Ladies and gentlemen, good day and welcome to Capri Global Capital Limited Q3 FY26 earnings conference call hosted by Go India Advisors. As a reminder, all participants' lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this 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, sir.
Thank you. Good afternoon, everyone, and warm welcome to Q3 FY26 earnings call for Capri Global Capital Limited. This is Hardik Doshi, Head of Corporate Finance and Investor Relations. Before we begin, as a brief disclaimer, the discussion on today's call regarding Capri Global Capital Limited's earnings performance is based on judgments derived from the declared results and information on business opportunities available to the company at this time. The company's performance is subject to risk, uncertainties, and assumptions that could cause results to differ materially in future. In that context, participants on today's call are advised to consider the same while interpreting the results. The full disclaimer is available on slide 63 of the earnings presentation. Participants are requested to kindly take note of the same. Format of today's call would be opening remarks by the management team, followed by Q&A.
Let me now introduce the management team for Capri Global Capital present on the call today. With us today, we have Mr. Rajesh Sharma, Managing Director and Promoter, Ms. Divya Sutar, Executive Director Strategy, Mr. Kishore Lodha, Chief Financial Officer, and Mr. Sanjeev Srivastava, Chief Risk Officer. I would now request our Managing Director, Mr. Rajesh Sharma, to present his opening remarks on the results. Over to you, sir.
Yeah, thank you. Good afternoon, everyone. I hope you all are doing well and had a good New Year break. We announced our interim financial results for the third quarter of FY2026 on 29 January. I trust you have had the opportunity to go through our earnings presentation, which is also available on our website. Before I move on to the financial and operational highlights, I would like to touch upon the broader operating environment during the quarter. India's economy continues to demonstrate resilience amid a mixed and uncertain global backdrop. Domestic demand remains steady, financial conditions and government schemes are supportive, and budgetary push for infrastructure spending, indigenous manufacturing, and service sector will drive the consumption and credit growth. India is expected to be among the fastest-growing major economies in FY26, underpinned by a stable inflation trajectory and strong structural fundamentals.
At the same time, the macro environment continues to be affected by external headwinds, including geopolitical issues, global market volatility, and currency movements, underscoring the need for disciplined execution and prudent risk management for financial institutions. Against this backdrop, I am pleased to say that Capri Global delivered strong quarterly performance in Q3 FY26, continuing its growth momentum and maintaining asset quality, while delivering highest-ever quarterly profit of INR 255 crores in 99% increase year on year. This performance reflects our strong execution capability and resilience business model even during the uncertain macro conditions. Now, coming to our detailed business and earnings performance during the quarter. The strong momentum we saw in the first half of FY26 continued through the third quarter across all our lending businesses. As of December 31st, 2025, our consolidated AUM stood at INR 30,406 crores, reflecting a robust 47% year-on-year growth and 12% quarter-on-quarter growth.
This performance was underpinned by broad-based expansion across segments. Gold loan grew an impressive 80% year-on-year, while housing loan rose 40% year-on-year. Our co-lending AUM surged 93% year-on-year to INR 7,138 crores, now accounting for almost 23.5% of total AUM, up from 21% in Q2 FY26, highlighting our strategic focus on capital-efficient growth. Disbursements for the quarter rose 87% year-on-year to INR 10,879 crores, supported by a widening distribution network and growing customer base. Our growth remains granular, diversified, and retail-led, with our customer base now exceeding 630,000, reaffirming the scalability and resilience of our business model. 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.
We successfully met our branch expansion targets with the net addition of 68 new branches across South India. While last quarter we focused on deepening our presence in existing geographies, this quarter we marked our entry in high-potential new geographies of Odisha, Andhra Pradesh, Telangana, and Karnataka to support the next phase of growth. Gold loan AUM saw robust growth increasing from INR 10,170 crore at the end of September to INR 12,555 crore by December, a sequential increase of 23%, led by healthy customer demand and improving branch productivity. In the context of rising gold prices, we maintained conservative loan-to-value ratios while ensuring strong collection practices across the portfolio. Asset quality remained a key focus. Our gold loan gross NPA stood at 0.39% as of December, underscoring our focus on risk management and portfolio quality even amid rapid growth.
Overall, Q3 marked an all-round performance for the gold loan business, combining scale alongside strong credit discipline and operational execution, with branch productivity increasing to INR 14.1 crore AUM per branch. Our MSME AUM grew to INR 5,886 crore, up by 19% year-on-year, supported by steady execution and network expansion. In the MSME business, all 16 branches in Uttar Pradesh we opened in Q2 FY26 are now fully operational, and by December end, these branches have achieved monthly disbursement run rate of INR 9.5 crores, and we expect this to cross INR 20 crore per month by March. During the quarter, we also commenced MSME operation in prime urban markets such as Mumbai, Pune, and Delhi, which will help diversify and strengthen our overall customer risk profile. Within MSME, our Micro LAP business continues to gain strong traction, with AUM rising to INR 650 crore.
