 "CreditAccess Grameen tanks 18%, hits 34-month low on weak Q3 results")
Shares of CreditAccess Grameen hit 34-month low of Rs 750.05, as they tanked 18 per cent on the BSE in Monday’s intra-day trade after the company reported a loss of Rs 99.5 crore in the December 2024 quarter (Q3FY25), led by higher provision at Rs 752 crore. The company had made the impairment provision for financial instruments provision of Rs 126 crore in Q3FY24 and Rs 420 crore in Q2FY25.
It had reported a net profit of Rs 353.42 crore in the same quarter last financial year (Q3FY24).
Its net interest income (NII) increased by 7.4 per cent year-on-year (YoY) to Rs 861.7 crore in Q3FY25, compared to Rs 802.4 crore in Q3FY24.
The stock price of the country’s largest Non-Banking Financial Company-Micro Finance Institution (NBFC-MFI) is quoting at its lowest level since March 2022. It has fallen below its previous low of Rs 810.10 on December 20, 2024. The market price of the company has more than halved, or declined 55 per cent from its 52-week high level of Rs 1,659.95, hit on February 12, 2024.
The microfinance institution (MFI), in a statement, said: "While early risk recognition, conservative provisioning, and accelerated write-offs resulted in a loss of Rs 99.5 crore in Q3FY25, it will safeguard our profitability over the coming quarters with growth rates normalising."
The NBFC-MFI's assets under management (AUM) grew by 6.1 per cent YoY to Rs 24,810 crore from Rs 23,382 crore, though it declined sequentially.
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While accelerated provisioning is expected to be undertaken in Q4FY25, the company's management has indicated confidence amid improving collection efficiency witnessed in the month of December and early January. Guidance for FY25 has been revised downwards for the second time, with growth at 7-8 per cent, credit cost at 6.7-6.9 per cent, and RoA at 2.3-2.4 per cent. However, the management has also indicated a recovery in growth at 18-20 per cent, with RoA at 4.5 per cent in FY26E.
While CreditAccess' management remains confident about peaking out of the stress, more sign of a revival is expected before a recovery in the company's valuations. Relative superior quarterly performance and recovery indication could keep valuation in a broad range in the near-term, ICICI Securities said in a note.
Motilal Oswal Financial Services (MOFSL) believes that sectoral pain in microfinance will continue for 2-3 more quarters, given that the stress on the balance sheet has to be provided for and subsequently written off for some semblance of ‘normalisation’. While the improvement in collections gives a glimmer of hope, we need to monitor the trends over the next 3-4 months before exuding confidence that this is indeed a trend reversal. Developments in Karnataka, while not overly concerning at this point, will need to be closely monitored, given that it is one of the core markets for CreditAccess, the brokerage firm said.
CreditAccess, in MOFSL's view, could likely continue to have a slightly bumpy ride in the near-term because of the calibration in loan growth and continuing forward flows, which will keep the credit costs elevated over the next two quarters as well. However, the management has indicated that delinquency trends are showing a clear improvement, with new delinquencies expected to normalise by Q1FY26.
With a strong capital position (Tier-1 of ~25 per cent), it is well-equipped to navigate the near-term disruption in the MFI sector and will embark on a healthy loan growth trajectory once there is higher confidence in the reversal of this delinquency trend, the brokerage firm said in the company's results update.