CreditAccess Grameen hits new high; soars 13% on strong Q2 results

In Q2, the company's net profit nearly doubled to Rs 347 crore, on the back of an improved income profile and strong control on the cost of operations.

Shares of CreditAccess Grameen hit a new high of Rs 1,560, soaring 13 per cent on the BSE in Monday’s intra-day trade in an otherwise weak market after the company reported a strong set of earnings for the September quarter (Q2FY24). The country's largest microfinance lender's net profit nearly doubled to Rs 347 crore, as compared to Rs 175.1 crore in a year ago quarter, on the back of an improved income profile and strong control on the cost of operations.

The stock surpassed its previous high of Rs 1,502.30 touched on August 1, 2023. At 11:14 AM; it was quoting 9 per cent higher at Rs 1,516. In comparison, the S&P BSE Sensex was down 0.23 per cent at 65,246.

The company’s net interest income (NII) increased by 49.6 per cent year-on-year (YoY) from Rs 516.2 crore to Rs 772.0 crore. Pre-provision operating profit (PPOP) increased by 68.3 per cent YoY from Rs 334.4 crore to Rs 562.6 crore.

Gross loan portfolio grew 36.0 per cent YoY to Rs 22,488 crore while the customer base grew 21.2 per cent YoY to 4.60 trillion at the end of Q2FY24. The company’s asset quality improved during the quarter with a gross NPA declined 139 bps YoY at 0.77 per cent and net NPA reduced 53 bps YoY at 0.24 per cent in Q2FY24.

CreditAccess Grameen is a leading Indian microfinance institution headquartered in Bengaluru, focused on providing micro-loans to women customers predominantly in rural areas across India. The company is now operating across 364 districts in 16 states (Andhra Pradesh, Bihar, Chhattisgarh, Goa, Gujarat, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Odisha, Rajasthan, Tamil Nadu, Telangana, Uttar Pradesh & West Bengal) and one union territory (Puducherry) through 1,877 branches.

The company’s Promoter is CreditAccess India B.V., a multinational company specializing in micro and small enterprise financing. It is backed by institutional investors and has a micro-lending experience in India of more than a decade.

Healthy customer retention coupled with focus on operating efficiency is seen to aid profitability ahead. Management has revised margin guidance from earlier 12-1.2 per cent to 12.7-12.8 per cent and RoA from earlier 4.7-4.9 per cent to 5.4-5.6 per cent, while keeping growth guidance unchanged at 24- 25 per cent and provision at 1.6-1.8 per cent. Continued healthy business growth coupled with superior ROA should aid valuations ahead, ICICI Securities said in a note.

CreditAccess Grameen is primed to dominate the segment by providing the lowest cost organized financing, improving operational efficiency through continuous technology enhancement, and integrating risk management in every process to drive superior asset quality and lower credit costs, according to Motilal Oswal Financial Services.

Despite cyclical tailwinds, the upcoming state elections later this year and general elections next year are near-term risks for the sector. The brokerage firm strongly believes that the magnitude and frequency of loan waivers (if any) will be much lower than in the past.