CreditAccess Grameen shares drop 7% after Q2 results; time to buy the dip?

CreditAccess Grameen share price fell up to 7 per cent today after Q2 results showed slower growth recovery. Analysts, however, remain positive on long-term AUM and profitability outlook

CreditAccess Grameen share price today

 

CreditAccess Grameen share price witnessed a notable decline of nearly 7 per cent on the BSE on Wednesday, October 29, after analysts flagged delay in the lender’s growth recovery after it reported its September quarter results on Tuesday.

 

At 1:20 PM, CreditAccess Grameen shares were trading 5.8 per cent lower at ₹1,388.65 per share, having hit an intraday low of ₹1,373.85 per share. By comparison, the BSE Sensex was up 0.5 per cent.

 

CreditAccess Grameen Q2 results: Key highlights

• CreditAccess Grameen’s net profit jumped 109 per cent quarter-on-quarter (Q-o-Q), but fell 32 per cent year-on-year (Y-o-Y) to ₹130 crore. 
• It reported net interest income (NII) of ₹1,030 crore, up 6 per cent Y-o-Y and 5 per cent Q-o-Q. CreditAccess’ NIM expanded 75bps Q-o-Q. 
• It’s credit costs also declined to around 8.7 per cent in Q2FY26 from 9.4 per cent in Q1FY26. 
• On the asset quality front,  it noted an improvement in collection efficiency (excluding arrears) to 94.5 per cent (vs 93.2 per cent Q-o-Q), reducing gross non-performing asset (GNPA) ratio to 3.7 per cent from 4.7 per cent Q-o-Q.

CreditAccess Grameen guidance

• The lender’s disbursement and AUM declined by 2 per cent and 1 per cent, respectively, over the previous quarter. 
• The management, thus, guided for lower end of its earlier FY26 AUM growth of 14-18 per cent, even as it expects strong growth in H2FY26. 
• CreditAccess management also guided to exit FY26 with RoA of ~4 per cent, followed by ~4.5 per cent in FY27. 
• The management also revised its credit cost guidance for FY26-27 upward by ~40-50bps in FY26 due to higher PAR accretion in few states and an additional 30-40bps from increased ECL provisioning, resulting in a total increase of 70-100bps in FY26E. 

 

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CreditAccess Grameen stock: Should you buy or sell? What brokerages say:

 

Emkay Global Financial Services | Retain 'Add' | Target price: ₹1,550

CreditAccess Grameen reported subdued gross loan portfolio growth at 3 per cent Y-o-Y as the MFI book declined 4.5 per cent Q-o-Q. However, the retail finance portfolio grew strongly (up 61 per cent Q-o-Q), albeit on a low base, mainly led by increased renewals of high-vintage customers through individual business loans.

 

The brokerage retained ‘Add’ and increased CreditAccess Grameen share price target by ~15 per cent to ₹1,550, rolling, given its credible track record to ride the MFI recovery wave and delivering strong RoA (2.7-5.2 per cent over FY26-28E). 

 

"We also take comfort in the company’s strong capital buffers and management pedigree vs peers. We trim FY26E earnings by 9 per cent, given higher write-offs and upfronting of credit cost, we raise FY28E earnings by 6 per cent. Key risks include slower than expected recovery in MFI, and management attrition," it said.

 

Axis Securities | Maintain 'Buy' | Target: ₹1,685

CreditAccess Grameen, it said, has successfully navigated the challenges of the recent MFI credit downcycle and has exhibited resilience as it readies for its next leg of growth. The optimism around GLP growth picking up from H2 onwards, in this backdrop, is encouraging.

 

The brokerage noted that while asset quality is on the mend, a delay in the pace of PAR accretion is likely to weigh on credit costs in the near term, with a deviation of 70-100bps vs the earlier credit cost range. 

 

Resultantly, FY27E credit costs have also been guided upwards by 70-80bps. 

 

"However, superior NIM delivery and controlled opex, with the C-A ratio expected to improve by 20bps in FY27E, should drive PPOP/Total Assets higher by ~100bps, adequately offsetting the impact of higher credit costs. Consequently, we factor in strong GLP/NII/Earnings CAGR growth of 20/20/56 per cent over FY25-28E, with RoA/RoE delivery of 4.3-4.4 per cent/18-19 per cent over the same period," it said with a upward revision in target price. 

 

JM Financial Institutional Securities | Downgrade to 'Add' | Target: ₹1,560

While CreditAccess Grameen would be a major beneficiary in the upcoming MFI growth cycle, management’s commentary on elevated credit costs over the medium term would lead to moderation in profitability, the brokerage said. 

 

"Further, given ~19 per cent rally in stock price in the last three months, current valuation of 2.7x FY27 P/BV adequately captures extent of current improvement. Hence, we downgrade the stock to ADD with revised target price of ₹1,560 valuing it at 2.8x FY27E P/BV (vs earlier target of ₹1,475 valued at 2.6x FY27E P/BV)," it said.