Capital Trust Limited has received a rating downgrade from CARE Ratings, with its long-term bank facilities revised to BB from BB+ with a stable outlook. The revision reflects the non-banking financial company's weak profitability, deteriorating asset quality, and declining scale of operations in recent periods.

Rating Revision Details

CARE Ratings announced the downgrade on December 16, 2025, affecting the company's long-term bank facilities. The rating agency has also withdrawn its outstanding rating on the non-convertible debenture bearing ISIN number INE707C07064, as the corporation has repaid the bond in full.

Key Performance Challenges

Weak Profitability

The company's financial performance deteriorated significantly in H1 FY26, reporting a net loss of ₹2.60 crores compared to a profit of ₹0.10 crores in FY25. The decline was driven by lower interest income and reduced fee income from business correspondence activities.

Deteriorating Asset Quality

Asset quality has been under significant pressure, with gross NPA ratio rising sharply to 9.40% in September 2025 from 5.90% in FY25 and 1.40% in FY24. The company witnessed fresh NPA additions of ₹10.75 crores in H1 FY26 on an assets under management basis.

Capital Position and Business Developments

Despite the challenges, Capital Trust has taken steps to strengthen its capital position. The company's tangible net worth had declined to ₹0.20 crores as of September 30, 2025, with capital adequacy ratio at 10.00% against regulatory requirements of ₹10.00 crores and 15% respectively.

However, the company raised capital of ₹23.80 crores in November 2025 through a rights issue, with ₹13.81 crores from promoters and the remaining from public subscription. Post this capital infusion, the company's tangible net worth improved to ₹2.60 crores and capital adequacy ratio to 35.70%.

New Business Initiatives

Capital Trust has ventured into the secured lending segment by introducing gold loan products with tenures ranging from 6-12 months. In October 2025, the company achieved early traction with disbursements of ₹0.75 crores in the first month of operations.

The company also entered an agreement with Suryoday Small Finance Bank in October 2025 without first loss default guarantee requirement, which is expected to help improve business volumes gradually.

Operational Scale and Geographic Presence

The company's assets under management have been declining, standing at ₹123.85 crores as of September 30, 2025, compared to ₹725.00 crores as of March 31, 2019. Capital Trust operates across 10 states through 287 branches, serving 47,355 customers, with major presence in Bihar (35% of AUM), Uttar Pradesh (19%), and Odisha (12%).

Outlook and Rating Sensitivity

CARE Ratings maintains a stable outlook, expecting that recent capital raise and management's decision to move towards secured lending will help improve scale and maintain financial stability. Positive rating actions could result from sizeable scaling up of operations while improving asset quality and profitability, while continued deterioration in asset quality or liquidity profile could lead to further downgrades.

Capital Trust Limited , a publicly listed financial institution with four decades of experience in India's diverse financial landscape, has successfully completed its rights issue, raising ₹23.81 crore. The issue was oversubscribed by 1.33 times, demonstrating strong investor confidence in the company's strategic direction.

Strategic Shift to Secured Lending

In a significant move, Capital Trust has announced its entry into the gold loan business, marking a strategic shift towards secured lending. This decision comes as the company aims to strengthen its balance sheet and focus on high-quality, low-risk assets.

Key Developments

1. Rights Issue Success: The company's rights issue of 1,70,09,702 equity shares at ₹14 per share (including a premium of ₹4 per share) was successfully closed, raising a total of ₹23.81 crore.

2. Gold Loan Launch: Capital Trust has already opened its first two gold loan branches in Western UP and Delhi, with branch disbursements crossing ₹75 lakh in the first month.

3. Business Correspondent Partnership: The company has launched a risk-free Business Correspondent partnership with Suryoday Small Finance Bank, which is now active across 47 branches (Phase 1).

4. Portfolio Restructuring: Capital Trust has taken a decision to write off and provide for its existing unsecured loan portfolio, which has faced persistent stress in recent periods.

Financial Performance

The company's financial results for Q2 reflect the impact of this strategic shift:

The significant loss in Q2 FY26 is primarily attributed to the impairment and write-offs of financial instruments amounting to ₹1,605.62 lakhs, as part of the company's strategy to clean up its balance sheet.

Future Outlook

Despite the shift towards secured lending, Capital Trust will continue to offer unsecured MSME and shopkeeper loans through co-lending and partnership models with established financial institutions. The company plans to leverage its extensive network of 250+ branches across rural and semi-urban India for this purpose.

Yogen Khosla, Managing Director of Capital Trust Limited, commented on the developments: "Our objective is to start afresh in secured lending, with a strong focus on gold loans and other low-risk businesses. At the same time, we remain committed to serving MSME borrowers through our partnership and co-lending models, as well as our own portfolio. The successful completion of the rights issue strengthens our capital base and supports our long-term vision."

With this balanced approach, Capital Trust Limited aims to build a resilient, diversified lending model that addresses the credit needs of underserved markets while ensuring portfolio quality and sustainable growth.

As the company transitions into this new phase, investors and stakeholders will be keenly watching how effectively Capital Trust can execute its strategic shift and capitalize on the opportunities in the secured lending space, particularly in the gold loan segment.