasonality effect and transition of a new loan or business system and loan management system during the first two months of the year, the MSME and Housing Finance AUM saw temporary stabilization. However, we are confident that our growth momentum will be back from Q2 onwards and will continue in the coming quarters. Our Gold Loan AUM increased by 55% quarter-on-quarter to cross ₹5,400 crore, supported by our extensive Gold Loan branch network of 750 branches spread across nine states and union territories and co-lending partnership with four banks. These branches have started to scale up and have reached a productivity of ₹7 crore AUM per branch. Share of Construction Finance and indirect lending disbursal remained steady during the quarter driven by the existing sanction pipeline. The combined AUM share for both Construction Finance and indirect lending stayed at 20%. Further, we are committed to our cautious risk management strategy, keeping the mix below 20%. Our focus will remain on residential projects within the Affordable Housing sector while maintaining a granular book in indirect lending. Now, coming to the earnings, let me first start with our core earnings. Our yields were at 16.3%, an increase of 70 basis points, and our spread reached 7%, an increase of 60 basis points quarter-on-quarter, driven by our diversification into high-margin business. The increase in marginal cost of funds was more than offset by the improvement in yields to our advantage. The net interest income, or NII, during Q1 FY2025 came in at INR 301 crore, an increase of 18% quarter-on-quarter and 27% year-on-year. Our non-interest income comprises three components: car loan distribution fee, co-lending income, and other non-interest income. Our non-interest income increased by 35% year-on-year, supported by strong fee income from co-lending, which increased by 126% year-on-year and 17% quarter-on-quarter. With the momentum of our AUM remaining robust, our distribution franchise for car loan origination is now spread across pan-India. We anticipate this strong foundation will sustain the impressive growth trajectory of non-interest income. This strategic partnership and widespread distribution network position us well to capitalize on emerging opportunities and further enhance our fee income stream. On the insurance distribution front, we have already tied up with about 11 insurance companies and started accruing fee income. We are looking to generate more than INR 20 crore in net fee income from insurance distribution in FY2025. Following our branch expansion, we are now shifting our focus to improving the efficiency and productivity. The effect of this has already started to reflect our cost-to-income ratio, which has improved to 64.6% in Q1 FY2025, down from 70.5% in Q4 FY2024, marking an improvement of 5.9% in this quarter. Additionally, we are implementing advanced analytics to streamline our operation and enhance decision-making processes, which we believe will drive further gains in efficiency. We expect further benefits to accrue as the operating leverage is taken. As a result, our pre-provisioning operating profit increased significantly to INR 145 crore, up by 33% quarter-on-quarter. Our credit cost increased in Q1 FY2025 due to one-off slippage in our Construction Finance book, resulting in a technical write-off of INR 28 crore. However, based on our experience, we are confident of recovering the entire amount. Our GNP ratio and NNP ratio remained roughly flat at 2% and 1.1% respectively. Our stage three PCR ratio is still at 43%. As part of our resource diversification strategy, the company has initiated market buying in Q1. We successfully raised INR 500 crore by issuance of commercial paper, rated A1+ by CARE Ratings. This demonstrates our strong creditworthiness and enhanced our financial flexibility to support future growth initiatives. Our board has also approved funds raised of INR 20,000 crore by way of equity debt or convertible securities through Rights Issue, preferential allotment, or QIP. This fundraise will support our growth momentum and will further strengthen our balance sheet. Our Gold Loan business has now become profitable at operating level, and we reported a consolidated net profit of INR 75 crore, which increased about 19% year-on-year. The gains from higher NII in flat offset plus partly offset by higher credit costs are efforts to diversify our business income streams over the past two years, and are now beginning to yield significant results as seen in Q1 FY2025 performance. Now coming to technology and ESG, technology has been a critical focus area for us, and we implemented several key initiatives in FY2024. Our entire end-to-end loan life cycle is now completely digitized and tech-driven. We have made significant investment in technology, including our in-house developed loan origination system called Loan Expert for MSME and Home Loans and Swarnim for Gold Loans, Flexcube, which is a loan management system developed by Oracle, Capri Loans App for omnichannel customer engagement, Pragati Sales app for digital onboarding by our sales team, Collect Xpress, an efficient tool for collections, and Capri Business Partner App for our business partners. These platforms are currently stabilizing and have already started to yield positive results. These tech initiatives will lead to improvement in turnaround time, especially for our MSME and affordable housing businesses, by enabling seamless distribution disbursements that