CreditAccess Grameen surges 9%, hits new high on strong Q4 earnings

For FY24, the management has said that the company is sanguine to achieve a growth of 24%-25% in the gross loan portfolio, NIMs of 12%-12.2% with a steady state credit cost of 1.6%-1.8%

Shares of CreditAccess Grameen (CAGL) hit a new high of Rs 1,183, surging 9 per cent on the BSE in Wednesday's intra-day trade, after the lender reported a strong set of earnings with net interest income (NII) rising 34.2 per cent year-on-year (YoY) and 14.5 per cent quarter-on-quarter (QoQ) at Rs 619 crore. The healthy NII growth was mainly driven by robust growth in gross loans and margins accretion of 30bps QoQ / 90bps YoY at 12.2 per cent.

The stock of the country’s largest Non-Banking Financial Company-Micro Finance Institution (NBFC-MFI) surpassed its previous high of Rs 1,154.35, touched on June 2, 2022. In the past two months, the stock has rallied 31 per cent. In comparison, the S&P BSE Sensex was down 0.17 per cent at 61,826 at 09:50 AM.

The company’s profit after tax increased 86.4 per cent YoY to Rs 296.60 crore from Rs 159.10 crore in the year-ago quarter. As on Q4FY23, CAGL's reported GNPA and NNPA stood at 1.21 per cent and 0.42 per cent, respectively, as against 3.6 per cent and 0.9 per cent, respectively as on Q4FY22. The improvement in asset quality was led by steady collections at ~99 per cent.

For FY24, the management has said that the company is sanguine to achieve a growth of 24 per cent-25 per cent in the gross loan portfolio, NIMs of 12 per cent-12.2 per cent with a steady state credit cost of 1.6 per cent-1.8 per cent, translating into ROA of 4.7 per cent-4.9 per cent and ROE of 20.0 per cent-21.0 per cent.

With the performance coming in-line with management guidance. ICICI Securities believes CAG is well positioned to capture huge untapped opportunity in MFI space via deeper penetration in new, existing geographies and increase in customer base.

CRISIL Ratings, meanwhile, had reaffirmed its ‘CRISIL A+/Positive’ rating on bank facilities and debt instruments of CAGL. The rating continues to reflect strong market position and long track record of CAGL in the Indian microfinance sector, improving asset quality backed by sound risk management processes, healthy capitalization and, stable operating profitability. These strengths are partially offset by high, though improved substantially, geographical concentration in portfolio, inherently modest credit risk profile of the borrowers and, high susceptibility of asset quality to local socio-political issues, the rating agency said in rationale.

CRISIL Ratings believes CAGL will sustain its market position in the microfinance sector and maintain healthy capitalization metrics. The company’s overall profitability is also estimated to improve supported by higher pre-provisioning operating profits.