This vertical enabled us to serve emerging self-employed borrowers with smaller ticket size requirements. In Micro LAP, we added 14 branches during Q3, taking the total branch network to 151 branches as of December end. Our immediate focus now in this segment will be on improving sales productivity and operating efficiency across the expanded network before undertaking the next phase of branch expansion. Housing AUM stood at INR 6,490 crore, delivering a year-on-year growth of 40%. We continue to see resilient demand across the affordable housing segment, where rising income level and lower interest rate regime are driving demand for housing loans. With net addition of 18 branches, we further expanded our presence in high-potential South India market by entering the state of Andhra Pradesh and Karnataka. This strategic expansion is a step towards becoming a national player in housing finance, increasing portfolio granularity, and supporting yield expansion over time.
Our construction finance AUM saw steady growth of 37% year on year to INR 5,109 crore, now funding over 279 active residential projects with an average ticket size of INR 37 crore sanction-wise and outstanding portfolio ticket size of INR 18 crore. The book remains granular and well-diversified by geography, reflecting our focus on working with mid-sized and small developers in metro and Tier 1 cities. We continue to emphasize disciplined underwriting through rigorous due diligence and escrow-based cash flow management, ensuring a risk-first approach. Our total branch network expanded to 1,331 locations in Q3 FY26 with a new addition of 107 branches during the quarter, while our employee base increased to 13,066, up by 7% quarter on quarter. Our entry in new geographies is a step towards our ambition of building a pan-India footprint, enhancing customer reach, and increasing brand visibility, laying the foundation for the next phase of growth.
Let me now provide an update on our core earnings. Our yields and spread on net advances remain healthy in the quarter at 16.4% and 7% respectively, driven by continued loan book expansion, decline in cost of funds, and enhanced margin. Our net interest income for Q3 FY26 stood at INR 510 crore, representing a strong 48% increase year-on-year. We continue to strengthen our non-interest income stream in Q3 FY26, reinforcing our strategy of building a diversified and resilient earning profile. Non-interest income grew 124% year-on-year and 18% quarter-on-quarter to INR 240 crores, contributing 32% of our net total income for the quarter. This strong increase was largely driven by growth in commission of insurance distribution and co-lending fee income. In our insurance distribution business, we generated fee income of INR 34 crore during the quarter.
Q3 marked an important strategic milestone with the deployment of the upgraded Capri Care insurance ecosystem. During the quarter, we unveiled a refreshed brand identity and fully digital end-to-end platform that enables instant, real-time policy issuance, significantly easing insurance adoption across our retail customer base. More importantly, we expanded our product portfolio beyond traditional financial indemnity products to a holistic wellness-led offering. By embedding preventive healthcare solutions such as annual health screening and cashless consultation into the ecosystem, Capri Care is evolving from a claims-driven product offering into a proactive health and protection partner for our customers. This digital-first and integrated approach is expected to drive higher insurance penetration, improve customer engagement, and meaningfully enhance fee income contribution over time. Our co-lending income stood at INR 116 crore, driven by higher disbursal volumes and deeper engagement with partner banks.
This capital-efficient model continues to enhance ROE, diversify funding sources, and scale fee-led income without incremental balance sheet strain. Our car loan distribution business maintains its steady momentum, with origination of INR 3,290 crore in Q3 FY26, up 15% year-on-year. With a growing footprint and deep relationship across 14 partner banks and institutions, we have built a scalable platform with a pan-India network in this segment with potential to monetize further for distribution of other products. On the expenses front, our operating expenses increased 15% quarter-on-quarter. This was mainly driven by an increase in the employee cost on account of the net addition of 869 employees quarter-on-quarter and an increased employee incentive linked with higher disbursement. Our continued focus on operating efficiency is visible, with the cost-to-income ratio improving 51.6% in Q3 FY26 compared with 58.2% in Q3 FY25.
This sharp improvement underscored the benefit of a maturing branch network, rising productivity, and strong operating leverage across our businesses. As a result of margin expansion, improvement in operating efficiency, and strong traction in fee income, our pre-provision operating profit surged 92% year-on-year to INR 363 crore for the quarter. Further, we continued our strong profitability momentum in Q3 FY26, delivering a robust PAT of INR 255 crores, up 99% year-on-year. Our return ratio considerably improved during the quarter, with ROE of 15% and ROA of 4% for the quarter. Coming to our asset quality, our impairment cost for the quarter stood at INR 23 crore in Q3 FY26, down from INR 31 crore in Q2 FY26, or 0.4% of the gross loan book, and our provision coverage ratio on Stage 3 loans improved to 43.6%, demonstrating our prudent provisioning and conservative approach to risk management.