enhance sales productivity. They will also optimize costs by reducing file processing expenses, facilitate risk-based pricing through AI-driven credit underwriting, scorecards and digital collateral evaluation, and enhance portfolio quality with sophisticated dashboards and live monitoring and efficient collection tools. We look forward to sharing quantitative outcomes of our tech initiatives in a couple of quarters. Capri has established a systematic ESG practice in gold lending, has crafted policies on international standards in ESG guidelines. We are currently in the process of obtaining ratings from global agencies. Furthermore, we are conducting training for our internal teams and aligning our business processes with ESG requirements. Going ahead, we shall periodically keep our stakeholders updated on the progress we make on ESG assessments. With that, I conclude my remarks. We shall now take questions. Thank you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. We have our first question from the line of Satya Prakash Pandey from Haitong. Please go ahead. Hi, am I audible? Yes, please. Yeah. Good afternoon. I have two questions. First is on your insurance business. What was our net fee contribution from insurance business during the quarter? And if you can explain a little more on the 11 types for insurance distribution we have done. This is the first question. And the second is we've been discussing our target to achieve mid-teen ROE in the midterm, driven by higher fee income and operating leverage. Can you provide a clear timeline for when we might start seeing these improvements reflecting in our numbers? Especially, when do you anticipate reaching a sustainable 15% ROE? Because it's been some time that you've been guiding for mid-teens ROE. Yeah, these are my two questions. Thank you. So as far as the insurance contribution is concerned, in quarter one, we have achieved about INR 12 crore insurance income. The tie-up about the 11 insurance companies are the different, different products for different kinds of customers, for medical and for health insurance, for life, for accident cover. Like that, we have for the variety of the products, we have kind of these 11 insurance companies. Now, coming to by when, we will start our mid-teens ROE and how this ROE is looking this year. As compared to ROE, which was less than 8%, in FY2025, we are likely to report the ROE in the range of about 10.5%-11%. And we believe that next year, ROE further should be improved by another 2%-2.5%. Once we achieve a scale of about INR 25,000 crore plus, by then, I think we will be more or less in a steady state in terms of our branch expansion and also on the increased investment in the technology and data science capability. We should be able to achieve about 15% ROE in FY2027. Okay. Thank you. Thank you so much. That answers my question. That's it from my side. Thank you. Thank you. We have our next question from the line of Satyam Badhera from Profitmart Securities. Please go ahead. Hello. Am I audible? Yes, sir. Please go ahead with the question. Thank you for opening the call. I have a couple of questions. Could you explain the impact on net interest margin during the quarter in the Gold Loan business following the RBI regulations? Additionally, you mentioned that the Gold Loan segment has been profitable. Could you provide insights on your expansion plans, given that you previously indicated the temporary pause because of resuming branch operations? My other question is, car loan origination continued to be down over the past couple of quarters. What could be the reason behind the decline? So coming to net interest income, net interest income has improved in quarter one as compared to net interest income here. So it has improved. If you talk about our net interest income, it has come to INR 301 crore. If you talk about the Q4 FY 2024, it was INR 255 crore. So there is a significant increase, about 18% in this. And if you compare to the year-over-year basis, it has come from INR 237 crore to about INR 301 crore. So net interest income has been contributed largely from all the segments, but more from the Gold Loan side. If we talk about Gold Loan profitability, Gold Loan has become profitable because we have crossed INR 5 crore in all the branches. And normally, Gold Loan started breaking even above INR 4.5 crore. So all the Gold Loan branches, which is 750, have started contributing. While as compared to last year, we incurred the operating losses in the Gold Loan because AUM was lower tied. That is a journey that every branch has to achieve profitability only after 12 to 15 months, depending on when they achieve their AUM of ₹4.5 crore or so. So Gold Loan this year will contribute significantly on the profitability side as compared to the losses last year. If we talk about the car loan, car loan, we were shifting the business from the Capri Global Capital Limited to the subsidiary entity. So if you talk about the Q1 FY2025 car loan, net interest, net fee income was ₹31 crore, but Q1 FY2024, it was ₹24 crore. However, the preceding quarter, because January, February, March is always high, and April, May, June is a little soft quarter always for all the financial services. But as again, the INR 27 crore in Q4 FY2024, the fee income from the car loan has been INR 24 crore. So for branch expansion, any plan further for Gold Loan segment? So Gold Loan segment, we might add about 50 branches in the coming year. So that expansion will not be as aggressive as it was earlier because we already reached one threshold of 750 branches. So now branch expansion will be gradual. So about 50 branches or so we will add in the current financial year. Okay. Thanks. Thank you. A reminder to all participants, you may press star and one to ask questions. We have our next question from the line of Sohil Karani from ULJK Financial Services. Please go ahead. Good afternoon, sir. Thank you very much for this opportunity and congratulations on a good set of numbers. I would like to ask, how much of the book is on floating rate currently? How much of the total loan book is on floating rate? Floating rate? Combination. 