CreditAccess Grameen jumps 11% on strong February business update

Shares of CreditAccess Grameen surged 11 percent in intraday trading on March 6, following the company's robust loan growth across most geographies, as highlighted in its interim business update for February 2025. Despite headwinds in Karnataka, the microfinance institution (MFI) demonstrated resilience through stabilizing asset quality and improved collections in other states.

CreditAccess Grameen added over 1.5 lakh new borrowers in the first two months of 2025, bringing its Gross Loan Portfolio (GLP) to ₹25,395 crore. While the Karnataka region saw slower growth, this was counterbalanced by strong loan portfolio expansion across other operating geographies.

Although the company faced a temporary rise in delinquencies in Karnataka, it remains confident that the situation will normalize within the next one to two months. The overall asset quality has been stabilizing, with a declining Portfolio at Risk (PAR) accretion rate across most states, even as Karnataka remains an area of concern.

CreditAccess Grameen reported steady collection efficiency trends in February 2025, with overall metrics showing resilience. Excluding Karnataka, collection efficiency remained strong at over 99.5 percent. In Karnataka, however, efficiency declined from 99.4 percent in December 2024 to 95.1 percent in early February before recovering to 98.0 percent by the end of the month. The improvement was driven by enhanced collection efforts and a firm grip on employee attrition, with the workforce expanding from 19,333 in December to 20,265 in February. Additionally, more than 40 percent of borrowers in the PAR 1-60 category made partial payments, signaling a gradual recovery in asset quality.

Goldman Sachs Flags Concerns Over Karnataka Market

Despite the overall positive trends, international brokerage Goldman Sachs raised concerns over the Karnataka market. The brokerage’s channel checks indicated that collection efficiency for lenders in the state fell to 87-95 percent in February. This decline followed the enforcement of an ordinance banning unregulated microfinance activities, creating a liquidity crunch and potential moral hazard.

According to Goldman Sachs, the formal MFI sector, including CreditAccess Grameen, has faced collateral damage from these regulatory changes. Microfinance disbursements have also slowed due to incremental stress in the region. Given its significant exposure to Karnataka, CreditAccess Grameen is expected to bear the brunt of the impact, with a projected 15-37 percent hit to pre-tax profit for incremental loss rates of 2-5 percent on its Karnataka portfolio.

As of Q3FY25, Karnataka accounted for 31 percent of the company’s total loan book, making it the most exposed MFI in the state. CreditAccess Grameen also holds the highest market share in Karnataka at 19 percent, amplifying its vulnerability to regional disruptions.

Stock Performance and Market Outlook

CreditAccess Grameen's stock rallied as much as 11 percent to an intraday high of ₹1,022.45 on March 6. Despite this surge, the stock remains 34 percent below its 52-week high of ₹1,553, recorded in June 2024. However, it has rebounded over 36 percent from its 52-week low of ₹750.05, hit in January 2025.

The stock has been highly volatile over the past year, losing 36 percent in the last 12 months. While February saw a steep 15 percent decline, the stock has recovered 10 percent in just four trading sessions of March. This follows a strong January performance, where it gained 22 percent.

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