CreditAccess Grameen, a microfinance institution, surged 7.10% in Wednesday’s intraday trade on July 23, hitting an 11-month high of ₹1,370 apiece, as its June quarter results met expectations and upbeat management commentary further lifted investor sentiment.
Management indicated a broad-based improvement in PAR accretion across all key geographies, including Karnataka, reflecting enhanced on-ground execution and borrower discipline. The company highlighted that credit costs are expected to remain at similar levels in 2QFY26 due to accelerated write-offs, with a sharp decline anticipated from 3Q onward.
It remains focused on balance sheet normalization, with conservative provisioning and continued portfolio cleanup through write-offs. With the monthly PAR accretion on a continued downward trend, analysts said that the company will shift its focus towards resuming growth from H2FY26 onwards.
The company aims to maintain a monthly customer addition run rate of 1 lakh customers. While H1 will remain impacted due to the accelerated write-offs, the management is confident of clocking its guided run rate of customer addition over H2.
Brokerages spot early recovery signs, maintain bullish stance
Following the company’s June quarter figures, analysts have trimmed their estimates to factor in slightly higher credit costs. However, they said that there is a trend reversal on the horizon in the microfinance sector, which will play itself out over the next one to two quarters and get the sector to near-normalization (operationally) in 2HFY26.
“We strongly believe that the coming three months present an opportunity to separate high-quality franchises from weaker ones, with performance divergence across the MFI sector expected to be increasingly evident,” said Motilal Oswal.
The brokerage said that the stock trades at 2.1x FY27E P/BV and its premium valuations over its MFI peers should be sustained, given its ability to bounce back to normalcy much ahead of its peers. It retained its ‘buy’ rating on the stock with an unchanged price target of ₹1,500, based on 2.5x Mar’27E P/BV.
Axis Securities has also retained its ‘buy’ recommendation on the stock with a target price of ₹1,485 apiece, backed by expectations of improving growth visibility and a favorable asset quality outlook.
“CreditAccess Grameen is expected to restart its growth trajectory from H2FY26, as asset quality concerns gradually fade. We trim our NII/earnings estimates by 2-3% and 2-5% over FY26-27E, factoring in near-term headwinds on NII and earnings and continued investments towards branch infrastructure and scaling up of the retail finance portfolio over the medium term,” said Axis Securities.
Given the improving outlook, JM Financial upgraded the stock to BUY and revised its price target to ₹1,475, valuing it at 2.6x FY27E BVPS.
“While MFI is not completely out of the woods, CREDAG should be the first one among MFIs to recover from the current stress cycle, given its ability to recognize early stress (stage 2 at 30 dpd and stage 3 at 60 dpd in MFI), accelerated write-off policy, and higher ECL cover,” said JM Financial.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