0-14. Your question is, you are asking the composition of assets under management and home loan side of the floating and non-floating? Yeah. Mostly one, of course, Gold Loan would be fixed, right? So besides that, whichever segments that we are in, how much of that would be in floating, I mean? So, Gold Loan and this Construction Finance, Gold Loan line, it is a rate of interest we pre-decide based on the scheme opted by the customer. Construction Finance, it is all 100% floating. Home loan and MSME, we offer both the option to the customer. So there are about exact percentage, I think we will be able to tell you separately. You can send a mail to us and we will tell you the exact data. Got it. Got it, sir. Got it. One more question I would like to ask. We have seen a huge rise in yield on advances. Any light you would like to throw on that, sir? So yield on advances, if you see Q4 FY 2024, yield on advances by 15.6%, which has gone to about 15.3% on a portfolio basis. The contribution, because the Gold Loan, the overall portfolio is increasing, and Gold Loan yields are better than all the other products. So that is the reason there is an improvement in the overall yield on advances by about 70 basis points has happened. Got it, sir. Got it. I would like to ask one last question. How do you see the loan book shaping up going ahead? Is there any particular segment you'd see with more exponential growth or higher growth than others? Or is there any other book that you'd like to cut out of your or like ready to portion from your loan book? So I think on the overall loan book, our key growth drivers will remain these retail products comprised of home loan, Gold Loan, MSME. And this year, we added the micro debt, the smaller loan of about less than INR 5 lakh against collateral in the gold area. So these are the products which will give the contribution towards the growth. And there will be no single product which will come out disproportionately higher than others. So I think MSME is already about our MSME is about 28%, 30% is Gold Loan, and 23% is housing. So they will remain by and large in this proportion. Got it, sir. Got it. That is mostly my questions are done. Thank you for the opportunity. Thank you. A reminder to all participants, you may press star and one to ask questions. We have our next question from the line of Jay Dakshini from IIFL Securities. Please go ahead. Hello. Yeah, am I audible? Yes, sir. Please go ahead with the questions. Yeah. I want to ask two questions. First would be, what would be your cost of borrowing on market borrowings that you borrowed for this quarter? And the difference of that versus your bank of borrowings from bank borrowings? And what will be your ideal borrowing exposure in two years? The recent capital market borrowings are in the range of about 9%. Overall cost of borrowing is about in the range of about 9.6%, 9.3%. Ideal borrowing mix, I think, still the majority of borrowing will continue to happen from the mix of banks and some borrowing we will do from the refinancing from the larger institutions. NHB refinance, SIDBI, NABARD, and all these kinds of refinancing institutions. Okay. What will be the break-up of bank borrowings for MCLR-linked and EBLR-linked? So all the bank borrowings are MCLR- linked. Got it. There is a significant decline in disbursement in MSME and HL loans. What factors drove this decline in disbursement? Since we have gone live in new technology platform for origination called this loan origination system. And because of that, it taken some time to stabilize. The first quarter was training our on-ground team to get familiarized with that system. So I think that system by and large is stabilized now in the month of July. So this month, this quarter onward, we will see the growth coming back. And by the October onward, we will see full-fledged benefit of the new technology also start coming in. And so we will see the change happening because of technology which was getting adopted on the ground. First quarter was a little softer. Okay. Got it. Yeah. Thank you. Thank you. Before we take the next question, a reminder to all participants, you may press star and one to ask questions. We have our next question from the line of Aryan Oswal from Finterest Capital. Please go ahead. Yes, sir. Hello. Am I audible? Hello. Yes. You're audible. Yes. Thank you for taking my question, sir. So my first question is regarding the cost of funds. Do you expect it to increase even further in the coming quarter? And when do you see the trend reversing? And also, what are we doing so that our cost of funds doesn't cross a certain limit? I think cost of funds in this year should remain by and large in this range. We are not yet clear how the interest rate scenario will pan out because of various things. I believe that cost of funds should not