Creditaccess Grameen Limited — Q1 FY26 earnings call

Call held 22 Jul 2025

Management summary

CreditAccess Grameen Limited reported a challenging Q1 FY26 with a PAT of ₹60 crores, impacted by significant write-offs of ₹693 crores. Despite this, the company achieved its highest ever Q1 disbursement and showed strong improvements in asset quality metrics, with PAR 15+ acquisition rate dropping to 0.46%. The retail finance portfolio continued its strategic growth, and the company maintained comfortable capital adequacy and liquidity levels, setting a positive tone for future growth and profitability.

Highlights

  • Highest ever Q1 disbursement in company history.

  • PAR 15+ acquisition rate improved to 0.46% in June '25 from 1.34% in Nov '24.

  • Net interest income grew 7% QoQ to ₹937 crores.

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

  • Added 2.16 lakh borrowers in Q1 FY26, with 43% new-to-credit.

Concerns

  • Undertook write-off of ₹693 crores in Q1 FY26, including ₹603 crores accelerated write-off.

  • PAT of ₹60 crores in Q1 FY26, leading to ROA of 0.9% and ROE of 3.4%.

  • PAR 15+ for borrowers with 4 lenders stood at 14.3% in mid-June 2025 vs 12.6% in March 2025.

  • Elevated employee cost due to new hires and normative salary increments.

Key financials

2 periods

Headline

  • Net Interest Income
    ₹937 Cr
    QoQ +7%
  • PAT
    ₹60 Cr
  • NIM
    12.8%
  • ROA
    0.9%
  • ROE
    3.4%
  • GNPA
    4.7%
  • Net NPA
    1.8%
  • PAR 15+ Acquisition Rate
    46%
  • Retail Finance Portfolio Share
    6.8%

Q1 FY26

  • Write-off
    ₹693 Cr

What they filed

Q1 FY27: revenue up 21.9%, net profit up 721.7% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,453 1,380 1,407 1,463 1,508 +4%1,490 +8%1,597 +14%1,783 +22%
Net profit186 -100 47 60 126 −32%252 +352%340 +623%493 +722%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Liquidity Cash ₹2,025 Cr · Undrawn ₹3,093 Cr Sanctions in hand of Rs. 3,093 crore and another Rs. 6,500 crore worth of sanctions in pipeline. Capital adequacy remains comfortable at 25.5%.
    The liquidity levels including cash and cash equivalents were adequate at Rs. 2,025 crore amounting to 7.3% of the total assets. Additionally, we have sanctions in hand of Rs. 3,093 crore and another Rs. 6,500 crore worth of sanctions in pipeline. The capital adequacy remains comfortable at 25.5%.

Guidance & targets

Profitability

  • Credit Cost Profitability · FY26 · Medium confidence 5.5% to 6%
    on the guidance on credit cost, because we are seeing month-on-month improvement, we believe that we should be able to reach that.

    — Ganesh Narayanan

  • Credit Cost Run Rate Profitability · H2 FY26 · High confidence 3% to 3.5%
    in second half, the run rate will be 3%-3.5%.

    — Nilesh Dalvi

  • OPEX/AUM Ratio Profitability · by end of FY26 · High confidence below 5%
    you should see overall Opex/AUM less than 5% as we move forward. And then Q3, Q4 as the growth picks up, we should see that ratio again dropping below 5.

    — Ganesh Narayanan

Volume

  • New Customers Added Volume · FY26 · High confidence 1 lakh per month
    adding roughly around 1 lakh customers on an average per month for this financial year.

    — Ganesh Narayanan

  • Overall Borrower Base Growth Volume · FY26 · High confidence 5% to 7%
    we should see around 5% to 7% growth in the borrower base on an overall basis.

    — Ganesh Narayanan

  • MFI Book Growth Volume · Normal scenario (implied FY26) · Medium confidence 13% to 15%
    in a normal scenario, MFI book should grow in the early teens, maybe around 13%-15%.

    — Ganesh Narayanan

  • Overall AUM Growth Volume · Normal scenario (implied FY26) · Medium confidence 20% to 25%
    along with retail, we projected that the overall growth should be 20% plus, 20%-25% kind of range.

    — Ganesh Narayanan

Market Share

  • Retail Finance Share in AUM Market Share · by end of 2028 · High confidence 12% to 15%
    by end of the year 2028, we should reach anywhere between 12%-15%.

    — Ganesh Narayanan

Capacity

  • Number of Branches Added Capacity · FY26 · High confidence around 200 (8% to 10%)
    On an average, we do around 200. This year also, we should do around 8% to 10%.

    — Ganesh Narayanan

What to watch in Q2 FY26

Karnataka PAR 15+ accretion rate stabilization

By end of Q2 FY26
Current Still significantly higher at 58 bps compared to June '24
Target Further drop in new PAR accretion

Why it matters

Stabilization in Karnataka is key for overall asset quality improvement and credit cost reduction.