Our Stage 2 asset increased by INR 95 crore quarter-on-quarter and were 4% of gross loans. However, our stage 3 ratios improved quarter-on-quarter for gold loan, housing loan, and construction finance, and remained flat for MSME loans. At consolidated level, our stage 3 asset remained flat at INR 275 crore quarter-on-quarter, resulting in our gross stage 3 ratio at 1.2%, down sequentially by 10 basis points, while net stage 3 ratio stood at 0.7%, down 7 basis points sequentially. Let me talk about liability side. Our borrowing increased by 38% year-on-year, and incremental borrowing sanction limit year to date, this fiscal was around INR 6,860 crores. We added 11 new lender relationships year to date, taking the active relationship now to 30+. We also continue to diversify our borrowing mix by raising funds through other instruments such as NCDs and commercial papers.
During the quarter, we raised INR 635 crores from NCDs and commercial paper. As a result of MCLR reduction and our effective effort on repricing existing liabilities, we are happy to share that we saw quarter-on-quarter reduction of 24 basis in our cost of funds. Following equity capital infusion of INR 2,000 crore in Q1 FY26, our balance sheet is now significantly stronger with the low leverage ratio of 2.8x, providing ample headroom to support accelerated growth across business segments. Our standalone capital adequacy ratio of CGCL is at 30.3% and 24.8% for Capri Global Housing Finance Limited. Our liquidity remains comfortable, with INR 4,274 crores in cash and bank balances, investments, and underwriting credit lines across CGCL and CGHFL. Our technology investments continue to deliver tangible outcomes, and to understand the sustainability of these numbers, we need to look at the engine powering them.
Four years ago, we began rebuilding Capri as a platform-centric NBFC, and that decision is now generating exponential operating leverage. Our performance is not just the outcome of incremental manpower; it is also the product of scaling our systems. Our in-house technology stack delivers higher disbursement, sharper credit selection, and shorter cycle times, all without a proportional rise in cost. Our disbursements are up 87% year-on-year. However, manpower has increased by just 19% year-on-year, driven largely by the addition of 265 new branches year-on-year rather than a rise in core operating load. This is the compounding effect of an AI-native operating model, one where productivity, speed, and risk discipline accelerate together and where growth is driven by architecture, not headcount.
We have built an AI-first lending platform from the ground up and embedded it at the core of our credit architecture, made around the critical element of clean governance continuously in this data. The customer journey runs on a fully native, seamless flow from digital onboarding through our mobility app called Spark into a centralized loan origination system called Orion that orchestrates complex workflows end to end. This foundation delivers insight, speed, and risk precision that a legacy vendor-led ecosystem cannot match. This distinction is most visible in our proprietary intelligence model, Sentinel for credit and Kronos for collections. The credit model acts as a vigilant guard, moving us from static scoreboard to dynamic risk compliance, while the collections model drives time-driven escalation aligned to delinquency aging. Our agentic communication stack across voice, WhatsApp, SMS, and GenAI bots now manages customer engagement end to end.
It sends nudges, automatically analyzes call transcripts, detects early risk signals, and triggers the right action instantly, creating a real-time, high-accuracy feedback loop across the collections funnel. On the ground, our field collection executive operates on a specialized geotagged mobility app called Pegasus, ensuring fast-moving, wide coverage execution by optimizing routes and tracking visits in real time. This structurally lowers the cost of collections and improves cure rates without expanding our feet on the street workforce. Underpinning this capability is a robust hybrid multi-cloud strategy and unified data foundations that feed our real-time executive dashboards called Zeus, ensuring that decisions regarding funnel visibility and asset quality are backed by live data. We have modernized the entire application development lifecycle by embedding artificial intelligence at every stage, driving an 83% year-on-year improvement in employee-to-PR code productivity.
With AI-driven automated reviews and agentic testing frameworks, we have brought our error rate down to below 5%, supported by a 4-time increase in code coverage year-on-year. As a result, we are delivering new features faster with higher reliability and with leaner teams, giving us a sustained execution advantage. This velocity translates directly into business outcomes and customer experience. Consequently, products like gold loans have a turnaround time of less than 30 minutes, and our pre-approved top-up loans are disbursed in 60 seconds. We are monetizing, trusting, and leveraging the India Stack to acquire and verify customers at a very low cost. Importantly, we have ensured that speed does not come at the expense of governance and is aligned with regulatory guidelines. The technology foundation is in place; the systems are mature and are built to compound earnings at scale.
On the ESG front, I am pleased to share that our ESG practices have been recognized by the leading global independent rating agency, including S&P Global and Morningstar Sustainalytics. Capri Global has achieved an S&P ESG score of 71, the highest among all NBFC peers, and has been assessed as low ESG risk by Morningstar Sustainalytics. These ratings place us firmly among the leaders in ESG practices within the NBFC sector and reflect our adherence to globally benchmarked standards. Importantly, these assessments are based entirely on publicly available, independently verified data, underscoring the strength, transparency, and resilience of our governance and operating model. We shall now be happy to take your questions.
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 will wait for a moment while the question queue assembles. The first question is from the line of Aman Baheti from InCred Capital. Please go ahead.
Hi. Thank you for the opportunity. Am I audible?
Yes, please.
