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Informist, Wednesday, May 14, 2025

By Christina Titus

MUMBAI – Analysts are split down the middle on estimates of March quarter net profit for CreditAcccess Grameen Ltd. While five brokerages expect the microlender to post a profit, four expect it to report a loss. The lender is likely to post a net profit of INR 876.40 million in March, according to an average of estimates from five brokerages. Four brokerage firms, on other hand, expect the lender to report a net loss of INR 999.50 million.  

Net profit estimates for the microlender ranged from a profit of INR 217 million to INR 2.40 billion while net loss projections varied between INR 200 million and INR 2.54 billion. The company had reported a net profit of INR 3.97 billion a year ago and a net loss of INR 995.2 million in the December quarter.

For the March quarter, the lenders' net interest income is expected to fall marginally on year to INR 8.79 billion, based on the average of estimates from nine brokerages. However, on a sequential basis, the net interest income is projected to rise by nearly 2%. Estimates for the net interest income ranged from INR 8.08 billion to INR 9.75 billion. In the December quarter, the company reported a net interest income of INR 8.63 billion.

"Despite headline portfolio growth and marginal collection efficiency improvements, the underlying asset quality trend is deteriorating," Nomura Equity Research said in a report. "Rising stress in Karnataka, Tamil Nadu, and Bihar, along with the scale of write-offs suggest persisting on-ground issues." The rise in asset quality stress will in turn result in higher provisions, analysts said. The lender's gross and net non-performing asset ratios as of Dec. 31 were 3.99% and 1.28%, respectively.  

"Asset quality normalisation is anticipated by end of Q1 FY26 (Apr-Jun)," the non-bank lender had said in its previous quarter's investor presentation. It further said profitability is expected to normalise in Jul-Sept. 

With asset quality a concern, most brokerages see high credit cost in the March quarter. Credit cost is likely to be in the range of 8.0-10.4%, according to the estimates from five brokerage firms. The lender's non-annualised credit cost was 5.39% for Apr-Dec. Some brokerages expect the company will report growth in advances for the March quarter, a few expect advances growth to moderate while some expect it to be stable. The lender disbursed loans worth INR 50.85 billion in Oct-Dec, down 4.9% on year. 

"The implementation of the MFI ordinance and the noise around it in Karnataka impacted the collections for the company," Equirus Securities Ltd. said in a report. "Consequently, despite improving collection trends in the Non-KA geos (Non-Karnataka geographies), the overall performance for the quarter is expected to be weak."

Karnataka government issued an ordinance in February which aims to regulate microfinance institutions. The new ordinance looks to penalise lenders for coercive loan recovery practices by imposing a jail term of up to 10 years and a fine of up to INR 500,000 for violations.

CreditAccess has 362 branches in Karnataka as of Dec. 31, accounting for 17.6% of its total branch network. The gross loan portfolio in Karnataka constitutes 32% of the total loan book, highest among all states. The portfolio at risk for 30 days was 2.9% and for 60 days was 1.9% in the December quarter.

As a result, commentary on the measures taken to tackle the Karnataka ordinance, impact of microfinance industry network guardrails, and guidance on credit cost and overall event specific write-off will be keenly watched, Equirus noted. The company is scheduled to announce its earnings on Friday.

Shares of the company have risen nearly 26% since Jan. 24, when it announced financial results for the December quarter. On Wednesday, shares of the company closed 0.2% higher at INR 1,190 on the National Stock Exchange.

Following are the Jan-Mar earnings estimates for CreditAccess Grameen based on reports from nine brokerage firms in descending order by the estimate of net profit:

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Edited by Subhojit Sarkar

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