CREDITACC - CreditAccess Grameen Ltd. Share Price

Management's outlook for FY26 indicates a balanced approach towards stabilizing asset quality while driving growth. They project an AUM growth of 14% to 18%, with microfinance (MFI) growth expected in the range of 8% to 12%. The retail finance segment is anticipated to comprise the balance of growth. Key metrics projected for FY26 include:

• NIM of 12.6% to 12.8%
• Credit cost of 5.5% to 6%
• ROA of 2.9% to 3.4%
• ROE of 11.8% to 13.3%

Management acknowledged challenges like higher delinquencies and regulatory impacts, particularly from Karnataka's ordinance and the anticipated changes in Tamil Nadu. They emphasized that despite the concerns, customer repayment resilience remains strong, with continued partial payments from borrowers.

Despite operational hurdles in Karnataka affecting growth, management indicated successful disbursements"”adding 2.61 lakh borrowers in Q4 FY25, 43% of whom were new-to-credit, leading to a total addition of 7.49 lakh for FY25. Unique borrower count increased from 26.3% in August 2024 to 31.1% by March 2025.

Management expressed commitment to maintain a robust balance sheet while navigating regulatory landscapes, highlighting the proactive engagements with regulators and the industry associations like MFIN, facilitating a collective focus on customer protection and governance. They also confirmed plans for leadership transitions, with current MD Udaya Kumar Hebbar retiring on June 25, 2025, and Ganesh Narayanan set to take over the MD and CEO role from June 26, 2025.

Questions and Answers from Q&A Section - Earnings Transcript

1. Question from Rajiv Mehta:
"Sir, when I look at the ECL coverage, they seem to have come down across Stage 1, 2, and 3 assets in this quarter versus the previous quarter. Can you throw some light on this and the impact on credit cost guidance?"

Answer:
"Thank you, Rajiv. We managed a slight change in ECL coverage, particularly for Stage-3 borrowers who pay over 50% of EMIs, leading to about a 2% variation. The coverage is based on 60-day DPD rather than 90-day DPD, so no significant changes occurred."

2. Question from Shreya Shivani:
"What is the outlook on retail finance segment ticket sizes, as they have remained range-bound for past quarters? Also, how has its asset quality behaved during recent challenges?"

Answer:
"Our average unsecured business loan ticket size is around Rs.1.7 lakh; we see it remaining stable. For secured business loans, it's Rs.5.8 lakh and home loans at Rs.6.8 lakh, maintaining low PAR 30 rates. The asset quality remains stable even with current challenges."

3. Question from Shweta:
"Bihar's borrower base has significantly declined, with concerns over over-leveraged borrowers. Are we reducing our penetration in Bihar?"

Answer:
"We saw a decline in Bihar due to careful management and accelerated write-offs. However, we are now scaling up. We implemented new controls and expect growth with careful entry into the market while maintaining quality."

4. Question from Abhijit Tibrewal:
"What growth can we expect in FY27 and beyond for group lending given the write-offs? How can we expect this to stabilize?"

Answer:
"We expect group lending growth between 8-12% for FY26 due to write-offs, with a gradual recovery into FY27. Sustained customer additions and renewals can lead to a steady state of 14-15% growth for microfinance, including retail finance."

5. Question from Nidhesh Jain:
"What steps are we taking regarding our credit cost management in light of investments and higher expected credit costs?"

Answer:
"We expect a credit cost of 3.0-3.5% this year. Pricing adjustments based on district-level ECL will help moderate risks without significantly affecting yields. We'll continue to evaluate prices accordingly to manage impacts."

6. Question from Viral Shah:
"How do you view the recent cycle in terms of analyzing PAR trends and collection efficiencies?"

Answer:
"We focus on ex-bucket collections as a more relevant measure today. Once our provision cleaning is complete, we can revert to traditional PAR analysis. Currently, ex-bucket collections tell us about performance better under the existing influence of PAR."

7. Question from Ashlesh Sonje:
"What is the progress on borrower identification issues related to KYC requirements?"

Answer:
"We primarily use Voter ID for KYC, and through the regulatory changes, we now check against voter databases to mitigate risks. Improved bureau reporting frequency also aids in identifying multiple lenders more effectively."

8. Question from Hardik Shah:
"Can we delve deeper into the projected penetration levels for individual loans going forward?"

Answer:
"We expect non-microfinance loans to reach 12-15% by FY28. The mix will shift towards secured loans, aiming for a 50-50 balance in the longer run. Current yields do not suggest significant adverse effects; operational efficiencies will help maintain NIM."

These questions and answers encapsulate the major concerns and plans discussed in the earnings call, reflecting the company's strategic focus amid industry challenges.