Hello? Yeah, hi. Hi, sir. So, my first question is, with our ongoing investments in distribution, how should we think of benchmarks like AUM per branch, per employee that signal our transition from build-out to operating leverage in gold and Micro LAP businesses?
Yes, thank you. So, as far as the AUM per branch is concerned, gold loans as we have narrated in our call also that it has already crossed INR 14.1 crore per branch AUM. And we expect this gold loan AUM to continue to grow in line with our there are many branches which are still less than INR 10 crore, while the average is INR 14 crore, where some of the branches are about INR 25 crore, some of the branches are below INR 10 crore. So, there exists a good scope that these branches will continue to deliver 30% plus growth. Plus, we intend to add more branches. So currently, if you talk about 910 branches, there are about 20% branches are more than INR 20 crore per branch. Between INR 5 crore to 20% branches, almost there are about 67% branches.
There are some newly opened branches we opened in the last 2 quarters [have] less than INR 5 crore. So, those branches will continue to grow. Plus, we also intend to add new branches. So, the existing branches will also continue to grow with the addition of the opening of the new branches. So, per branch AUM, we can expect we are at INR 14.1 crore. These existing branches will continue to grow 30%, and then there will be addition of the new branches. If we talk about Micro LAP, which we are operating about 151 branches currently, the AUM is about INR 650 crore, which averages about close to INR 5 crore plus. These branches will deliver an AUM of about, say, INR 10 crore by the next year. And we intend to achieve INR 3,000 crore of AUM in about another 2.5 years from now.
That is the trajectory we are following.
Okay, sir. Okay, sir. Thanks for that. It was very helpful. So, the second question is in line with our portfolio mix. So, as we are seeing a shift from traditional lending towards gold loans and co-lending, but our NIMs have remained largely unchanged. I mean, so what's the outlook there on gold loan yields?
Gold loan yields are currently in the range of about 17.8%. Overall, if we talk about the overall yield of the company, it is about 16.4% at the portfolio level. With the increase slightly in the gold loan portfolio, the overall yield and spread will improve. Plus, the Micro LAP segment is also increasing, where the yield is also going to be supportive. We expect the gold loan to remain in the range of about 18%. Likely, there will be improvement about 20-25 basis going forward by various retail gold loan focus we are bringing it now, increasing the smaller branches. So there, we should see some improvement in our yield, plus certain other measures we are taking. So overall, gold yield is likely to be 18%. And our overall yield of the company, which is 16.4%, should improve slightly.
It should improve by 10-20 basis points in next year.
Okay, sir. Thank you. Thank you so much.
Thank you. The next question is from the line of Sohail Kanalil from ULJK Financial Services. Please go ahead.
Good afternoon, everyone. Very good congratulations for the good performance in this quarter. I had a couple of questions to ask. Basically, we have seen co-lending has been scaling faster from 20%-23.5% in Q3. And how do we see this shape up going ahead? Is this going to keep increasing further on?
I think co-lending will remain largely in the current range between 20%-23%. We do not intend to grow it further from this level. We are able to maintain this is a very good level to have it. It's very, very highly ROE accretive. There's a focus of regulators as well as the banks to partner in the co-lending so that it is a collaboration between the low-cost fund and the low-cost collection efficiency of NBFC and low-cost fund of the banks. But we intend to maintain this level.
Got it, sir. One more question I had regarding, so how do gold loan prices have, I mean, the gold prices itself have gone up significantly in the last few quarters. Right now, it's at peak. So, if we see further downside in gold prices, what kind of scenarios have we embedded for your loss and provisioning? Have we done for that?
Yeah. So, I think it's a very good question in the recent times of the recent volatility of the gold loan. But as a company, we follow the very conservative practice in terms of the way we decide the LTV. In the rising trend of the gold, we reduce our LTVs. During January, whatever we disburse, our loan disbursement was happening at the LTV about 64% against the 75% permitted. And the portfolio level, our LTV is 60% overall. So, it means we have a portfolio level 40% margin in the current trend. So, the second thing is that the moment we also have a system that early warning triggers, we are able to send to the customers through SMS and WhatsApp messages in case anybody's LTV breaches.
At the individual level, where the loan amount is anything between INR 50,000-INR 2,000,000, if the gold prices have fallen and the margin call triggers, we send the message. We manage the dynamic collateral monitoring, where we monitor the portfolio and individual loan account systematically and take the prompt corrective action. Borrowers are required to restore the margin within 14 days of intimation, limiting prolonged exposure during the period of price correction. Then we retain the right through our agreements to initiate auction of pledged gold, including prior loan maturity if collateral coverage becomes inadequate or borrower risk increases materially. So, there are various safeguards inbuilt. If we talk about currently, as I said, in the January month, our all disbursements where we disburse the loan where the AUM was only 64%.
