CreditAccess expects recovery amid improving PAR performance

The stock of CreditAccess Grameen has lost nearly 9% in the past three trading sessions after the country’s largest listed microfinance company declared rising slippages, higher credit cost, reduced collection efficiency, and rising gross non performing assets (GNPA) ratio for the March quarter.

On a positive note, the lender reported lower accretion in the portfolio at risk (PAR) in states other than Karnataka in the March quarter. The condition in Karnataka is expected to improve in the second half of the current fiscal year. The credit cost is expected to normalise in the second half of FY26 to around 3.5% from 7.8% in FY25. Analysts have reduced FY27 earnings estimates by 4-8%.

Karnataka and Tamil Nadu, which contribute 31% and 19% to the gross loan portfolio respectively, exhibited higher delinquencies in the March quarter. An ordinance issued by these states to protect vulnerable borrowers from coercive loan recovery affected the collection efficiency.The PAR-AUM (assets under management) ratio in Karnataka and Tamil Nadu increased sequentially to 2.4% and 4.5% in the March quarter from 1.2% and 3.2% in that order. The ratio also shot up in Bihar to 7.3% from 5.3% by similar comparison though the state has a relatively small share of 4.8% in the total loan book. The company expects a reversal in the PAR trend not before the September quarter.

The credit cost shot up to 7.7% in FY25 from 2.1% in the previous year due to higher provisioning and write-offs. This also affected the return ratios. The return on assets (RoA) contracted to 1.9% from 5.6% in FY24 while the return on equity dropped to 24.9% from 7.7%.
The situation is likely to improve in the current fiscal year given the possibility of a recovery from the December quarter. The company expects to limit credit cost between 5.5% and 6% for FY26 while RoA and RoE are likely to be 2.9-3.4% and 11.8-13.3% respectively.
The company’s gross loans fell by 2.9% to Rs 25,948 crore in the March 2025 quarter. Net profit nearly halved to Rs 47.2 crore from Rs397 crore a year ago. Net interest margin (NIM) contracted by 40 basis points to 12.7%.
Motilal Oswal Financial Services has cut the FY27 earnings estimate by 10% amid higher credit cost and lower credit growth. It expects AUM growth of 18% between FY25 and FY27. The brokerage expects CreditAccess to bounce back to normalcy faster than other microfinance peers and therefore, it has raised the stock’s target price to Rs1,425 from Rs1,170. The stock was traded at Rs1,101 on Wednesday on the BSE.