increase. If it all increases, it will not be more than 10-20 basis, and which we should be able to pass on to all the new lending which are happening now. It should not have an impact on our expense. Okay. And sir, a lot of bigger names from the NBFC space have turned their focus on granular retail loans. So can you shed some light on the increasing competition in this space and how are we different from the competition? So, I think this space is quite competitive, not from now. Even in the last two, three years, we have seen that there is a competition. Only way that you keep focusing on giving a better turnaround time to your customer. And the only way to help this is the technology. And your decision-making should happen based on the data science capabilities on various things. So, I think automated processes and data science-driven decision-making, these are the two aspects which we are confident that will have an edge over most of the competition and be able to have a faster processing, better decisioning, and better outcome in terms of asset quality and all. Okay. Thank you so much, sir. That's all from my side. Thank you. Before we move on to the next question, a reminder to all participants, you may press star and one to ask questions. The next question is from the line of Deepesh Sancheti from Manya Finance. Please go ahead. Yeah. Am I audible? Yes, sir. Hello. Finally, that we have crossed the break-even mark in our Gold Loan business. Are we planning to expand in the southern and the eastern parts of the country, or are we planning to deepen our presence in the existing markets? Hello. Hello. So yes, Gold Loan expansion will continue to be in the North and West. We do not intend to go in South because we believe that South is already hugely penetrated, and already there the competition is much larger here. North and West still have a lot of scope and besides that, our entire current network of branches of home loan and MSME in the North and West. So even from the cost perspective, from branding perspective, presence perspective, that is going to be helpful to us. Are we facing a lot of competition from the PSUs also? It is in between the government had mandated the PSUs to go aggressive on Gold Loans. So competition in Retail segment is always there. So I believe that we have to focus on our service delivery and our origination and our customized product. Not that there is not adequate competition. Competition is there. Within that competition, we have to be aligned our offerings and continue to grow. Okay. What about the impact of import duty on gold? With the cut on import duty, the prices decline. What is the impact on do you see on our gold business happen due to this? And do you expect the prices to decline further or start increasing as we enter the fiscal period? So Gold Loan reduction on the import duty has enabled the Gold Loan prices going softer. And so on the existing portfolio, your LTV has gone up. So that is where we have to see that our LTV come within the acceptable range. So we will do the collection call and all that. But having said that, how the Gold Loan prices behave, we are not focusing on that. This is the impact because of the customs duty reduction, and that is in control because it is not more than 5%. But going forward, the Gold Loan will behave based on various other factors, which I don't think we are competent to comment on that. How much more margin requirement is required with every 1% decrease in gold prices? If the gold prices increase 1%. Decrease. Decrease. If they decrease in the 1% and our LTV is 0.75, then 75% of that amount, our LTV will increase. To that extent, either the LTV should remain within the acceptable range or else we have to recover from the customer. Being these are the customer in the range of every single side of INR 90,000. The impact that way and to recovery is very, very low. Okay. Just a last question from my side now. With the new fundraising which we have done, what will be the impact on book value? It's premature to say because it depends on what quantum, in what shape, and when you raise. It is just enabling provision. We have yet to take shareholder approval and also discuss various options. Then we decide which option, which instrument, and what quantum we will be finally doing. Okay. So just a follow-up on that. So in case of you're going for preferential warrants or maybe preferential equity, as investors, retail investors, or institutions, can we also participate? Whom do we have to contact if that is the case? As I said, we are not yet clear what instrument and what timing it will be. So if any case happens, that will be in any case will be disclosed to the stock exchanges and time to time various announcements. But at this moment, we are not yet clear, and no further progress has been done till after the shareholders' approval. I'm sorry, but if there is a participation from proprietary houses like us, then what is the point of contact of the company? I think, as I said, whenever we slide this, everybody will be informed via the stock exchange announcement and various other ways. Okay, sir. I'll contact you regarding this again. Thank you. Thank you. Thank you. Before we move on to the next question, a reminder to all participants, you may press star and one to ask questions. The next question is from the line of Ajit Kaushal from Royal Global University. Please go ahead. Good afternoon. Am I audible? Yes, sir. We request you use your handset to ask a