So, 36% of the margin we were maintained during the time when the gold was going up one way. Between December and January, we were maintaining our fresh disbursement LTV, not 75, but between 70%-72%. So, there also, we have taken a conservative approach, also the gold loan lending happening on the last 30 days' average price, accordingly rate program is decided. So, based on all these frameworks, we are at quite a comfortable position where the LTV is just 60% at the portfolio level.
Got it, sir. I think the book has been very well managed. Thank you. Thank you, sir. This has been very helpful.
Thank you. The next question is from the line of Varun Dubey from Share India Securities. Please go ahead.
First of all, sir, congratulations on your superb set of numbers. I mean, the company has shown really good growth. If you can just comment on what was the reason for decline in the overall net interest margin to 9.1%? And also, the company has said that the overall spread could reach to 7.2% going forward. So, I mean, does the company stay with the same guidance for spread as well?
I think what is the relevant indicator to track is the spread. The spread has not come down. The spread has improved from 6.9%-7%. There's an improvement in the spread and our margin. As regards to net interest margin concern, the more you leverage, net interest will fall. The right indicator is spread, where we are showing an improvement of 10 basis from 6.9%-7%.
Okay, sir. But we are guided for 7.2%, I remember, in the second quarter. So do you stay with the guidance of 7.2%? I mean, will we see more 20 basis point improvement in spread in the fourth quarter?
Yes. There will be improvement in the fourth quarter in the spread further. On the back of our AUM of the gold loan rising, some support will come from the scale benefit and also from the cost of fund is going down. So already, we reduced about 24 bases in cost of fund down. In the last quarter, some of the loan will get further reset. And the mix of borrowing of the short-term commercial paper and other measures, our overall spread will continue to improve. And I think we are given a guidance of 7.2, which we hope to deliver that.
Okay, sir. So, one last question I just wanted to understand on your gold loan branches because I remember you were saying 995 branches was a target for FY26. I mean, what would be the addition for gold loan branches in FY27? I think, so there was a separate. Are there approvals that the company needed for additional branches? So, what's the update on that, sir?
I think the branches which we'll add in the last quarter of the gold loan, we'll let them stabilize and achieve at least six months' time. We'll approach the RBI at the appropriate time. RBI gives their approval and decision within 45 days. In the second half of FY27, we'll announce the expansion of our gold loan branches based on what time we approach and subject to our approval and program. Accordingly, we'll announce at the right time how many branches we'll be adding in the second half.
Okay. Thank you, sir. Thank you for asking the questions. And once again, congratulations on your superb set of numbers. Thank you.
Thank you.
Thank you. The next question is from the line of Ishank Gupta from Choice Institutional Equities. Please go ahead.
Hi, sir. Good afternoon. So, my first question was for gold loan segment that we have already observed a sharp decline in yields. So, what was the primary reason? Was it because of higher competition? And I couldn't hear properly. So, could you reiterate? I mean, what is the expansion we are seeing in the yields of gold loan?
As far as expansion is concerned, by current quarter, we will be ending up with 999 branches of the gold loan. And last quarter, we have seen we added about 68 branches in the gold alone. As far as the yield is concerned, the decline in the yield in Q3 FY26 compared to Q2 FY26 is directly linked to our strategy of expanding the retail loan book with a particular focus on a smaller ticket size loan in rural markets. This shift has been effective in driving customer acquisition and enhancing market reach. But it naturally resulted in lower average ticket size, and it is a slight compression of the yield. Furthermore, the rural market has seen improved cash flow availability due to the harvesting cycle, allowing customers to make timely repayment, access rebate schemes, and remain within the lowest ROI brackets.
However, next quarter, we expect the yield to improve by 20 basis points or so.
Any further expansion in 2027 and 2028?
2027, 2028, we will go to our regulator for the approval. The second half, he'll announce our phase of expansion in the gold loan branches. First half, we will try to make our existing branches which opened in the last 3-4 months to make them grow and achieve the breakeven. Thereafter, we'll go for the next expansion round.
Sir, what about the expansion in other branches other than gold loan? What do you pencil in for FY2027 and 2028 other than gold loan?
In the MSME, Micro LAP, and home loan, we are continuously adding. Next year, we can assume that between 100 and 125 branches across Micro LAP, MSME, and home loan, we will add.
Understood. So sir, taking further on the point of MSME sector, the government has continued its stance of supporting the MSME sector. So, based on that, can we assume our exposure towards MSME should also improve? So, what could be the AUM mix within the next 1-2 years?
You have seen this quarter also, overall, we have shown the 19% growth in the MSME segment. If you talk about the composition of AUM, currently, gold is about 42%, which will improve to about 45%-46%. As regards to MSME and construction finance and housing is concerned, they will largely remain in the range of about 18%-20% each one.
Understood. Understood. And sir, we have already reached our exposure to 40%. So, we are currently penciling 45% as the exposure towards gold loan. So currently, the gold prices have already witnessed high volatility in January. So, do you see good growth based on it if the prices do fall further or are volatile in February and March?
