Capri Global Gets 'Buy' Stamp from JM Financial! ₹245 Target Price Hints at Major Upside

JM Financial has initiated coverage on Capri Global Capital Limited, assigning a strong 'Buy' rating and setting a target price of ₹245. The brokerage firm believes the non-bank lender is well-positioned for sustained growth, driven by its diversified retail-focused franchise, robust asset quality, and an expanding non-interest income engine.

Background Details

• Capri Global Capital Limited, established in 2011, operates as a diversified non-banking financial company (NBFC).
• The company has built a 100% secured lending book, with nearly 80% of its assets concentrated in retail segments.
• Its product offerings have expanded over time to include construction finance, secured MSME lending, housing finance, gold loans, and most recently, micro-LAP (Loan Against Property).
• Capri Global also generates fee income through a car loan origination business and obtained an insurance distribution license in 2024.

Key Numbers or Data

• JM Financial has set a target price of ₹245 for Capri Global, valuing the stock at 2.3 times its estimated Price-to-Book value (P/B) for FY28.
• The brokerage forecasts an Asset Under Management (AUM) Compound Annual Growth Rate (CAGR) of approximately 35% between FY25 and FY27.
• Profit After Tax (PAT) CAGR is projected to be around 62% over the same period.
• Average Return on Assets (RoA) and Return on Equity (RoE) are expected to be 3.6% and 15.6%, respectively, over FY26–FY27.
• Gross Stage 3 (GS3) and Net Stage 3 (NS3) asset quality ratios were reported at 1.3% and 0.7% respectively in Q2FY26.

Company Strategy

• Capri Global's core strategy involves maintaining a fully secured lending book, with a strong emphasis on retail market segments.
• Growth is being fueled by expansion in high-yield segments like gold loans and the developing micro-LAP portfolio.
• The company plans to scale up MSME prime loans to help balance its yield profile and mitigate potential margin pressures.
• There is a strategic focus on increasing non-interest income through co-lending, car loan origination, insurance distribution, and upcoming bond syndication.
• Co-lending and direct assignment structures are actively utilized to enhance income generation.

Financial Outlook

• JM Financial expects AUM growth momentum to remain strong, driven by the combined strength of gold loans and MSME credit demand.
• Operating leverage and steady credit costs (around 0.5% post-FY26) are anticipated to support profitability.
• Non-interest income is becoming a crucial contributor to overall profitability, providing stability.
• Asset quality is projected to remain robust, supported by the entirely secured loan book, despite minor temporary increases in GNPA that have shown swift collection improvements.

Valuation and Risks

• At current valuations, Capri Global trades at approximately 1.8 times its FY28 estimated Price-to-Book value, which JM Financial believes offers significant upside potential.
• The target price of ₹245 suggests healthy potential returns for investors.
• Key downside risks identified by analysts include a sharp correction in gold prices, a broad economic slowdown impacting the MSME segment, or rising credit stress across the market.

Impact

• This initiation of coverage with a positive outlook from a reputable brokerage like JM Financial could significantly boost investor interest and potentially drive Capri Global's stock price upward.
• It validates the company's business model and growth strategy, potentially creating positive sentiment for other players in the Indian NBFC sector.
• Impact rating: 7

Difficult Terms Explained

• P/B (Price-to-Book Value): A valuation metric that compares a company's market price per share to its book value per share. It indicates how much investors are willing to pay for each unit of a company's net assets.
• AUM (Assets Under Management): The total market value of investments managed by a financial institution on behalf of its clients.
• CAGR (Compound Annual Growth Rate): The average annual growth rate of an investment over a specified period longer than one year, assuming profits are reinvested.
• PAT (Profit After Tax): The net profit of a company after all expenses, interest, and taxes have been deducted from its total revenue.
• RoA (Return on Assets): A financial ratio that measures how profitably a company is using its assets to generate earnings.
• RoE (Return on Equity): A profitability ratio that shows how much profit a company generates with the money shareholders have invested.
• GS3/NS3 (Gross Stage 3 / Net Stage 3): These refer to asset quality classifications under regulatory norms, indicating non-performing assets (NPAs). GS3 is the gross value of impaired loans, while NS3 is the net value after accounting for provisions.
• GNPA (Gross Non-Performing Asset): The total value of loans that are in default and have not generated income for a specified period.
• Micro-LAP (Micro Loan Against Property): Small-value loans provided against the collateral of a property.
• Co-lending: A model where two lenders share the risk and reward of a loan, often involving a bank and an NBFC, working together on origination and servicing.
• Direct Assignment: A securitization method where a lender directly sells a pool of loans to an investor without using an intermediate Special Purpose Vehicle (SPV).
• Bond Syndication: The process where a group of investment banks collectively underwrite and distribute a new issue of bonds to investors.