CreditAccess Grameen up 9% on fund raising plans; CLSA initiates coverage

CLSA initiated coverage on CreditAccess Grameen with a 'BUY' recommendation and a target price of Rs 840

Shares of CreditAccess Grameen rallied 9 per cent to Rs 749 on the BSE on Friday in an otherwise weak market after the company announced that its board has approved Rs 1,000 crore fund raising plans.

At 10:11 am, the stock was trading 6 per cent higher at Rs 731, as compared to 1.2 per cent decline in the S&P BSE Sensex. The counter has seen huge trading volumes with a combined 182,000 equity shares changing hands on the NSE and BSE.

“The board of directors of the company at their meeting held on Thursday, September 3, approved issue of equity shares by way of permissible mode(s) including but not limited to private placement and/or follow-on public offering and/or preferential issue and/or qualified institutions placement, or any combination thereof up to an amount not exceeding Rs 1,000 crore,” CreditAccess Grameen said in exchange filing.

The company has called extra-ordinary general body meeting on September 26, 2020 to take shareholders approval.

CreditAccess Grameen is microfinance institution (MFI), focused on providing micro-loans to women customers predominantly in rural areas across India.

The company also shared its business update for the month of August, where it said that loans under moratorium are down to 18 per cent in August from 24 per cent in July. The company's collection efficiency improved to 82 per cent in August from 76 per cent in July. Full/partial paying customers also increased from 83 per cent in July to 85 per cent in August.

Disbursements in August stood at Rs 484.6 crore in August although disbursements were made only to those customers making on-time payments.

"Robust liquidity with Rs 1,778 crore in cash / bank balance & liquid investments as on 31st August 2020 compared to Rs 1,636 crore in July, along with undrawn sanctions of Rs 424 crore and new sanctions in pipeline of Rs 2,705 crore," the company said.

Meanwhile, foreign brokerage CLSA has initiated coverage on CreditAccess Grameen with a 'BUY' recommendation and a target price of Rs 840.

“The recent Madura Micro Finance (MMFL) acquisition will help it to consolidate its leadership position in the top-3 states of the MFI industry. We believe CreditAccess Grameen is better placed to capture the Indian MFI opportunity, due to its unique customer-centric business model, strong HR practices, steady branch expansion and MNC parentage. CreditAccess Grameen’s asset quality in earlier crises (like demonetisation) and during the current Covid-19 period has been better than the industry, which gives us confidence on its risk underwriting,” the brokerage firm said in a note.

In the past three months, the stock has outperformed the market by gaining 34 per cent, against 13.5 per cent rise in the S&P BSE Sensex. It hit an all-time high of Rs 1,001 on February 20, 2020.