Target: ₹1,042
CMP: ₹964.80
The near-term outlook for CreditAccess Grameen is facing challenges, with a focus on cautious growth and regional disparities in early bucket delinquencies, as per a detailed analysis of business trends from the February 2025 update.
It is anticipated that CreditAccess Grameen may fall short of its FY25 growth and RoA guidance of 7-8 per cent and 2.3-2.4 per cent, respectively. Despite this, there are some positive developments with attrition rates stabilizing and borrower acquisition gaining traction in January and February 2025. However, the company may need to recalibrate its business strategies and focus on prudent customer acquisition going forward.
We have revised down our FY25 earnings estimates by a significant 29 per cent to account for the impact of the Karnataka ordinance. Additionally, we have reduced our FY26 estimates by 13 per cent due to spill-over effects. With growth expected to be sluggish at 4 per cent in FY25 before potentially rebounding to 20 per cent in FY26, and RoA projected to decline significantly (2 per cent in FY25; 4-4.5 per cent in FY26-27 compared to over 5 per cent previously), CreditAccess Grameen’s resilience will be put to the test.
Despite a notable decline in valuation and the anticipation of negative factors peaking in Q4, we are maintaining an Accumulate rating on the stock.