So even though some price correction, which we've already seen happening, but on the ground, still, the larger market of the gold loan is still exiting the informal segment with the small money lender and the small jewelry shop who also do the lending activity. That market, which continues to shift to the organized sector because of the fair practice and the better interest rate, I believe that still, a lot of market, which is going to shift from the informal to formal. And we'll see decent growth in the gold loan segment in the coming years.
Yeah. That was it from my side. All the best for the next quarter.
Thank you. Participants who wish to ask a question, you may press star and one at this time. The next question is from the line of Preet Nagersheth from Wealth Advisors. Please go ahead.
Yes. Hi. So, my question is that given that the borrowing announced in the budget is going to be more, and this will result in higher yields for government finances, do you see an increase in cost of funds for the company because of that for FY27?
So, I put it this way that across the level, if the cost goes up, then by all the lenders, that actually gets passed on to the borrower. But any cost reduction happens because of a better credit rating or otherwise. That benefit accrued to us. So, in case the cost goes up, we'll be able to pass on because that will happen for every lender. And that cost, of course, will get passed on to the customer. So, that will not change our spread.
However, any cost reduction which we achieve because of our mix of borrowing by using the short-term instrument like commercial paper or short-term NCD or by improvement in credit rating, these two features, that benefit will directly accrue to the P&L.
So, what happens in the case where banks who are competing with gold loans and companies like Capri Global, for them, their cost of funds do not increase as much as they will be for an NBFC? So, because of heightened competition, could this result in the yields on gold loans coming down?
So, in any case, banks are lending at less than 10%. And the gold loan NBFC are lending anything between 15%-18% rate. So already, that difference is there. But the customer segment of the banks and NBFC is entirely different. Second thing, the focus of the gold loan NBFC is purely only on the gold loan customer, where the banks do many other products also. So, attention to the customer, customer serving to this small borrower borrowing INR 30,000, INR 40,000, INR 50,000 rupees for a six-month loan, where banks' margin may not be even INR 500 rupees, the service and the attention of the NBFC is going to be the key differentiating area. So, it is not that the banks are not lending today at low rate. So that 25 bases here and there, not. Even today the difference is more than 500 basis points.
Still, all the gold loan NBFCs continue to grow. So I think that is not the factor of rate of interest that what rate banks are lending or what rate we are lending. They are entirely two different segments of customers.
Gotcha. The other question I had was regarding the gold LTV. So you explained right now regarding the prior participant. The question I wanted to ask was that till what price of gold are we comfortable after which, if it falls, we will have to start as you explained, you will have to start calling customers and managing that? So what kind of price fall would you still be okay with?
So, you have to understand it is like this that a customer whom we are giving a INR 100,000 say, against the gold of INR 100,000, we are giving a INR 75,000 loan. That is a regulatory limit. But our portfolio is currently sitting at 60%. It means that our portfolio is already at INR 60,000. Assuming that somebody we are giving the loan in the month of January, when the gold loan prices have gone up 10% again and fallen more than 10%, that time, you were having a loan-to-value not 25%, but we are following a loan-to-value of only 65%. So, 35% margin we were taking. Even though gold loan prices fall 10%, still, till then, it will remain within 75% range.
The moment his LTV breaches, where the LTV exceeds because of the reduction of the gold loan value beyond 75%, suppose some customer's LTV has become 78% or 79% on a particular day, 4% breach in a INR 75,000 loan, which means that INR 3,000 we have to recover from him. From the system, an auto message will be sent to the customer that your LTV has been breached by this and this amount. Within 14 days, if you don't reach towards the margin, we have the right to auction the gold. Plus, it will also invite the penal charges and this and that. The customer is being called by the branch, and SMS is already sent to him, and recovery is done. So, it is not that in one day, 25% correction will happen, and we are out of the money.
Correction will happen gradually, and there's an educated system-based alert, and calls are triggered, and recovery is made from the customer. Individual customer, we have to collect INR 3,000, INR 4,000, INR 5,000 only to make up that margin. In the worst scenario, we will end up selling the gold and realizing our money. Being ticket size being so granular and the risk is so diversified, this does not pose a real risk in terms of recovery. Gold being so liquid, and gold is only an asset class where customer parts with the position, it remains in our custody. So, there is no process of taking the position, something like that in real estate. Here, gold is in our position. We can sell and realize ours. So, there is no real risk as such.
Gotcha. Gotcha. The other question I wanted to understand is that what kind of growth momentum do you foresee for quarter four and also for the next financial year, if you can give some guidelines?
I think we have said that this year, we will continue to deliver a growth to be in the range of about INR 33,000-INR 34,000, and we are on that track. Already, we achieved INR 30,400 crore this nine-month period. We will continue to grow. Next year, we revise our guidance to deliver anything between about INR 43,000-INR 44,000. Earlier, we said that we'll achieve INR 50,000 crore AUM by FY28. Now, that guidance we revised to reach INR 55,000 crore by FY28.
Alongside this growth, do you have any targets for your ROAs and ROEs? What do you think you will achieve by FY28?
