Reduce Capri Global Capital; target of Rs 695: ICICI Securities

ICICI Securities research report on Capri Global Capital

Capri Global Capital (Capri) demonstrated superior execution of its ‘granularisation’ strategy in FY23 with combined share of MSME, gold and affordable housing increasing to 79% (74% in FY22) and trimming construction finance (CF) share to 18% vs 19% in FY22. Notably, car loan business scaled new heights; it disbursed close to Rs60bn car loans in FY23 with branch+ fleet-on-street expanding to 450 by Mar’23 from 213 in Mar’22. During FY23, it forayed into gold financing and expects gold loan AUM to contribute ~25% of consolidated AUM over the next 4-5 years with total branch network of 1,500 in the near term. Considering high yields in gold loans (~18-21%) vs blended yield of 15.2% during Q4FY23, it expects NIM to improve or stabilise going ahead. Overall, with up-fronting gold loan related investment in FY23, likely AUM growth at 30- 35% in FY24 (capital raising of Rs14.4bn via rights to support growth) and stable asset quality, it expects RoE to remain in mid-teens in FY24.

Outlook

The stock rerated sharply over the past six months capturing most positives, thus, leaving limited scope for rerating, in our view. We reinitiate coverage with a REDUCE rating and a TP of Rs695, assigning a multiple of 3.5x to Sep-24E BVPS, considering 2.6% RoA in FY25E.