Capri Global Capital Ltd. makes a corporate announcement

The Rs 500 Crores Tranche I NCD issue did not have one single coupon or tenor. It comprised six series, with coupons ranging from 8.80% to 9.50% and maturities from 24 to 120 months. The issue was rated IVR AA/Positive by Infomerics and ACUITE AA/Stable by Acuité. ^[1]

Coupon and tenor terms are from the issue structure. ^[1] Effective yields are as specified in the NCD terms. ^[2]

Cost comparison: The company reported Q1 FY27 cost of funds at 8.90%, calculated as finance costs, net of lease liabilities, divided by average total interest-bearing liabilities. ^[3] On that WACF basis, every series carried a higher effective borrowing cost, ranging from 9 bps above WACF for Series I to 59 bps above WACF for Series VI. These are derived spreads from the reported effective yields and 8.90% WACF.

The key nuance is that Series II’s 8.80% coupon was below WACF, but its 9.15% effective yield was above WACF, reflecting the difference between the stated coupon and the annualised effective return. Since the allocation across the six series is not provided, an issue-weighted average effective cost for the entire Rs 500 Crores cannot be calculated. The company separately reported Q1 FY27 cost of borrowings at 9.10% in its results release, indicating a metric-definition difference versus the presentation’s 8.90% cost-of-funds measure. ^[4]*

The primary end-use is lending growth and balance-sheet funding: at least 75% of the Rs 500 crore issue, or at least Rs 375 crore, is earmarked for onward lending, financing and repayment of existing borrowings. The remaining amount, capped at 25% or Rs 125 crore, may be used for general corporate purposes. ^[5]

Impact on leverage and capital adequacy

• Debt-to-equity: This is a secured NCD issuance, not an equity raise. Therefore, it does not directly increase shareholders’ equity. The latest reported D/E ratio was 3.7x in Q1 FY27. ^[6] If the proceeds are deployed for incremental lending, debt would rise without a corresponding equity increase, putting upward pressure on D/E. The repayment component could partly offset that effect through refinancing or replacement of existing borrowings. The disclosure does not provide an issue-specific pro forma D/E calculation.
• CAR/CRAR: CGCL’s latest standalone CAR was 24.7% in Q1 FY27. ^[6] The NCD proceeds should not be treated as a direct addition to regulatory capital because the disclosure describes them as secured NCD funding, not as equity or a specified Tier-II capital instrument. Consequently, CAR could come under pressure if the funds expand risk-weighted assets through new lending; the effect would be smaller if proceeds are primarily used to refinance existing debt. The disclosure does not quantify the post-issuance CAR.

Bottom line: the issue primarily supports onward lending and debt refinancing. It strengthens funding capacity but, being debt-funded rather than equity-funded, does not mechanically reduce the reported 3.7x D/E or increase the 24.7% CAR; the eventual effect depends on deployment and the resulting growth in risk-weighted assets.

The April 2026 Tranche I NCD is broadly priced in line with CGCL’s recent rupee debt, but with a slightly longer minimum tenor and a narrower coupon range. It signals a deliberate move to broaden capital-market funding, but not a wholesale replacement of bank term loans: banks remain the largest funding source, and recent incremental bank borrowing was still materially higher than NCD/CP issuance.

Pricing and maturity comparison

The key pricing change versus the earlier public issue is not a uniform reduction. The current floor of 8.80% is 25 bps above the prior 8.55% floor, while the current 10-year coupon of 9.50% is 20 bps below the prior 9.70% ceiling; both comparisons are derived from the respective issue terms ^{[2] [7]}. In other words, the new public curve is more compressed around the 9% range, rather than clearly cheaper across all maturities.

The structure is also more duration-oriented than the recent small private placements. It removes the earlier 18-month option and retains a 120-month option, providing CGCL with a wider maturity ladder and more scope to match longer-duration liabilities against its growing loan book. Management has described the liability book as long-tenure relative to short- to medium-tenure assets, with cumulative surplus across maturity buckets ^[11].

Is this a strategic shift toward market borrowings?

Yes in strategic intent; not yet in funding dominance.

• CGCL’s investor presentation explicitly identifies the objective as widening the lender base and increasing the share of market borrowings ^[12].
• Management has said that the company intends to reduce the percentage of bank borrowings and is exploring public bonds, commercial paper, institutional refinancing and eventually an offshore dollar-bond programme ^[13].
• The company raised Rs 1,271 crore through NCDs and commercial paper in Q1 FY27, but management also said it raised Rs 3,868 crore through bank borrowings during the same quarter ^[11]. That indicates diversification, not displacement of banks.
• On the annual funding profile, bank funding declined from 60% in FY25 to 55% in FY26, while market borrowings declined from 10% to 8%; co-lending/DA increased from 21% to 24%. Thus, the reduction in bank dependence has so far been shared with co-lending and other funding channels rather than driven solely by NCDs ^[14].

There is also a basis inconsistency in the Q1 FY27 disclosures: the earnings call describes NCDs and CPs as contributing about 10% of borrowings ^[11], whereas the funding-profile chart shows market borrowings at 2% ^[15]. The exact Q1 percentage therefore should not be treated as a clean trend without reconciliation.

The subsequent USUSD 300 million senior secured bond issued at a 7.55% coupon and maturing in 2029 is stronger evidence that the strategy is extending beyond domestic NCDs into international capital markets ^[16]. Its coupon is not directly comparable with the rupee NCDs because currency, hedging and all-in rupee funding costs differ.

Conclusion: the tranche is best read as part of a planned liability diversification programme—more public NCDs, commercial paper and eventually foreign-currency bonds—rather than a pivot away from bank term loans. The strategic direction is clear, but the balance-sheet mix remains bank-led and the economic benefit will depend on whether market funding can reduce all-in cost without creating excessive refinancing, duration or currency risk.