Detailed Narrative
Asset Quality Stress and Transitory Cycle
Management acknowledged a temporary increase in delinquencies across various geographies, citing localized disruptions and third-party interventions. PAR 90+ stood at 1.74%, while GNPA reached 2.44% (measured at 60+ DPD). The stress is primarily attributed to over-leveraged borrowers and weather-related income variations for agri-laborers. Management believes this credit cycle is transient📎 and expects stabilization to begin in Q3 FY25, with a turnaround in Q4 FY25.
Revised FY25 Guidance
Due to the current industry landscape, CreditAccess revised its FY25 annual performance guidance. Loan portfolio growth is now expected at 8-12%, down from previous expectations. NIM guidance was set at 12.8-13.0%, and credit cost is projected to be higher at 4.5-5.0%. Consequently, ROA and ROE targets were lowered to 3.0-3.5% and 12.0-14.0%, respectively.
MFIN Guardrails and Underwriting
The microfinance industry, through MFIN, implemented new guardrails in July 2024 to strengthen underwriting norms. CreditAccess noted that these measures are essential for long-term industry health but have led to an accelerated realization of delinquencies in the short term. The company is focusing on 'high touch' engagement and deploying senior field staff to manage PAR control.
Lender Overlap and Vintage Analysis
A key highlight of the call was the granular analysis of customer overlap. Customers with 4 or more lenders accounted for 12.6% of the group lending portfolio but had a significantly higher PAR 15+ of 12.2%. In contrast, unique customers showed the lowest delinquency. Management highlighted that stress is concentrated in low-vintage customers (0-4 years) who were onboarded during a period of high loan velocity.
Medium-Term Growth Outlook
Despite near-term challenges, management reiterated its medium-term goal of reaching ₹50,000 crore AUM by FY28. This growth is expected to be driven by a combination of Microfinance and Retail Finance businesses. Retail finance is targeted to reach a 15% share of the total portfolio by FY28, up from its current small base of ₹945 crore.