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    CreditAcc. Gram.

    CREDITACCGood
    Financial Services·22 Jul 2025
    Management Summary

    CreditAccess Grameen reported a quarter focused on balance sheet normalization through aggressive write-offs and provisioning. While bottom-line profitability was temporarily suppressed by a ₹693 crore write-off, core operating metrics remained strong with record Q1 disbursements and steady NIMs. Management expressed high confidence in a sharp recovery in the second half of FY26, targeting a 4.5% ROA and 18% ROE as credit costs normalize.

    Highlights

    8

    • Highest ever Q1 disbursement in company history despite a challenging credit cycle

    • PAT stood at ₹60 crore, impacted by an accelerated write-off of ₹693 crore

    • Net Interest Income (NII) grew 7% QoQ to ₹937 crore with a steady NIM of 12.8%

    • Asset quality showing signs of stabilization with PAR 15+ acquisition rate dropping to 0.46% in June '25 from 1.34% in Nov '24

    • GNPA stood at 4.70% and NNPA at 1.78%, predominantly measured at 60+ DPD

    • Retail finance portfolio share increased significantly to 6.8% from 2.9% YoY

    • Average cost of borrowings declined by 8 bps to 9.7% at the end of Q1 FY26

    • Capital adequacy remains robust at 25.5% with a comfortable liquidity position of ₹2,025 crore

    What Changed1

    vs Q3 FY26

    Guidance items4 → 5 (+1)

    Key financials

    Single quarter

    06 metrics
    1. 01Net Interest Income₹937 Cr+7.0%QoQ
    2. 02NIM12.8%
    3. 03PAT₹60 Cr
    4. 04GNPA4.7%
    5. 05ROA90%

    Segment breakdown

    Microfinance (GL)
    44.3% 3-Year Loan Share11.1% Borrowers with >3 pre-lenders
    Retail Finance
    6.8% Portfolio Share₹1,300 Cr Unsecured Business Loans₹250 Cr Mortgage Loans
    List

    Guidance & targets

    5
    CategoryTargetPriority
    Profitability
    Credit Cost
    5.5% to 6%
    		Medium
    Profitability
    H2 ROA
    4.5%
    		High
    Other
    Diversification into Retail Finance
    12%-15%
    		High
    Volume
    New Customer Additions
    1 lakh per month
    		Medium
    Margin
    Opex/AUM
    < 5%
    		High

    Risks & concerns

    4
    RiskSeverity

    Elevated Credit Costs in H1

    Management admits H1 will have elevated credit costs due to accelerated write-offs of non-paying accounts. — Management acknowledged

    medium

    Employee Attrition in Tamil Nadu

    Higher attrition noted in Tamil Nadu, managed by keeping a higher bench strength. — Management acknowledged

    low

    Regulatory Rejection Rates

    MFIN guardrails have increased customer rejection rates by 5-10%, potentially slowing near-term growth. — Both acknowledged

    medium

    Areas of Evasion(1)

    • Slightly vague on the exact month-on-book performance data for the new retail finance book when asked by Renish.

    Q&A highlights

    3

    “Karnataka is gradually inching towards stabilization with new PAR 15 plus accretion rates significantly being controlled at 0.58% for the month of June '25 from a peak of 2% in February 2025.”

    Karnataka is a core market; its stabilization is critical for the overall credit cost trajectory.

    asked by Renish from ICICI

    2 min read5 chapters

    Detailed Narrative

    01

    Aggressive Balance Sheet Normalization

    The company undertook a significant write-off of ₹693 crore in Q1 FY26, which included ₹603 crore related to 180+ DPD non-paying accounts. This accelerated write-off strategy is designed to drive the balance sheet toward normalization by the end of Q2. Despite the high write-off, the company maintains a strong provision buffer, holding ₹331 crore in provisions over and above the PAR 90 requirements.

    02

    Karnataka Recovery and Asset Quality

    Karnataka, a key geography that faced stress, is showing clear signs of stabilization. The PAR 15+ accretion rate in the state fell to 0.58% in June 2025, a sharp decline from the peak of 2% seen in February 2025. Management expects this trend to continue, with the state likely reaching normal levels by the third quarter of FY26.

    03

    Strategic Pivot to Retail Finance

    The retail finance portfolio is becoming a significant growth lever, with its share of the total book rising from 2.9% to 6.8% YoY. The unsecured business loan book stands at approximately ₹1,300 crore, while mortgage and home loans contribute ₹250 crore and ₹134 crore respectively. Management has set a clear target to increase the diversification of the overall portfolio to 12-15% by 2028.

    04

    Operational Efficiency and Branch Expansion

    CreditAccess added 54 branches in Q1 FY26 and plans to add approximately 200 branches for the full year, representing 8-10% growth. While employee costs were elevated in Q1 due to annual increments and a reversal of bonus provisions in the previous quarter, management expects the Opex/AUM ratio to drop below 5% in the second half as AUM growth accelerates.

    05

    Funding Advantage and Cost of Funds

    The company successfully lowered its average cost of borrowings to 9.7%, aided by a maiden US $100 million multi-currency syndicated social loan. This transaction was priced comparably to domestic rates but notably lower than the company's average cost of borrowing. Management expects further benefits from MCLR resets as the interest rate cycle turns, targeting additional cost of fund improvements by year-end.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.