So, I think we have already delivered in this quarter 4% ROA, and we continue to maintain that our aim will be to deliver ROE in the range of about 16%+ and ROE anything between 4%-4.25%.
Gotcha. Wonderful. Thank you. All the best.
Thank you. Anyone who wishes to ask a question may press star and one. The next question is from the line of Mr. Bansal from NBG Investments. Please go ahead.
Yeah. My question is on this gold loan ratio. While answering the earlier participant questions, you said that you have a margin of around 35%-40%. But I see your presentation where you said that your loan-to-value ratio is around 72%, which means that you have the margin of around 28%-30%. So, can you help me understand what are these two things?
So, what I think you have seen, the slide number 8, is referring to the incremental disbursement. So, incremental disbursement, all three months, if you've seen Q3 FY26 showing is 72%. Now, 72%, thereby, it would mean that on the day when we disburse, suppose we disburse in the month of November and gold prices have gone up, thereby, it would mean that my LTV will keep coming down. So, in the current trend, when the gold was going up, our LTV started falling. Okay. We are able to clarify you.
Yeah. Yeah. Yeah. Understood. Understood. Thank you. Thank you for the clarification.
Thank you. The next question is from the line of Vikrant Pankaj Shah from Choice Institutional Equities. Please go ahead.
Thank you for giving me the opportunity. Could you share your perspective on the medium-term capital trajectory as growth continues, as capital adequacy converges towards target levels? How should investors think about trade-off between growth leverage and potential capital return?
We have adequate capital, as I explained, currently is about in the range of about 30%. We have adequate capital to support our growth for the next two years. So till FY28, the AUM, whatever we intend to reach of INR 55,000 crore, within that, as I said, 23% is off balance sheet item, which is the co-lending. For that, there is no capital allocation required. So keeping that in mind, we currently only have about 2.8% Tier 1 leverage. We are quite comfortable to achieve our target AUM of FY28 with the current capital.
Okay. Thank you.
Thank you. The next question is from the line of Vikramaditya Gajjar from Ventura Securities. Please go ahead.
Hello. My question is, given higher competition in secured MSME and LAP, are new loans coming at similar economics as before? If pricing is getting tighter, how are you compensating through underwriting discipline or risk controls?
So, I think the biggest lever we are focusing on, as you said, we are using technology platform across the way we onboard the customer, the way we process our loans, the way we do underwriting, and later, how do we do collection of the loan. The entire focus is how do we improve our productivity by continuously improving. And these technological-led initiative platform and agentic AI tools are making a sea change. If we can say that while the number of branches has gone up significantly, AUM has been doubled, our manpower headcount has increased only by a marginal 19% of that. So, our focus is going to become how you become operationally very, very efficient by using all these tech and data science tools.
So, our focus is going to remain that same amount of disbursement we do with the smaller number of people, with the less operating cost, and our model becomes very, very robust. And that is driving our ROA and ROE. If you see quarter-on-quarter, the improvement has been seen. Despite we continue to remain in growth phase, while we continue to add on the branches, the new capital has been added, and still, we are able to deliver the ROA of 4% and ROE about 15% result of the focus on productivity, efficiency using the technology and data science tools.
Okay. Thank you, and all the best.
Thank you. The next question is from the line of Sagar Shah from Spark Capital. Please go ahead.
Yes, sir. Thank you, sir. First of all, for the opportunity. And congratulations, sir, for such an excellent set of numbers. The majority of my questions are answered, actually. I just had one question. We have been affirmed by CRISIL the rating of A1+ . And our average cost of borrowings, our self-calculated, stands at 9.5%. And the lowering of cost of borrowings is one of the major things for us behind our ROE accretion. So, you guided around a few quarters before that our cost of borrowings is expected to come down once the rating actually gets upgraded. So, something like talks with the rating companies helps so that it's a big driver for us regarding our return ratio, sir.
So, I would like to say that cost of funds has already been reduced by 24 basis points on the back of a strong performance. The internal rating model which banks follow, this is that they have reduced the rate of interest and the risk spread. Further, we are diversifying the borrowing by mixing the short-term tools which are available. It is shorter tenure, but its lower costs like commercial paper and short-term STL. So, 24 basis points is already achieved. And we expect, on the back of good performance, credit rating should happen. Now, not that credit rating agency tells that in advance it will happen, but we believe it is a focus on continuous effort, and better performance will yield to the rating upgrade. Whenever it happens, they decide, and they let everyone know in the public domain also.
But without that also, by mix of borrowing and other measures, we see that continuously, we will bring our cost of funds further down. Whenever the credit rating happens, maybe after annual result or when, everybody will let you know. But there's a sharp focus on reducing the cost of funds by another 24-25 basis so that whatever 50 basis we expected that we bring it down in the next 3-6 months' time.
