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    CreditAcc. Gram.

    CREDITACCGood
    Financial Services·24 Jan 2025
    Management Summary

    CreditAccess Grameen faced a challenging Q3 FY25 characterized by elevated credit costs and industry-wide delinquency pressures. The company took a proactive stance by accelerating write-offs to clean the book by Q1 FY26. Despite the current stress, management signaled a turnaround starting in mid-November, with improving collection efficiencies and a return to growth in December and January.

    Highlights

    7

    • AUM stood at ₹24,810 crore as of December 2024, showing year-on-year growth but quarter-on-quarter degrowth due to accelerated write-offs.

    • Net Interest Income (NII) grew 7.4% YoY to ₹862 crore, with a portfolio yield of 20.2%.

    • Asset quality showed stress with GNPA at 3.99% and Net NPA at 1.28% (measured at 60 DPD).

    • Credit cost for Q3 FY25 was significantly elevated at ₹750 crore, including an accelerated write-off of ₹229 crore for 180+ DPD accounts.

    • NIM for Q3 FY25 slightly declined to 12.5% due to interest reversals of ₹75 crore.

    • Management provided preliminary FY26 guidance projecting a recovery with 18-20% AUM growth and 4.2-4.5% ROA.

    • Retail Finance division grew significantly, now accounting for 5.0% of AUM at ₹1,245 crore.

    Concerns

    1

    • Industry-wide Delinquency Cycle

    Key financials

    Single quarter

    06 metrics
    1. 01Net Interest Income₹862 Cr+7.4%YoY
    2. 02NIM12.5%
    3. 03GNPA4.0%
    4. 04Net NPA1.3%
    5. 05Credit Cost₹750 Cr

    Segment breakdown

    Retail Finance
    ₹1,245 Cr AUM5% AUM Share51% Disbursement Growth
    List

    Guidance & targets

    5
    CategoryTargetPriority
    Revenue
    AUM Growth
    7-8%
    		High
    Revenue
    AUM Growth
    18-20%
    		Medium
    Profitability
    Credit Cost
    6.7-6.9%
    		Medium
    Profitability
    ROA
    4.2-4.5%
    		Medium
    Profitability
    Credit Cost
    3.0-3.5%
    		Medium

    Risks & concerns

    4
    RiskSeverity

    Industry-wide Delinquency Cycle

    Management admits to a transient increase in delinquency due to tighter underwriting and external factors like weather. — Both acknowledged

    high

    MFIN Guardrail 2.0 Impact

    Management argues that 84% of borrowers with >=4 lenders are paying promptly and deleveraging is already happening. — Analyst downplayed

    medium

    Regional Stress in Karnataka and Tamil Nadu

    Specific districts in Karnataka (Gulbarga, Belgaum) and weather impacts in Tamil Nadu have pressured collections. — Both acknowledged

    medium

    Areas of Evasion(1)

    • Specific ticket size details of the written-off accounts.

    Q&A highlights

    3

    “these customers are already more than 180 days and there is no repayment coming from them from a minimum 90 days. So, that is where we thought into a write-off.”

    Investors are concerned about the quality of the book being written off and whether it represents a permanent loss of high-ticket customers.

    asked by Shreepal Doshi

    2 min read5 chapters

    Detailed Narrative

    01

    Proactive Asset Quality Management

    CreditAccess took a significant hit to profitability this quarter by opting for accelerated write-offs of ₹229 crore for accounts with 180+ DPD. Total write-offs for Q3 stood at ₹376 crore. This strategy aims to complete the 'accounting journey' of the current delinquency cycle by Q1 FY26, ensuring a cleaner balance sheet for the next fiscal year. Management maintains that they hold ₹134 crore higher provisions than the NBFC industry average.

    02

    Navigating MFIN Guardrails

    The company proactively addressed concerns regarding the upcoming MFIN Guardrail 2.0. They reported that the share of borrowers with >=4 lenders decreased from 25.3% in August to 18.8% in December 2024. Furthermore, 84% of this cohort is paying promptly, suggesting that the impact on customer retention will be manageable. Exposure to borrowers with unsecured indebtedness >₹2 Lakh also dropped significantly from 19.1% to 13.3% AUM share.

    03

    Operational Recovery and Growth Rebound

    After eight months of contraction, AUM growth resumed in December. Monthly disbursement rates, which were at 50-60% of normal levels between July and November, recovered to 80% in December and 90% in January. New-to-Credit customer additions also increased to 42% in Q3 FY25. Management expects the new delinquency addition rate to normalize by Q4 FY25 or Q1 FY26.

    04

    Retail Finance as a Diversification Engine

    The Retail Finance division is becoming a central pillar of the company's diversification strategy, now accounting for 5.0% of total AUM (₹1,245 crore). Disbursements in this segment grew 51% QoQ. Management noted that delinquency rates for MFI borrowers with retail loans (7.0%) are not significantly different from pure MFI borrowers (6.0%), providing confidence in the segment's underwriting.

    05

    FY26 Outlook: A Return to Normalcy

    Management issued a preliminary outlook for FY26, projecting a sharp rebound in performance. They are targeting AUM growth of 18-20%, an ROA of 4.2-4.5%, and an ROE of 17-19%. This is predicated on credit costs normalizing to 3.0-3.5% and NIMs remaining stable. The confidence stems from internal analysis showing that the current delinquency cycle is transitory📎 and peaking.

    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.