Image Source: The Economic Times
CreditAccess Grameen, India's top microfinance player, is set to see a turnaround in FY26H2, with analysts and management looking at normalizing credit costs and resuming strong growth. This follows a tough FY25, with high write-offs, increased non-performing assets, and lackluster profitability.
Financial Performance and Recent Challenges
-
Net profit for Q4FY25 fell 88.1% year on year to ₹47.2 crore, led by conservative provisioning and accelerated write-offs of ₹518.2 crore.
-
Gross NPAs rose to 4.76% as of March 2025, from 1.18% a year ago, indicating stress in the microfinance portfolio.
-
For the entire FY25, net profit increased 63.2% YoY to ₹531.4 crore, though quarterly performance laid bare continued asset quality woes.
-
Net interest income fell 5% to ₹876.1 crore in Q4FY25, and net interest margin contracted to 12.7%.
Strategic Adjustments and Outlook
-
As part of efforts to trim its balance sheet, the company has introduced accelerated write-offs and early risk recognition. It aims to achieve normalized asset quality by Q1 FY26 and profitability by Q2 FY26.
-
Asset quality is expected to stabilize by September 2025, with profitability normalizing shortly thereafter.
-
Loan portfolio expansion for FY26 is expected in the range of 14–18%, with microfinance contributing 8–12% and the balance from retail finance.
-
Return on Assets (RoA) of 4.2–4.5% and Return on Equity (RoE) of 17–19% are expected for FY26, reflecting a turnaround of strength.
-
The company has a good capital level (CRAR of 25.9%) and healthy liquidity to fund its growth aspirations.
Sector and Regulatory Environment
-
The microfinance industry is still under high stress caused by regulatory reins and local regulations, especially in Karnataka.
-
CreditAccess Grameen has de-risked exposure to group loans and high-risk customers, with a focus on collections and customer participation.
-
Whilst there are near-term challenges, analysts forecast earnings and revenue to rise by 28.5% and 26% annually, respectively, over the next three years.
Analyst and Market Sentiment
Brokerages have increased target prices for CreditAccess Grameen on the back of its robust management, capital cushions, and resilience to sector headwinds.
The firm also commands a premium to its peers on account of its confidence in its turnaround path as well as growth over the long term.
Relevant Sources: NDTV Profit, Business Standard, Emkay Global through Business Today, CreditAccess Grameen Q3FY25 Result Presentation, Simply Wall St
Advertisement
Advertisement