But we are hoping that by end of Q2, we should see further drop in new PAR accretion in Karnataka.

Risks & concerns

  • Elevated PAR 15+ accretion rate in Karnataka

    medium

    PAR 15+ accretion rate in Karnataka is still significantly higher at 58 bps compared to June '24, and PAR 0 increased to 9.2% in June.

    But when we look at Karnataka specifically, PAR 15 accretion rate is still significantly higher at 58 basis point compared to June '24. And also, when we look at PAR 0, which is increased to 9.2 in June. So, what is happening at the ground level?

    Analyst acknowledged

  • Elevated employee cost

    medium

    Employee cost was elevated due to increased headcount in Q4 FY25 and Q1 FY26, and normative salary increments.

    So, the employee cost has come in at an elevated rate. What should be the run rate? How should we build it for the year?

    Analyst acknowledged

  • Higher attrition in Tamil Nadu

    low

    Slightly higher attrition observed in Tamil Nadu, which is seen as a pattern across BFSI, managed by maintaining a higher bench.

    However, we do see slightly higher attrition in the state of Tamil Nadu, which is more or less I am seeing this as a pattern across BFSI, not necessarily microfinance. But we keep a slightly higher bench there to kind of manage attrition.

    Management acknowledged

  • Higher credit costs in Bihar

    low

    Company had slowed down in Bihar due to higher credit costs, but has since strengthened its team and policies and is now growing business.

    Right. So, Bihar, we had actually slowed down last year because we saw a certain amount of abrasion in the credit costs in Bihar. So, we had kind of strengthened the team, added people, and we've started growing business there.

    Management acknowledged

Q&A highlights

7 direct
PAR 15 accretion in Karnataka and credit cost guidance Partial
So, Renish, at ground level, the situation is consistently improving. If you see the chart, we have on a month-on-month basis, we've shown improvement in Karnataka also. I agree that it is not at a normal level. But we are hoping that by end of Q2, we should see further drop in new PAR accretion in Karnataka.

Highlights ongoing asset quality challenges in a key state and management's expectation for stabilization, impacting credit cost.

Asked by Renish (ICICI)

Retail finance growth strategy, products, and geography Direct
So, broadly today, retail finance comprises of graduated customers taking unsecured business loans. It also comprises of mortgage loans, that is secured business loans, as well as affordable home loans. This is predominantly done in our core geographies which is Karnataka, Maharashtra, Tamil Nadu, MP.

Provides insight into the strategic growth lever and its current composition and geographical focus.

Asked by Renish (ICICI)

Crossing the challenging portion of the credit cycle and growth confidence Direct
Yes. That is the confidence that we are seeing consistently month on month, right? So, that is why we have been publishing monthly updates. So, every month we are seeing improvement with certain amount of aberration that happened in April because of year closure and holidays and that translating to slightly elevated PAR in May also. But I think consistently if I see as a trend, we are inching towards normalcy.

Confirms management's belief that the worst of the credit cycle is behind them, supporting future growth plans.

Asked by Abhishek (AB Capital)

Employee cost run rate and Stage-3 provisioning trends Direct
On the first question, we don't see any specific difference in customer acquisition with respect to challenges in Karnataka, Tamil Nadu. It is like any other state. We are normally, normatively growing across all states. And with respect to OPEX, the employee cost in Q4 was slightly lower because we had reversed certain provisions with respect to our annual performance bonus, given the moderation in the performance of the company. Also, we added people in Q4 and Q1. Further, we have normative salary increments coming in effect from Q1. So, all these factors put together contributed to a higher employee cost on QoQ basis. But with growth starting, you should see overall Opex/AUM less than 5% as we move forward. And on the third question, Stage-3 provisioning, today we are at roughly around 63%. It is slightly lower than the last quarter because the Karnataka book where majority of the districts are classified as low risk has flown forward to Stage-3. Hence, you are seeing a slight lower provision. Otherwise, there is no change in provisioning model as such.

Addresses key cost and asset quality components, providing clarity on employee expenses and provisioning strategy.

Asked by Shreya Shivani (CLSA)

Composition of sanctions (JLG vs. retail finance) and employee attrition Direct
So, Shweta, with respect to the sanctions in hand and sanctions in pipeline, largely all these funding lines have an underlying as microfinance loans. So, we have not yet started availing loans, keeping retail finance as an underlying because that book is still in a growth phase and once we reach a certain disbursement quantum on a monthly basis, then we will look at hypothecating retail finance assets for our funding.

Clarifies funding strategy and the current reliance on microfinance book for sanctions, and addresses employee attrition trends.