Okay. So basically, due to the RBI rate cuts and the follow-through from the banking system, you are estimating around 25-50 basis points, another one. But if the rating gets upgraded to more AA+ or anything like that, then what is the minimum expectation that the company has of lowering the cost of borrowings? Because that will be in class with the top NBFCs. That is why that will be a big trigger for companies like Capri Global, actually, sir.
So, as we said, 24 basis is already achieved. Another 24-25 basis we intend to achieve in the next 3-6 months without accounting any rating upgrade. Whenever the rating upgrade happens, this is a gradual process that a lot of other avenues open up and then banks also take the measure. And another, it takes 6-9 months to actually come in the P&L because the rating reset of the existing borrowing happened at the reset date. New borrowing immediately starts happening at the lower rate. So, it's a process which happens in a gradual manner. Not that the moment rating upgrade happens, the entire borrowing cost comes down. But yes, in 6-9 months, the effect can be seen. So again, 24 basis is already achieved. Another 20-25 basis we'll achieve another between 3-6 months' time.
Whenever the rating upgrade happens, that will happen. The cost advantage will accrue between 6-9 months from there on.
Okay. Okay. Thank you, sir. All the best. First of all, again, congratulations for excellent set of numbers, sir. Thank you.
Thank you.
Thank you. The next question is from the line of Ninad Jadhav from LKP Securities. Please go ahead.
Yeah. Hello. Good afternoon. So, my question is on Micro LAP. So, you mentioned you're targeting a portfolio of INR 3,000 crore in the next two to three years. So, if you could share some color on customer demographics like what is the yearly targeting and the average ticket size of the portfolio? And also, what are the driving factors you are seeing that you would be able to achieve this target in the next two or three years?
LAP, average ticket size is about INR 5 lakh. It is collateralized by security. The yield is in the range of about 23%-24%. Currently, AUM is about INR 650 crore from the 51 branches. In the next 3 years' time from now, we intend to have a loan book of about INR 3,000 crore.
So, any ground situation you're seeing? How is the customer behavior or how is the repayment ability? So, the factors that will help in achieving your.
Currently, our collection efficiency in the range of Micro LAP is 19%, which is very, very good. And not like other Micro LAP lenders, we are using here technology and other tools to see that we are able to, at the time of sourcing the customer, bad customers are rejected there itself. So GNPA at Micro LAP, GNPA at the end of third quarter is about 0.9%, which is very, very good. Our P&L account for even the Net NPA happened in this range because we are making the yield about 23%-24%. Even 2%-2.5% is reasonable. But since it's a new portfolio and we are continuing to focus on our technological tool, I think the way we are sourcing customers, the way we are underwriting the customers, we are going to create the new benchmark in the industry in the Micro LAP.
Sure, sir. Okay. Thank you.
Thank you. The next question is from the line of Mokshankhi Sanghvi from BSC Advisors. Please go ahead.
Hello. Hi, everyone. Thank you for the opportunity. So, I guess the majority of my questions have been answered. My specific query was on the resignation of the CEO. So, the person was appointed and resigned within a period of less than four months. And there were some rumors in the market as well. If the management could provide a little more clarification than the sentence that was provided in the press release that he's pursuing the personal entrepreneurial journey, it would be a little better for us.
Yeah. Thank you. So yes, Mr. Monu, who was based through and throughout from Delhi, he was released in IIFL. We hired him. And before actually he gets settled down, I think rather than coming to Bombay and shifting this base here, he thought and reconsidered his decision in terms of that at this age juncture of his 52 ages, he would like to pursue some entrepreneurial opportunity. And he changed his mind, and he has gone back to Delhi. And he's told us that he's going to start something entrepreneurial in the fintech space. Having said that, not that he has built some businesses and involved. He just recently came. And within a short span of time, less than a quarter, he made up his mind. So, neither he brought any certain number of team members along with him. So, there is an impact of team coming, team going.
I don't think it has much impact. There is an adequate number of professionals in team in each vertical, be it MSME, be it gold, Micro LAP, housing finance, car loan. There is a separate risk head. There's a group CRO. So, all that is in place. It is not going to have any adverse impact as such.
Understood. My specific issue was on the front that after such a high-level KMP is entering the company and leaving in such a short span of time, it might have a signal that there are some types of underlying issues or something. But I guess your answer addresses my query. Thank you.
Thank you. Ladies and gentlemen, due to time constraint, that was the last question. I would now like to hand the conference over to the management for closing comments.
Yeah. Thank you. To conclude, we all know that we delivered a strong performance in Q3 FY26 with the healthy AUM growth across our key lending segment supported by a diversified and predominantly secured portfolio. Profitability improved during the quarter driven by changing mix to high-yield products, improving margins, strong growth in fee income, and operating leverage from our existing branch network. While asset quality remained resilient, with a strong capital position and continued investment in technology and distribution, we are well positioned to scale efficiently and are confident of increasing our AUM target to INR 55,000 crore by FY28 and sustainable return on average equity of 16%-18% and return on average asset in the range of about 4%-4.25% by FY28. Thank you.
On behalf of Go India Advisors, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.