CreditAccess Grameen Q1 Results Review - Muted Loan Growth; Asset Quality Deteriorates Further: Motilal Oswal

Motilal Oswal Report

CreditAccess Grameen Ltd. posted ~14% YoY growth in Q1 FY25 PAT to ~Rs 3.98 billion (inline). Net interest income grew ~29% YoY to ~Rs 9.3 billion and pre-provision operating profit rose 30% YoY to ~Rs 7.1 billion. Cost-to-income ratio was ~29% (previous year: ~31% and previous quarter: ~30%).

Reported yields/cost of fund were stable QoQ at ~21%/9.8%. The reported net interest margin contracted ~10 bp QoQ to ~13.0%. Management plans to implement a district-based loan pricing in Q2 FY25 to better align with provisioning rates and protect profitability. We model NIMs of 14.2%/14.1% for FY25/FY26.

CreditAccess Grameen’s Q1 FY25 disbursements declined ~6% YoY to ~Rs 44.8 billion due to the calibration of loan growth during elections in the face of a rise in delinquencies. AUM grew ~21% YoY but declined ~2% QoQ to ~Rs 263 billion (previous year: ~Rs 218 billion). The borrower base grew ~13% YoY to ~4.98 million (previous year: ~4.92 million).

Gross non-performing asset/net non-performing asset deteriorated ~30 bp/10 bp QoQ to ~1.45%/~0.45%. Provision coverage ratio dipped ~160 bp QoQ to ~69.2%.

CreditAccess Grameen attributed higher delinquencies to severe heat waves and operational limitations in collections at the time of elections. Annualized credit costs rose to ~2.6% (previous: ~1.4% and previous quarter: ~2.4%).

Last quarter, management raised its credit cost guidance for FY25 in anticipation of higher delinquencies and provisioning requirements in its non-core states.

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