Buy CreditAccess Grameen; target of Rs 1500: ICICI Securities

Moneycontrol • 9 days ago

Original source

Key Investment Pillars

  • Scaling retail finance: CREDAG has set out a clear strategic shift from a pure microfinance lender to a rural-focused, inclusive financing platform, with retail finance growing 1.5x over the past year and expected to reach 24-25% of AUM by FY27.
  • Improving asset quality: Asset quality has improved to its best level in 10 quarters, with GNPA falling to 1.79% and NNPA to 0.59%, supported by a strong collection efficiency of 98% and X-bucket CE of 99.71%.
  • Margin expansion: Risk-adjusted NIM is at its highest level, driven by yield expansion and lower interest reversals, with a pricing benefit of ~50bps given to customers from Oct'26 across all products, except for mortgage and 2W.
  • AUM growth guidance maintained: FY27 AUM growth guidance of 20-25% was retained, comprising 10-12% MFI growth and over 30% retail finance growth.

Thesis Validation Checklist

  • Monitor asset quality: Watch for any deterioration in asset quality, particularly in drought-affected regions, and the impact of the macro-prudential buffer on credit costs.
  • Track retail finance growth: Monitor the growth of retail finance and its contribution to AUM, as well as the company's ability to maintain its guidance of 24-25% share by FY27.
  • Keep an eye on margins: Follow the trend of risk-adjusted NIM and the impact of pricing cuts on margins, as well as the company's ability to maintain its guidance of 14.4-14.7% NIM.
  • AUM growth: Track the company's AUM growth and disbursements, particularly in the retail finance segment, to ensure it is on track to meet its guidance of 20-25% AUM growth in FY27.