Asked by Shweta D. (Elara)

Customer count write-off and active customer growth Direct
So, broadly, I think by end of Q2, most part of the write-off would have happened. And we are confident of adding roughly around 1 lakh customers on an average per month for this financial year. So, hopefully, we should be able to kind of maintain this trend and settle down around how much?

Provides insight into the impact of write-offs on customer base and the strategy for future customer growth.

Asked by Nidhesh Jain (Investec)

Regulatory relaxation on MFI portfolio percentage and individual MFI loans Direct
Right. So, you would have seen that we have already laid out a 2028 plan where we have said that we will diversify into these asset classes and over a period of the next few years, we will reach roughly around 12%-15% of diversification. Similarly, with this higher room, I think a lot players will step into experiment into adjacent asset classes, could be mortgage, some of them could be other asset classes that they are confident about.

Discusses the implications of regulatory changes on portfolio diversification and the company's long-term strategy.

Asked by Aravind R (Sundaram Alternates)

Viability of the traditional Joint Lending Group (JLG) business model Direct
See, I think we have kind of stated our position on this earlier also. The only change that we are seeing, Abhishek, is that the probability of the customer's life in the JLG model could be shorter. So, we still do not see that the JLG liability model will become unviable. But however, we believe that once a customer comes into the formal financial system, today we have customers who are 15 years, 20 years also with us. So, the vintage of the customer and microfinance could get moderated over a period of time.

Addresses a fundamental question about the core business model's future, indicating a shift towards individual loans for graduated customers.

Asked by Abhishek (AB Capital)

3 min read 7 chapters

Detailed narrative

Q1 FY26 Performance Overview

CreditAccess Grameen Limited commenced FY26 with positive momentum, achieving its highest-ever Q1 disbursement. The company reported a PAT of ₹60 crores for Q1 FY26, translating to an ROA of 0.9% and ROE of 3.4%. Net interest income grew 7% quarter-on-quarter to ₹937 crores, with a portfolio yield of 20.3% and a stable NIM of 12.8%. The cost-to-income ratio stood at 33.5%, and PPOP was ₹656 crores.

Asset Quality and Write-offs

Asset quality showed signs of stabilization, with the PAR 15+ acquisition rate improving significantly to 0.46% in June '25 from 1.34% in November '24. However, the company undertook a substantial write-off of ₹693 crores in Q1 FY26, including an accelerated write-off of ₹603 crores related to 180+ DPD non-paying accounts. PAR 90 stood at 3.29%, GNPA at 4.70%, and Net NPA at 1.78%. The company maintains strong provisions, holding ₹331 crores (133 bps) higher than PAR 90.

Funding and Liquidity

The company's average cost of borrowings declined by 8 bps to 9.7% at the end of Q1 FY26. It successfully raised ₹2,570 crores in Q1 FY26, including partial drawdowns from its maiden US$100 million multi-currency syndicated social loan. Liquidity levels remained adequate, with cash and cash equivalents of ₹2,025 crores (7.3% of total assets). Additionally, CreditAccess Grameen has sanctions in hand of ₹3,093 crores and a pipeline of ₹6,500 crores, with capital adequacy remaining comfortable at 25.5%.

Retail Finance Strategy and Diversification

The retail finance portfolio, a strategic growth lever, saw its share increase from 2.9% to 6.8% year-on-year by the end of June 2025. This segment primarily comprises unsecured business loans for graduated customers (around ₹1300 crores) and secured mortgage/home loans (₹250 crores and ₹134 crores respectively). The company aims to diversify its portfolio, targeting a retail finance mix of 12-15% by 2028, up from the current 6.8%.

Employee Costs and Attrition Management

Employee count grew from 20,970 in March '25 to 21,333 by June '25, with an annualized attrition rate of 27.1%. Employee costs were elevated in Q1 FY26 due to new hires and normative salary increments, but management expects the OPEX/AUM ratio to drop below 5% by year-end. While attrition in Tamil Nadu remains slightly higher, the company manages this by maintaining a higher bench.

Growth Outlook and Branch Expansion

The company is confident in adding approximately 1 lakh customers per month, aiming for an overall borrower base growth of 5-7% for FY26. Branch expansion is progressing, with 54 new branches opened in Q1 FY26, contributing to a total target of around 200 new branches (8-10% growth) for the year. Management projects MFI book growth in the early teens (13-15%) and overall growth (MFI + Retail) in the 20-25% range for FY26.

JLG Model Viability and Customer Progression

Management believes the Joint Lending Group (JLG) model remains viable as an entry point for customers into the formal financial system. However, they anticipate that the 'probability of the customer's life in the JLG model could be shorter' as customers graduate. The strategy involves customers starting with JLG, building a credit history over 2-3 years, and then progressing to individual loans, reflecting an evolved customer philosophy and long-term retention focus.

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