question. Yes. I am late joining to this particular conference. Can you let me know? My question is regarding the assets impairment. From this sector, actually, there is a maximum asset impairment you are looking for. So yeah, actually, this includes two parts. One is the ECL, and the other one is the so ECL is the provisioning expected credit loss, and the other one is the write-off. So there is almost INR 28 crore of write-off in the rest of the provisions, mainly. Okay. Yeah. Another part of my question, again, related to the asset impairment. So most of the write-off or non-performing assets, it is coming from SME or Gold Loan or housing from this sector? So it is more from the Construction Finance side. It's a Technical Write-off. What do you mean of technical write-off? What do you mean by technical write-off? So recovery will continue. The efforts for the recovery will remain continue. It's not like that it's completely wiped out from the book. So only technically we have taken the impact, but definitely efforts will remain continue. Okay. Okay. May I ask what you are expecting to what percent you will be able to recover if you can have any kind of estimate regarding that? Almost 80%-90% will be able to recover. Okay. Out of this INR 28 crores. Yeah. Yeah. I missed something, sir, because of the voice instruction, sir. What about the rest of the INR 18 crore? I think, if I'm right, I saw it is INR 46 crore around the asset impairment. Yeah. Yeah. Provision on the assets. But the rest of the INR 18 crore is provisions? More or less. Yeah. Okay. Yeah. Let's say the INR 18 crores is actually provisions as a part of normal course of business. When the loan goes for the book growth, AUM grows, as an NBFC business, they will have to continue to make provisions also against that. So that's a normal course of the business. So that INR 18 crores is an ECL provision, and INR 28 crores is the one-time write-off, which I also mentioned earlier. And it's a technical write-off. So technically, what happens is we write it off, and then we initiate the recovery process. And based on our experience from the past, we will be able to recover 80%-90%. Yeah. So last year, I also saw that it was showing around INR 2023-2024 crore of write-off in the first quarter of 2023-2024. Again, you have written off in the first quarter of 2024-2025. So whether it is being done strategically as far as the provisioning or the technical assets impairment are concerned? Yeah. I think we'll have to check about the Q1 number, which you just mentioned. We have written down your question. Why don't you reach out to us separately, and then we'll be able to give you the exact details. Sir, I thought INR 13 crore was the write-off and the rest of the provision in the ordinary course of business. Okay. Okay. Okay. Thank you. Thank you so much. Your answers have been very helpful. Thank you so much. Thank you. The next question is from the line of Manraj Badesha from MJ Global. Please go ahead. Yeah. Hi, sir. Am I audible? Yes. Yes. So first, we have a couple of questions. So could you help us understand this new Micro LAP segment? Is it a part of the existing MSME business vertical, or is it different in some way aside from the ticket size range, given that the MSME segment also has ticket size of around INR 1 million- INR 1.5 million? So it is a completely different segment, different team, different branches. So it is a different vertical. So MSME, currently, we have an average ticket size of INR 19 lakh. However, this Micro LAP will be an up to ticket average ticket size of INR 5 lakh. All the loans will be below INR 8 lakh. And these are the loans which are happening in the range of about 22% yield against the MSME, which is happening in the range of 15.5%. So this is to serve our customer segment in the rural areas, and branches are also getting opened accordingly. We intend to open about 70 branches in the next three quarters. And already 27 branches are going live, and we will start seeing some portfolio. But initial few months are the phase where we will build up these branches. Next year, you will see full benefits from these branches will start coming in. Okay. Okay. Thank you, sir. And secondly, on your guidance of INR 30,000 crore AUM over the next three years, could you help us understand better your plans in terms of scaling the business, and what verticals would you see higher growth? So higher growth will, of course, be coming from MSME, Gold Loan, and Housing and Construction Finance. By that time, Micro LAPs will still shorten in their loan for a lower amount. And this year, we closed INR 15,000 crore. Already, we reached INR 17,000 crore. So when we achieve INR 20,000 crore- INR 21,000 crore in FY20 25, I think we are well within our target to reach INR 30,000 crore by FY20 27. Okay, sir. Okay. Thank you so much. A reminder to all participants, you may press star and one to ask questions. A reminder to all participants, you may press star and one to ask questions. As there are no further questions, I would now like to hand the conference over to the management for closing comments. Over to you, sir. Thank you, everyone, for your time today in attending the first quarter FY2025 Capri Global Capital Results. We look forward to continue to engage with each one of you, and we look forward to kind of, again, speak to you during second quarter FY2025 results. Thank you. Thank you. On behalf of Go India Advisors, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.