The NBFC aims to open 1500 exclusive gold loan branches and is targeting a gold loan AUM of Rs80 bn over the next 5 years:
Capri Global Capital (CGCL) has reported a strong pick-up in disbursals, which touched Rs14.86 billion during Q2, 2022-23, increasing 57.2% y/y. This strong momentum was noted across all products resulting in the consolidated AUM increasing 47.4% y/y to touch Rs77.69 billion. CGCL did a massive branch expansion, adding 225 branches in one year to Q2, 2022-23 taking total branch network 325 branches. The car loan origination vertical has a presence across 322 locations in 29 states and UTs.
The gold loan foray was announced in Feb’22 and the product has been formally launched in August’22 through 108 exclusive branches. This has quickly scaled up to 182 exclusive gold loan branches with an AUM of Rs1.39 billion as of Q2, 2022-23. Lending business has a branch presence in 14 states, UTs. Rajesh Sharma, Managing Director, updates: “Gold loan business has contributed 10% to the total disbursals during the second quarter. Our focus on expanding the geographic footprint and in-house loan origination has helped the company maintain a strong momentum in its business. All gold loan branches are equipped with AI-enabled security systems and safety vaults. Borrowers have a dedicated relationship manager for a smooth experience.”
SENP, NTC Customers
CGCL’s business model focuses on secured lending and the company will continue to do so. During the last 4 years, the company’s customer base has been increasing at 33% a year. The lender focuses on customers in the ‘Self-Employed Non-Professional’ (SENP) category in tier 3 & 4 cities. Its customers are small business owners who may not have a formal proof of income.
In housing loans, 53% of CGCL’s loans are given to self-employed customers. CGCL has also built expertise in underwriting loans to new-to-credit (NTC) customers or customers without any past credit history. Sharma explains: “Our 15% disbursals in last FY were to NTC customers. We shall continue with its focus on the SENP and NTC customers in tier 3 & 4 cities, where we see ample opportunity in credit intermediation. Growth in past 4 years has been organic through in-house acquisition of new customers and without a dilution in the ticket sizes of loans.”
In Q3, 2021-22, CGCL entered into agreements with State Bank of India and Union Bank of India to offer MSME loans under the co-lending framework of RBI. Under the arrangement, CGCL retains 20-30% of originated loan and the remaining balance is held by the partner co-lending banks. Likewise, CGCL has entered into agreement with SBI to offer home loans under the co-lending mechanism in Q4, 2021-22. In the last 18 months, CGCL has launched 1 product under the newly created distribution vertical and 3 products in the lending vertical.
In Jan 2021, CGCL commenced distribution of new car loans of leading commercial banks. CGCL has cumulatively originated Rs40 billion in car loans earning a net fee income of Rs744 million. This is an asset light business in 29 states & UTs through 6 branches and feet-on-street presence in additional 316 cities and locations. Sharma informs: “We have distribution partnership with 6 leading public, private commercial banks. The car loan origination vertical originated Rs13.6 billion in new car loans for partner banks, growing 4x y/y. The vertical generated Rs285mn in net fees from partner banks. A common underwriting framework has been evolved between CGCL and co-lending banks to ensure uniformity of processes and credit quality.”
The pandemic, because of initial lockdown and later on the brutal second wave, severely impacted people across strata. A significant 86% of CGCL’s retail borrowers by value being small business owners were also amongst those impacted. The remaining 14% belonged to salaried segment. In-line with the guidelines issued by RBI, CGCL extended the restructuring facility to all eligible borrowers. As of March 2022, the total restructured loans amounted to Rs2161 billion and carried a 22% provisioning.
Sharma clarifies: “However, the construction finance portfolio, which comprises lending to affordable housing projects, showed remarkable resilience. We did not have to restructure any exposure in this portfolio and the asset quality has stayed pristine with nil NPAs. Most of our restructured loan portfolio in the retail segment would exit moratorium by Q1, 2023-24. Regular servicing through EMI payments has commenced.”
Sales Mobility App
CGCL has been investing in digital initiatives to re-engineer its processes and make them efficient. However, CGCL’s business model entails a certain degree of touch-and-feel. Hence, the sourcing in near term shall remain overwhelmingly physical while the processes from customer onboarding to post-disbursal servicing become digital with faster turnaround times.
CGCL has undertaken a number of initiatives on the technology front in the past 2 years. Its key digital initiatives include OCR-based documentation, eNACH registration, video KYC, digital signatures, and incorporation of UPI payments from leading payment service providers and gateways into its systems. The car loan distribution vertical has its own car loan leads application that has been developed in-house. CGCL has a customer self-service portal and a CRM application to interact with customers digitally. As at June 30, 2022, the company’s in-house tech team comprised 59 employees.
Sharma points out: “Our sales mobility application has digitized 50% of the loan origination to disbursal process. The tech footprint is entirely cloud based. A data analytics platform and data warehouse are in place. Key enablers of our expanding technology footprint are the in-house technology team, investments in and deployment of the latest technologies, including machine learning and artificial intelligence, and the data analytics platform.”
CGCL has already added 210 branches in H1, 2022-23 including 182 exclusive gold loan branches and 28 branches for other businesses. Company commenced retail footprint in Uttarakhand and is further expanding in Uttar Pradesh. The focus on states of MP, Rajasthan, and Gujarat for both gold and non-gold retail businesses continues. Sharma reveals: “We will continue to expand branch presence deeper in existing states in North and West. We will continue to improve processes and evaluate all opportunities to leverage the digitization and make the entire loan journey seamless. We aim to open 1500 exclusive gold loan branches and are targeting a gold loan AUM of Rs80 billion over the next 5 years.”