Release Date: October 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CreditAccess Grameen Ltd (NSE:CREDITACC, Financial) reported a year-on-year AUM growth of 11.8% to INR25,133 crores, indicating robust business expansion.
- The net interest income increased by 20.8% year-on-year to INR932 crores, showcasing strong revenue generation.
- The company maintained a stable portfolio yield of 21.1% and an interest spread of 11.4%, which are among the lowest in the microfinance industry.
- CreditAccess Grameen Ltd (NSE:CREDITACC) has a strong capital adequacy ratio of 26.1%, providing a solid financial foundation.
- The company has a comfortable liquidity position with cash and cash equivalents of INR2,036 crores, amounting to 7.6% of total assets.
Negative Points
- There has been a temporary increase in delinquency across various geographies, impacting asset quality.
- The company witnessed a quarter-on-quarter decline of 4.4% in overall AUM and a 1% decline in the customer base.
- The cost to income ratio stood at 30.7%, indicating potential inefficiencies in cost management.
- Credit cost for Q2 FY '25 was high at INR420 crores, reflecting increased provisions due to elevated delinquencies.
- The company revised its FY '25 annual performance guidance downwards, anticipating lower loan portfolio growth and higher credit costs.
Q & A Highlights
Q: Given the increase in PAR (Portfolio at Risk) levels in certain states, when do you expect these numbers to stabilize, and is the current credit cost at its peak?
A: Udaya Kumar Hebbar, MD & Whole Time Director, explained that the PAR increase is expected to stabilize in Q3 FY '25, with improvements anticipated in Q4. The credit cost is likely at its peak, and a moderation is expected from the next quarter as the company is already carrying significant provisions for the 15+ DPD (Days Past Due) book.
Q: What was the collection efficiency in Q2, and is there an improvement in October?
A: Udaya Kumar Hebbar noted that the collection efficiency was 96% in Q2, down from 97% in Q1. Nilesh Dalvi, Head of Investor Relations, added that the on-time collection was 95% for September, and October is showing stability at similar levels.
Q: How is the company planning to manage growth in the current environment, and what are the expectations for FY '26?
A: Udaya Kumar Hebbar stated that growth is expected to pick up in Q4 FY '25, with no significant challenges anticipated for FY '26. The company is reiterating its medium-term growth outlook, aiming for an INR50,000 crore loan portfolio by FY '28.
Q: How much of the PAR 0 buildup in September can be attributed to heavy monsoon and floods, and what is the impact on October collections?
A: Udaya Kumar Hebbar mentioned that about INR70-80 crores of defaults in September were due to floods, which have mostly recovered. October collections are stable, and any impact from recent rains is expected to be temporary.
Q: What are the learnings from the current credit cycle, and how is the company implementing changes?
A: Udaya Kumar Hebbar highlighted that the defaults are primarily from new customers acquired from other MFIs. The company is focusing on improving underwriting standards, particularly in newer states, and retaining existing customers to mitigate similar issues in the future.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
