Capital Trust Limited (CTL), a technology-driven NBFC focused on informal MSME lending in rural India, has reported a loss after tax of ₹8.3 crores for the first quarter. The company, which specializes in empowering shopkeepers and traders in semi-urban and rural areas, faced headwinds in a challenging market environment.

Financial Performance

The company's financial results for Q1 revealed several key metrics:

Market Challenges and Strategic Response

Capital Trust attributed the contraction in AUM and rise in NPA percentages to portfolio run-off and intentionally reduced disbursements. This strategic decision was made in response to prevailing stress in the microfinance institution (MFI) and deep rural market sectors.

Business Model and Market Presence

Despite the challenging quarter, Capital Trust continues to maintain a significant presence in the informal MSME lending space:

• Operates through 284 branches across 10 states
• Targets shopkeepers and traders with loans ranging from ₹50,000 to ₹10 lakhs
• Has historically disbursed over ₹4,500 crores to more than 12 lakh clients
• Maintains partnerships with 16 on-balance sheet funders and 5 co-lending partners

Unique Selling Proposition

Capital Trust positions itself as a pioneer in bridging the credit gap for informal MSMEs, particularly shopkeepers and traders who are often underserved by traditional financial institutions. The company employs a hybrid dual-credit model, combining digital intelligence with local expertise to assess creditworthiness and manage risk.

Looking Ahead

While the current quarter has been challenging, Capital Trust's established network and technology-driven approach position it to potentially benefit from the growing formalization of the informal MSME sector. The company's focus on digital processes, including 100% paperless onboarding and AI-based risk scoring, may help in scaling operations efficiently as market conditions improve.

As the rural and semi-urban economy continues to evolve, Capital Trust's role in providing structured, affordable credit to Bharat's entrepreneurs remains crucial. However, the company will need to navigate the ongoing market stresses carefully to return to profitability and growth in the coming quarters.

Capital Trust Limited , a non-banking financial company (NBFC), has reported a significant loss in the first quarter, reflecting the challenges faced by the unsecured lending sector in India. The company's financial results, approved by its board of directors on August 14, reveal a stark contrast to its performance in the same quarter of the previous year.

Financial Performance

Capital Trust Limited posted a net loss of Rs 832.34 lakhs for the quarter ended June 30, a substantial decline from the profit of Rs 73.36 lakhs recorded in the corresponding quarter of the previous year. The company's total income also saw a significant decrease, falling to Rs 1,263.57 lakhs from Rs 2,474.82 lakhs year-on-year.

The earnings per share (EPS) turned negative at Rs (4.89), compared to a positive Rs 0.45 in the same quarter of the previous year.

Operational Challenges

Capital Trust attributed the decline in performance to several factors:

1. Cautious Lending Approach: The company adopted a wait-and-watch strategy for disbursements due to prevailing collection challenges in the unsecured lending and small loan sectors in India.

2. Reduced Asset Under Management: The cautious approach resulted in lower disbursements and a consequent reduction in the company's Asset Under Management.

3. Interest Waiver: Other expenses for the quarter included a waiver of overdue interest amounting to Rs 265.12 lakhs due to non-collection issues.

Direct Assignment of Loans

Despite the challenges, Capital Trust continued its loan assignment activities. During the quarter, the company transferred loans worth Rs 525.86 lakhs through direct assignment. The weighted average holding period for these loans was 12 months, with a weighted average residual maturity of 7 months.

Unsuccessful Rights Issue

The company had opened a Rights Issue for subscription on June 25, which closed on July 24. However, the company reported that this rights issue was unsuccessful.

Management Commentary

Yogen Khosla, Chairman and Managing Director of Capital Trust Limited, signed off on the financial results. The management's decision to adopt a cautious approach to lending reflects the broader challenges faced by the NBFC sector in India, particularly in the unsecured and small loan segments.

Auditor's Review

The financial results for the quarter ended June 30 were reviewed by the Audit Committee and approved by the Board of Directors. The Statutory Auditors, JKVS & Co., Chartered Accountants, have issued an unmodified opinion on the standalone unaudited financial results.

As the company navigates through these challenging times, stakeholders will be keenly watching how Capital Trust adapts its strategies to improve its financial performance in the coming quarters.